China Luxury Forecast 2010 Ruder Finn

CHINA
LUXURY FORECAST
AN IN-DEPTH ANALYSIS OF LUXURY PURCHASE BEHAVIORS AND TRENDS IN GREATER CHINA FOR 2010
Content
Methodology & Scope Chinas Luxury Outlook Purchase Motivations Brand Ranking & Image Where To Buy Luxury Information Channels
Online Strategy
2010 Albatross Global Solutions and Ruder Finn Asia All rights reserved
Methodology and Scope

1,100 luxury consumers surveyed in March-April 2010 Mainland China, Hong-Kong, Taiwan
City of residence
Gender
10% 10% 33% 49%
51%
47%
Tier 1 Cities
Tier 2 Cities
Hong-Kong
Taiwan
Female
Male
Methodology and Scope

Young respondents Annual income criterion:
o More than RMB 100,000 a year o Average annual income around RMB 250,000
Age
8% 4% 16% 34%
Yearly personal income (RMB)

1.7% 7.0%
16.7%
55.9% 18.8% 38%
Below 25
26-30
31-35
36-40
Above 40
100-180 K 500-1,000 K
180-250 K Above 1,000 K
250-500 K
Chinas Luxury Outlook

Chinas luxury market will grow in next 12 months
This trend is consistent across Mainland Chinas first and second tier cities as well as Hong Kong
Expected growth in cosmetics and apparels

Awareness of the economic crisis
Do you think the Economic Crisis is Over?

70% 60% 50%
56% 58% 54% 48% 44% 36% 64%
40%
30% 20% 10% 0%
37%
34% 28%
Yes No No idea
9%
8%
9%
8%
8%
All China
Tier 1 Cities
Tier 2 Cities
Hong-Kong
Taiwan

No impact on purchase intentions: 78% of shoppers plan to spend the same or more in the coming year How much do you plan to spend on luxury items in the next 12 months compared with the last 12 months?
Taiwan 31% 32% 37%
Hong-Kong
17%
44%
39% Less
Tier 2 Cities
23%
38%
39%
The same
More
Tier 1 Cities 20% 44% 36%
All China
22%
40%
38%

There are significant variations between regions
How much did you spend in the last 12 months to buy luxury goods? (RMB)
Taiwan 21% 20% 19% 19% 8% 12% Below 5K 5K-10K Tier 2 Cities 9% 23% 30% 27% 8% 4% 10K-20K 20K-50K
Hong-Kong
17%
18%
16%
29%
15%
5%
50K-100K
Tier 1 Cities 11% 19% 23% 29% 12% 6% Above 100K
All China
11%
21%
25%
27%
10%
5%
Purchase Motivations
Consumers are driven by enjoyment and taste Gift-giving is still strong in Mainland China Men care most about brand reputation; women are attuned to store design and window display The store experience and the attitude of sales advisors are absolutely critical
Emotional purpose: enjoyment & experience first
What is your motivation when you purchase a luxury item (emotional)?

65% 55% 47%
25%
Status
Exclusive and rare
Taste
Enjoyment and experience
Emotional purpose: taste and status
What is your motivation when you purchase a luxury item (emotional)?

Taiwan 55% 49% 58%
Hong-Kong
59%
59%
59%
Status Taste Enjoyment and experience
Tier 2 Cities
44%
55%
65%
Tier 1 Cities
47%
57%
68%
Rational purpose What is your motivation when you purchase a luxury item (rational)?
84%
27%
29%
28%
Personal use on a regular basis
For collection
As a gift for personal friends As a gift for business partners
Rational purpose: gift for business partners
Buying luxury as a gift for business partners

36% 28% 28%
11% 8%
All China
Tier 1 Cities
Tier 2 Cities
Hong-Kong
Taiwan
Men care most about brand reputation Women are attuned to store design and window display In front of a luxury store, what elements entice you most to enter ?
Brand reputation
71%
Products displayed in the window
59%
Presented new collection
45%
Design of the shop
27%
SAs ready to welcome you
9%
Music in the store
3%
Store experience and the attitude of sales advisors
Once in a store/counter, which of the following factors entice you to make a purchase?
Quality of product Sales Advisor attitude Professional advice Discount Special promotion Choice of product Environment 14% 24% 28% 32% 39% 45% 57%
Brand Ranking & Image

Louis Vuitton, Gucci and Chanel top the list of purchase intention
China cares where a luxury product is made
Brands are expected to be socially responsible

What brands do you intend to buy in 2010 ? Rank 1 2
3
Brand Louis Vuitton Chanel

Gucci
Score 136 112

71
4 5
6
Dior Hermes
Cartier
52 43
36
7 8 9 10 11 12 13
14
Prada Omega Longines Estee Lauder Armani Rolex Burberry

Swarovski
33 30 24 23 21 20 18
17
15
Lancme
17

Importance of country of origin
Does the made in label have an importance when buying luxury items?
90% 91%
84% 81%
84%
All China
Tier 1 Cities
Tier 2 Cities % of Yes
Hong-Kong
Taiwan

Preferred countries
If YES, which country/countries do you favor?

58% 58% 50%
35% 28% 18% 10% 6%
France
Italy
Switzerland
Germany
Japan
USA
Spain
China

Importance of Corporate Social Responsibility
Does the social responsibility of a luxury brand affect your purchasing decision of its products?
Don't care 22% No 10% Yes 68%
Where To Buy Luxury?

Hong Kong is still the paradise of luxury shopping for Greater China consumers
Shanghais extensive luxury offerings and convenience have made it an especially attractive place to buy fashion and accessories
Japan and Korea are becoming important destinations for people buying cosmetics

Hong Kong, paradise of luxury consumption
o Luxury Cosmetics
To which country/city do you usually go to purchase luxury goods?

Tier-2 cities Guangzhou Beijing Shanghai Macao Hong-Kong Singapore South Korea Japan United States Europe 12% 16% 6% 13% 25% 5%
7%
5% 9% 11%
51%
China

o Jewelry & Watches

Tier-2 cities Guangzhou Beijing Shanghai Macao Hong-Kong Singapore South Korea 6% 7% 53% China
5%
6% 13% 12%
1%
8% 8% 28%
Japan
United States Europe

Fashion and Accessories

Tier-2 cities Guangzhou Beijing Shanghai Macao Hong-Kong Singapore South Korea Japan United States Europe 17% 25% 7% 11% 21% 5% 49% China 11% 13% 21% 29%

Different purposes, different destinations % of respondents going to Europe to buy luxury goods (according to personal income)
49% 49%
31% 27% 21% 18%
33%
32% 23%
18% 13%
20%
Fashion & accessories 100,000-180,000 RMB
Jewelry & watches 180,000-250,000 RMB 250,000-500,000 RMB
Luxury cosmetics Above 500,000 RMB
Information Channels
Brand stores and official websites are Chinese consumers most favored channels Growing importance of online communication:
For brand generated content For consumer opinions
Traditional print media continue to be an effective channel for Chinese luxury consumers
Brand stores and brand websites are the most efficient What are your preferable ways to get information about luxury goods?
Brand stores Brand's official websites Friend's referral Print ads Print media articles Outdoor advertisement Consumer opinions TV ads Department stores Consumer events TV reports Online articles Outlets Online ads Online consumer campaigns Mobile advertisement Radio ads Radio reports 71% 69% 54% 51% 46% 43% 40% 38% 31% 27% 26% 22% 21% 20% 17% 7% 5% 5%
Most important online channels
Given a full score of 5 for the most important one, what mark do you give to the following categories of websites (so as to gather information, official or not, about luxury goods)?
3.97 3.73 3.21 2.72 2.60
Brands' official websites
Vertical websites
News Portals
Social websites
Blogs
Growing importance of vertical websites
Can you give th e name of the website that you most regularly visit to get information about luxury goods? Rank Brand Score
1 2
3
Official brands websites Rayli.com

Sina.com
50 45
39
4 5
6
Yoka.com Yahoo.cn
163.com
29 25
14
7 8
9
Sohu.com Ellechina.com
Baidu.com
14 11
11
10
11
Google
Vogue.com.cn
11
10
122010 Albatross Global Solutions and Ruder Finn Asia All rights reserved Onlylady.com
Traditional media remain important What are your preferable ways to get information about luxury goods? (according to yearly personal income)
61.3%
55.6% 53.8% 51.5% 49.4% 46.5% 42.0% 48.7%
Print media articles RMB 100-180K RMB 180-250K RMB 250-500K
Print ads Above RMB 500K
Online Strategy
Chinese consumers are willing to experiment purchasing online
Concern over authenticity is the biggest barrier
Beijing and Shanghai are the most open to online retail
Online Strategy
Almost half of respondents are willing to purchase online
If luxury goods go online, will you consider this way of purchasing?
Male
60%
40%
No Yes
Female
52%
48%
Online Strategy
Motivation for buying online
Which of the following factors would entice you to make a luxury purchase online?
69% 57% 47% 75% 64%
Can browse or search Can consult product information comments posted by whenever I want other online buyers
More convenient than shopping in physical stores
Lower price in online More promotional stores offers in online stores
Online Strategy
Regional differences
If luxury goods go online, will you consider this way of purchasing?
Eastern Tier 2 cities Hong-Kong Taiwan 38% 39% 40% 41%
Western Tier 2 cities

Guangzhou Northern Tier 2 cities Southern Tier 2 cities Shanghai Beijing
43%
45% 45% 47% 54% % of Yes
THANK YOU!
For more information about the China Luxury Forecast, please contact one of the following persons :
Ruder Finn Asia: Olivier RUELLE Tel: +86 (10) 6462 7321 ext. 646 ruelleo@ruderfinnasia.com Graham NORRIS Tel: +86 (10) 6462 7321 ext. 625 norrisg@ruderfinnasia.com

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CHINA

Methodology and Scope

10% 10% 33% 49%

Methodology and Scope

Yearly personal income (RMB)

55.9% 18.8% 38%

180-250 K Above 1,000 K

Chinas Luxury Outlook

Expected growth in cosmetics and apparels

Chinas Luxury Outlook

Do you think the Economic Crisis is Over?

Chinas Luxury Outlook

Chinas Luxury Outlook

What is your motivation when you purchase a luxury item (emotional)?

Exclusive and rare

Enjoyment and experience

What is your motivation when you purchase a luxury item (emotional)?

Status Taste Enjoyment and experience

Personal use on a regular basis

As a gift for personal friends As a gift for business partners

Buying luxury as a gift for business partners

Products displayed in the window

Presented new collection

Design of the shop

SAs ready to welcome you

Music in the store

Brand Ranking & Image

China cares where a luxury product is made

Brands are expected to be socially responsible

Brand Ranking & Image

Brand Ranking & Image

Brand Louis Vuitton Chanel

Score 136 112

Prada Omega Longines Estee Lauder Armani Rolex Burberry

Brand Ranking & Image

Tier 2 Cities % of Yes

Brand Ranking & Image

If YES, which country/countries do you favor?

35% 28% 18% 10% 6%

Brand Ranking & Image

Don't care 22% No 10% Yes 68%

Where To Buy Luxury?

Where To Buy Luxury?

To which country/city do you usually go to purchase luxury goods?

Where To Buy Luxury?

To which country/city do you usually go to purchase luxury goods?

Where To Buy Luxury?

To which country/city do you usually go to purchase luxury goods?

Where To Buy Luxury?

31% 27% 21% 18%

Fashion & accessories 100,000-180,000 RMB

Jewelry & watches 180,000-250,000 RMB 250,000-500,000 RMB

Luxury cosmetics Above 500,000 RMB

Brands' official websites

Official brands websites Rayli.com

55.6% 53.8% 51.5% 49.4% 46.5% 42.0% 48.7%

Print media articles RMB 100-180K RMB 180-250K RMB 250-500K

Print ads Above RMB 500K