Luxury Brands Look to China for Cushion in Crisis

In this April 15, 2009 photo, Chinese shop at a Louis Vuitton fashion boutique in Beijing, China....

In this April 15, 2009 photo, Chinese shop at a Louis Vuitton fashion boutique in Beijing, China. Sales of designer clothing, jewelry and other goods in China are expected to climb at least 7 percent this year while global industry revenues could fall by 10 percent, consulting firm Bain & Co. says. (AP Photo/Andy Wong)

(AP)

Clutching a fistful of shopping bags from designers Vivienne Westwood, Dior and Alexander McQueen as she concluded one of her twice-monthly shopping sprees, 29-year-old Zhao Bing looked like the picture of hope for luxury retail.

"Is there a financial crisis in China? I don't think it has affected my life very much," said Zhao, who spent 7,000 yuan ($1,000) in 90 minutes at upscale Lane Crawford in Beijing's financial district last week. "I still buy those big brands, anyone you could think of."

Many well-heeled Chinese shoppers like Zhao, a film technician who gets an allowance from her parents on top of her salary, are spending freely during the global economic crisis. High-end designers and luxury retailers that thrive on such extravagance hope China's growing luxury-seeking population will cushion them against the collapse in demand in other countries.

China's 6 billion euro ($8 billion) luxury market accounts for just 3 percent of global sales, compared with 38 percent in Europe, 33 percent in South and North America and 12 percent in Japan, according to Bain & Co. But China and Brazil are projected to be the two fastest-growing luxury markets through 2012, according to consulting firm Bain & Co.

And sales of designer clothing, jewelry and other luxury goods in China will climb 7 percent this year, while worldwide luxury revenue could fall 10 percent, Bain & Co. forecast. Last year, luxury sales surged 25 percent in China while they were flat worldwide.

Just as more mainstream brands like Starbucks Corp. and Yum Brands Inc.'s KFC are expanding fast in China, higher-end brands such as Salvatore Ferragamo and Gucci are adding stores here — while many retailers have postponed or limited expansion in listless U.S., European and Japanese markets.

"The China market is growing fast. Beside the global downturn, which affects every country, China is quite stable," Michele Norsa, chief executive of Salvatore Ferragamo SpA, said in an e-mail response to questions. "Definitively, we are optimistic."