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Luxury: Is The Two Or Three Tier City A Paradise Or A Hell?

2011/7/23 10:15:00 41

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Luxury goods

When brands enter China's two or three tier cities, people worry about luxury brands. Is the luxury brand able to maintain its high-end brand image after the expansion?

According to the World Luxury Association's 2010-2011 annual survey report on luxury goods consumption in China, luxury goods in China

consumption

The top three were Hangzhou, Wenzhou and Qingdao.

In 2010, luxury brands came out of the "northward Canton" and began to enter the inland two or three line cities.

More than 100 top international brands are accelerating the layout of the luxury market in China. The total number of franchised stores has reached 1000. Apart from big cities such as Beijing, Shanghai and Guangzhou, the branches of central and western cities have mushroomed.

The French luxury brand LV has opened 27 stores in 22 cities in China, including Changsha, Xi'an, Qingdao, Xiamen, Wuxi, Wenzhou and other two or three cities, while Ningbo and Hangzhou have gathered almost all of the international luxury goods.

Roger Farah, President of the US top luxury brand Ralph Lauren, recently said at a luxury forum that consumer demand in many two or three line cities is being released, and new markets must be opened up in addition to increasing investment in the first tier cities.

Then, what factors make luxury brands go deep into China's two or three tier city market? Will such strategic layout have a negative impact on its high-end brand image?

Future wealth heights

Luxury brands are pushing forward to the two or three line market. First of all, they see the huge market.

purchasing power

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China's rapid urbanization and the growth of wealth outside big cities have bred a large number of luxury consumers in two or three line cities.

Bain research shows that in 2008~2009, more than 60% of China's luxury consumption growth came from two or three cities, such as Zhuhai, Shaoxing and Wuxi.

The sales performance of luxury goods in Zhengzhou, Chengdu and other places also highlights the strong consumption power and business opportunities of the two or three line cities.

According to a survey by McKinsey, Beijing, Shanghai, Shenzhen, Guangzhou and other cities now concentrate about 30% of the Chinese rich, but by 2015, 75% of the rich will live in two or three line cities and some non coastal cities.

Goldman Sachs predicts that China will increase its consumption of luxury goods from 40 million to 160 million in the next 5 years, mainly in two or three line cities.

As the main battleground of luxury consumption, the two or three line cities have broad prospects for development. This is also the main driving force for many luxury brands to rush to China's two or three line cities.

Compared with the high cost of living in big cities, the two or three line urban residents spend less, and the employees in the oil, electricity and telecommunications industries earn the first tier city level. They also constitute the main force of luxury consumption.

As the main body of the new luxury consumers, the consumption amount of the two or three line cities is almost equal to that of the consumers of the same income in the first tier cities.

According to the World Luxury Association's 2010-2011 year survey report on China's luxury goods consumption cities, the top three cities of China's luxury consumption ability are Hangzhou, Wenzhou and Qingdao.

Grey income may provide another explanation for purchasing power.

Recently, Wang Xiaolu, deputy director of the National Economic Research Institute of the China foundation for reform, released the "grey income and national income distribution". In 2008, the total disposable income of the whole country was 23 trillion and 200 billion yuan.

The data of the National Bureau of statistics is 14 trillion yuan.

In 2008, the average per capita income of cities and towns in China was 32154 yuan, not 15781 yuan announced by Statistics Bureau.

Of course, this report has been refuted by the National Bureau of statistics, but it also reflects the purchasing power of the two or three line cities in fact, which is actually underestimated: This is the place that will really support the rapid growth of big brand sales in the future.