MILAN — For years the luxury goods industry has been calling China the next big thing. Now there’s some hard data showing just how much potential actually exists there.
The Chinese market, including Hong Kong, for apparel and accessories totaled about $95 billion in 2002, according to figures from Italian consultancy Pambianco presented at a conference here this week.
The luxury segment of the market comes to about 1 percent of the $95 billion, a number approaching $1 billion. That may seem a relatively small percentage compared with Western countries, where the figure comes closer to 10 percent. But given China’s huge population, that’s still a substantial chunk of customers.
Mainland China’s market for clothing and accessories came to $75 billion in 2002, while Hong Kong’s stood at $20 billion, according to the Pambianco data.
The balance shifts when it comes to the luxury segment, where Hong Kong took the lion’s share with a market of about $800 million. But Pambianco stressed that such a level approaches saturation point. The real growth is seen in Mainland China with its burgeoning cities and an emerging middle class. Its market last year stood at between $150 million and $200 million.
“China is definitely coming up as one of the most important consumer markets,” said Oliver Yang, Gucci’s general manager for Europe and the Middle East.
Many Italian brands have managed to crack the Chinese market, whether directly, through franchising agreements or in tandem with local partners. According to the Pambianco ranking, men’s wear group Ermeneglido Zegna, which owns the women’s label Agnona, has the most stores in China with a network of 45 units. Benetton is second with 41 doors and accessories group Furla comes a distant third with 24 stores. Prada is fourth with 22 Prada, Miu Miu and Church’s stores.
Pambianco also executed research on Chinese women, their habits and their preferences. When it comes to favorite brands, responses varied from city to city. Those in Beijing like Giorgio Armani, Christian Dior and Gianni Versace. Guangzhou shoppers are more partial to Gucci, Louis Vuitton, Prada and Yves Saint Laurent. Versace and Prada are tops in Shanghai.
Other key points that emerged from Pambianco’s survey of Chinese women, aged 25 to 40, included:
- Average personal spending on apparel per year comes between $2,164 and $4,234 or, in local currency, between 20,000 renminbi and 35,000 renminbi. For shoes, it’s between $120.96 and $241.91, or 1,000 renminbi and 2,000 renminbi. This compares with an average family income of about $21,772, or 180,000 renminbi, per year. Dollar figures are converted from the Chinese renminbi at current exchange rates.
- Spending on accessories centers on jewelry and hair ornaments, although interest in leather goods and handbags is growing. Families on average spend between $2,419 and $4,383, or 20,000 to 40,000 renminbi per year, on accessories.
- Consumers tend to be brand faithful and have more of a “follower” mentality than those in Western countries. They show the strongest interest in international brands with a history, that are recognizable and perceived as credible and reliable.
- China is relatively isolated from international trends. Working women strive for a crisp, professional look, often accomplished with wrinkle-free fabrics. Coordinating shoes and handbags is often important to them. Shanghai is the most internationalized style center and there is also a stronger interest for accessories there.
- Women tend to spend sporadically, saving big outlays for special occasions. Style veers toward the opulent and ostentatious.
Meanwhile, an increasing number of Italian companies are turning to China for their production needs. IT Holding is starting to produce accessories there and Giorgio Armani gets some of his T-shirts manufactured in China.
“Sooner or later we have to come to terms with [China],” said Romeo Orlandi, director of the Beijing office of Italy’s export commission ICE.
Although many companies operating in China have a litany of complaints ranging from bureaucratic hurdles to the difficulty of finding reliable partners and the proliferation of fake goods, Orlandi and other conference participants stressed that the country holds enormous potential.
“It doesn’t require large investments so much as attention,” said Orlandi.