1.1 Identifies Key Issue---Luxury brands in China

Identifies Key Issue

In the past years, the Chinese luxury brands market has been developing vigorously, the sales volume of luxury brands has kept rising, the consumption psychology of the consumers has become increasingly mature, and the consumption patterns have witnessed continuous innovation. In 2008, China has become the world’s second largest consumer of luxury goods, just follow Japan. According to a recent forecast report by Bain & Company, the global sales share of luxury brands decreased by 16% in the US, 10% in Japan, and 8% in Europe, but the share increased by 12% in China in 2009 (Li et al. 2011, 1).

It is fact that with the economic boom, the Chinese consumer has become wealthier, on the other hand, with international supermarket chains expand, department stores and mass retailers paving the way for luxury retailers. Luxury brand companies begin to pay more attention and investing in the Chinese market, with Louis Vuitton, Bally, Gucci and Ferragamo among the first wave of retailers to open outlets in China more than 10 years ago. According to Times global luxury survey: China, India, Russia (2007), 22% of affluent consumers in China own a Rolex, 66% of affluent Chinese men have bought at least one watch in the past six months, and have paid an average of $2,253 per watch.

However now, with consumer spending power increasing and the expectations of customers are higher, the luxury brand needs more to do promotional activities to attract more consumer level, of course, luxury brands need more products more employees and greater investment is expected to tap China market. Moreover government restrictions becoming more strict, luxury brands face high pressure to strengthen their commitment to China or risk losing ground to their rivals(Joana 2011).

There is one article, “International Luxury Brands May Face Product Quality Enforcement in China”, April 5, 2010 was posted by Sheppard Mullin. In this article, the writer explain that the Administration for Industry and Commerce of Zhejiang province (the “Zhejiang AIC”) decide penalty to some international luxury brands such as Hermes, Hugo Boss, Dolce & Gabbana, Paul & Shark, Trussardi, Tommy Hilfiger and Versace based upon routine quality examinations which found goods sold in China to be substandard. No one can deny that the problems with the luxury goods were quality and safety issues and counterfeit materials becomes day by day important. Specifically, on one side in China luxury brands face threat from fake products, on the other side, luxury brand owners neglect the brand protection which cannot understand customer clearly. Reviewing China market become into an urgent issue for luxury brands.

Therefore, from my perspective, how to continue to grow the luxury brand product market share in China is the current important marketing issue for the luxury brand owner.

Reference:

Joana. 2011. Luxury Brands in China Revise Marketing Tactics in Response to Growing Number of Female Entrepreneurs. http://thenextwomen.com/2011/06/16/luxury-brands-china-revise-marketing-tactics-response-growing-number-female-entrepreneurs (accessed March 20, 2012).

Li, G., G. Li., and Z. Kambele. 2011. Luxury fashion brand consumers in China: Perceived value, fashion lifestyle, and willingness to pay. Journal of Business Research: 1-7.

Mullin, G. 2010. International Luxury Brands May Face Product Quality Enforcement in China. http://www.fashionapparellawblog.com/2010/04/articles/enforcement-of-fashion-laws/international-luxury-brands-may-face-product-quality-enforcement-in-china/ (accessed March 20, 2012).

Times global luxury survey: China, India, Russia. 2007. http://www.time.com/time/magazine/article/0,9171,1664369,00.html (accessed March 20, 2012).