The following article is published courtesy of IDI Portal
There are over 50,000 new millionaires in China this year as compared to last year, according to a new report – a massive increase which should have luxury brands wondering how they can benefit from this huge market.
According to the 2010 Wealth Report of the Hurun Research Institute, which analyzes the number and distribution of China’s affluents across the nation, there are a total of 875,000 millionaires in China today, up 6.1% from last year.
The average age of China’s millionaires is 39 – some 15 years younger than their counterparts worldwide – a fact explained by the incredibly ambitious nature of Chinese society. China’s wealthy, notes Hurun Report founder Rupert Hoogewerf, have made their fortunes primarily from the service, property and manufacturing sectors.
“The growth in the number of Chinese millionaires has been driven by a rise in property prices, especially luxury property, the recovery of the stock market and a generally strong Chinese economy,” explains Hoogewerf.
Despite the financial crisis plaguing world markets, the country’s economy continued to grow over the past year, according to China’s National Bureau of Statistics. China’s GDP rose by 8.7%, the Shanghai Composite Index added 30% and the number of millionaires just keeps growing.
Trade figures show that while China is now the second largest luxury market in the world, about 50% of all luxury items are still purchased outside of the country – simply because they are cheaper off the mainland – China imposes a 33% tariff on all luxury goods.
According to a report by the TNS Research Center, 64% of Chinese think luxury brands symbolize success, while 1% of the population considers them to denote superficiality. Generally, says the report, the Chinese use luxury and luxury brands as a tool – a means to an end – making for diverse luxury segmentation.
Traditional status symbols like cars, thought still extremely important, no longer reign supreme over “new luxury” preferences, such as jewelry, brand availability and travel options, which have personal added value.
In regards to luxury brands, the Wealth Report found that Chinese millionaires, who own an average of three cars, prefer Cartier jewelry, followed by Bulgari and Montblanc. Their favorite luxury fashion brands are Giorgio Armani, Gucci, Louis Vuitton and Hugo Boss.
Tom Doctoroff, North Asia Area Director of the JWT advertising firm, has a few words of advice for luxury brands seeking to establish themselves in China. “Make sure you’re bringing the brand in line with Chinese cultural imperatives and what Chinese people are looking for. Don’t assume that all luxury consumers are the same, because it’s a very vertically segmented market,” he explains.
Doctoroff explains that any luxury brand has to take into account cultural differences, calling on companies to establish a local marketing department in China. “If you think that you can import your creative and your marketing programs, you’re wrong,” says Doctoroff.
As for lifestyle, Chinese millionaires’ interests include collecting fine art and watches and traveling. They enjoy vacationing in the United States, France and Canada, with Hong Kong and Yunnan, in southeast China, being their favorite domestic vacation spots.
China’s wealthy are also involved in philanthropic work, and take special interest in education, disaster relief and social welfare projects. “China’s millionaires are fast becoming sophisticated, and they are aspiring towards higher social status,” said Hoogewerf.
As for the country’s super-rich the Wealth Report finds that the number of billionaires this year has nearly doubled from last year’s report. “There is a great deal of hidden wealth in the Chinese economy, with a significant number of low-key billionaires keeping their heads below the parapet,” explains Hoogewerf.