According to data from Euromonitor International, as reported in Women’s Wear Daily (WWD), luxury consumption in Asia-Pacific is expected to grow around 170 percent over the next five years, eclipsing Western Europe which is traditionally the leader in luxury consumption.
Continued growth in demand from China has contributed to this trend, forcing luxury companies to meet an ever-increasing desire for their goods.
At the International New York Times Luxury Conference held in November, executives shared statistics and outlooks on the growth of the Asian market and how luxury companies will have to evolve to suit this trend.
According to the WWD article, Jing Ulrich, Managing Director and Vice Chairman of Asia Pacific at J.P. Morgan Chase & Co., said that a strong savings culture in China underpins luxury’s potential. “Chinese people save about 50 percent of their income,” she said. “China has savings of over 200 percent of GDP; that’s approximately $20 trillion.”
China’s luxury goods market is concentrated in Shanghai and Beijing, but for men’s wear luxury company Ermenegildo Zegna, the areas of Harbin, Chongqing and Wuhan are getting increasingly important.
According to Zegna, second and third-tier cities make up one-third of the company’s Asia sales, on par with China’s first-tier cities. The rest of Asia makes up the remaining third.
“Only those truly committed to investing in this region will remain leaders,” Zegna said at the conference. He strongly believes investment in the region will guarantee payback in the future. The brand has about 80 stores across 36 cities in China, and 12 in Hong Kong and Macau.
Tom Ford Chairman, Domenico De Sole, said the company understood the importance of China in Asia’s luxury goods market very early on, and at an early stage entered Hong Kong, Shanghai and Beijing with its ready-to-wear collection, according to the article.
Tom Ford’s online store is set to launch next year. “Online has changed the world, especially in Asia and Southeast Asia,” De Sole said. “You cannot be a successful brand if you’re not in Asia. “The customer base here is young, sophisticated and characterized by a lot of travelers who are knowledgeable about both business and fashion.”
“In the beginning, logo was everything in China. Now we must be careful not to be too logo-driven; the Chinese customer today wants more style and sophistication,” said Zegna.
Speakers described Asian luxury shoppers as young and digital-and social-media savvy.
Thomas Crampton, Director of Social Media, Asia-Pacific, at Ogilvy & Mather, said Chinese customers are more active online than their U.S. counterparts in terms of reading online reviews of products, comparing prices and sharing photos or videos.
Men’s wear is seen as a prime opportunity in Southeast Asia, said the article. According to the most recent Wealth-X and UBS World Ultra Wealth Report 2013, Asia is home to 3,985 ultrarich males with a combined wealth of $585 billion, out of 4,635 ultrahigh-net-worth individuals in Southeast Asia, whose combined wealth amounts to $620 billion.
Gregoire Blanche, Regional Director South East Asia and Australia at Cartier, said that the Asian culture of gifting — to show respect by bestowing a gift worthy of a business partner’s status — has helped boost the luxury timepiece sector in Southeast Asia to become the eighth-largest export market for Swiss watches in the world.
“Watches are the prime symbol of status amongst men in Singapore,” Blanche said. “With cars and property simply out of reach, these men turn to the next thing they can acquire to show off their wealth — a luxury timepiece. [Watches] hold a typical quality and value in the eyes of the masculine Asian culture where traditions and accomplishments are essential concepts.”