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The luxury market in China: An overview

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  1. Sectors and players of luxury market in China
    1. The market for furniture and household equipment in China
    2. Key segments and players in the cosmetics industry
  2. Localization strategy in China
  3. Distribution strategy in China
  4. Communication Strategy in China
    1. The geographical structure of the luxury market in China

China's economic market is developing at a rapid speed and shows great potential to attract the foreign investors. The increase in the purchasing power of its inhabitants is the main factor motivating the French luxury brands to sell their products in the international market (9.6millions sq km and 1.3 billion people in 2005).

Among these people, 0.8% of the Chinese population is estimated as the share of consumers whose income and personal wealthpermit them to purchase luxury goods imported from the West, which is therefore 10 million potential buyers for all luxury products.

The population, fond of luxury, is essentially localized around the two largest cities: Shanghai and Beijing, but this zone has a tendency to expand. It comprises men and women who are in the age group of 25 to 40 years, having a high level income and whose socio-educational level and the style of living are also comparatively high. Within this population, we can distinguish several targets:

Among men, the consumers of luxury goods are mostly businessmen who are socially assertive and model their consumption patterns on the high Western social level.

Among women, we distinguish several types of consumers of luxury goods:

-"The entrepreneur": They have approximately the same characteristics that of the men mentioned above.
-The "white collar": Consumers between the age group of 25 and 40 years, who is part of the first generation of women who worked in foreign enterprises.
-The ?Asian Bobo?: They have a high standard of living, and blends two characterstics, a strict and rigorous worklife and the other being imaginative and "bohemian" lifestyle. This consumer adheres to a mix of Chinese and Western cultures and love luxurious and original creations.
-The "kept woman": These customers spend a lot of money for their beauty, online products and purchases major brands at low prices. Often poorly educated, their mode of consumption is rather impulsive.

The presentation of the market is complete, it is now necessary to study the localization strategies, distribution and communication used by the major luxury companies in order to penetrate the vast Chinese market.

[...] The market for luxury goods is growing steadily in this region as the luxury cosmetic market has witnessed growth of 12% over the past two years. The big brands continue to attract as many visitors as possible who come to southern China. From a qualitative point of view, the consumers of Guandgong is characterized by its low loyalty towards brands. One does not hesitate to switch brands after a promotional offer or the emergence of new features. So the price remains the key purchasing criterion. [...]

[...] Depending on the structure of the luxury market in China (see figure below), the communication strategy focuses on the top 5 luxurious cities in China that have a higher purchasing powerBeijing, Shanghai, Chongqing, Shenzhen and Tianjin. To apply the best communication strategy, one must understand the potential of Chinese customers: they are men and women aged between 25 and 45 years, with high income and high style of living. The geographical structure of the luxury market in China After analyzing geographically and demographically the luxury market in China, now we will discuss the main channels used for communication of luxury on the Chinese market. [...]

[...] Today, the major luxury brands cannot afford to remain absent from the Chinese market which represents a new source of growth.However, it should be noted that apart from these regions, the awakening to the luxury market is very slow and very heterogeneous in the Chinese market. III. Distribution strategy in China The choice of types of intermediaries is particularly important in a luxury market and particularly in a booming country like China The distribution network however is facing several challenges: - Economic growth in this country, specially with regards to location strategy - The image control - Monitoring prices - Risks Several types of intermediaries may be retained by the market players of the luxury, depending on the functions sought , the strategy of the firm and market constraints. [...]

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