Any doubts about whether luxury spending is back on the increase can be erased by a single look at China’s consumer spending. The nation is amazing global luxury goods makers and dealers and bolstering their bottom lines at a pace that is little short of astonishing, according to those who sell to the Chinese market.
Chinese consumption is one of the main factors fueling the recovery of the luxury sector and leading expansion of luxury houses such as Hermés, L'Oreal, Prada and Coach into the Chinese market, Reuters reports.
And the move is going both ways. WhileEuropean brands are looking to invest in Chinese handmade and luxury goods, Chinese firms are looking for acquisitions in European luxury brands. European firms are now listing themselves on the Hong Kong exchange to take advantage of the broader Asian exposure the move would offer.
Chinese companies are also seeking market listings outside Asia, Reuters reports. NYSE Euronext, which listed 22 Chinese companies in 2010, expects to list more in 2011 as China expands beyond its own region. International IPOs mean more money, both in fees for the listing exchange and for the companies being listed—and money fuels growth.
The factor that astonishes the most, however, according to Lamborghini Chief Executive Stephan Winkelmann, is the speed with which it all happens. "The biggest surprise you get in China is the speed of change,” he told Reuters.
Federico Marchetti, of Italian online fashion retailer Yoox, concurred: "Chinese fashion people are changing. They are getting more and more sophisticated with a speed that I have never seen in my life with any customer. In two years from now they will be the most sophisticated customers of fashion in the world."
Speed isn’t the only thing surprising about the Chinese market. Their appetite for luxury seems to know no bounds. Frederic de Narp, chief executive of jeweler Harry Winston, which plans to open two stores in Shanghai by the end of 2011, said, "Nothing is too big, nothing is too beautiful, nothing is too expensive for the Chinese today. They are on a quest for true luxury."
If Chinese customers in search of luxury goods do not hesitate to spend, then Chinese retailers know they have a ready market for foreign treasures. "During the Baselwatch fair, a Chinese retailer offered to buy our entire annual production of the automatic Golden Bridge model,” said Antonio Calce, chief executive of Swiss watchmaker Corum.
Winkelmann said the new prosperity of the Chinese is fueling their desire to own the best. "They come with their suitcases of money to buy," he said. "For me it's still astonishing that these things exist. It's the child-like enthusiasm for the things, which is something for me unknown in the western world."
Read coverage about the Financial Planning Association’s trip to China this month at AdvisorOne.