Luxury sales boom in China, where giving gifts is an art
HONG KONG -- It's the season to load up on luxury goods in China.
For high-end retailers such as Gucci and Cartier, the Christmas-through-Chinese-New-Year's season is one of the busiest retail periods of the year. In a culture where gift giving is second nature — where Louis Vuitton handbags may be given in hopes of securing a business contract or iPads handed out as prizes at company parties — the holidays give the Chinese another reason to buy.
"The Chinese love affair with gift giving is one of the key drivers for luxury brands," says Rupert Hoogewerf, chairman and chief researcher at the Hurun Report, a Shanghai publisher of magazines for China's wealthy. "The money spent on gifting, especially at Chinese New Year, is staggering compared to the West."
Luxury sales in the West are recovering smartly from the global recession. But they're still growing at a fraction of the rate of China's sales. China is now the second-largest market in the world for luxury goods, behind Japan, and it could become the largest as early as the end of this year.
Rising personal wealth is driving this trend. But so is gift giving: Personal and business gifts account for 25% of luxury goods sales in mainland China, consulting firm Bain & Co. estimates.
For Christmas, Zhang Yuqing, managing director of a media company in Shanghai, gave diamond De Beers earrings to his girlfriend and Omega Seamaster watches (the brand James Bond wears in the movies) to close friends and business associates. He plans to buy more luxury items for Chinese New Year, which falls on Jan. 23 this year.
"There are so many reasons to give now, both Chinese and Western," says Zhang. "We like to share with each other."
While Christmas is not a religious holiday for most Chinese, a growing number are celebrating by exchanging gifts. Chinese New Year, when money is traditionally given to children — in lucky red envelopes — is an even more important time for presents, because the week-long holiday gives Chinese time to shop, according to Bruno Lannes, a partner at Bain & Co.
To attract buyers like Zhang, the owners of Landmark, a sleek high-end mall in Hong Kong that's home to Gucci, Dior and Louis Vuitton, ran a promotion in December that awards the top spender a vacation in Bali via private jet, a trip valued at more than $60,000.
Nearly half of Landmark's overall sales come from mainland buyers.
Raymond Chow, executive director of commercial property at Hongkong Land, which owns the property, says he can't disclose exactly how much the winner spent. But past winners' monthly purchases have been in the eight digits in Hong Kong dollars, or at least $1 million U.S.
"They'll spend the money anyway, but (the promotion) helps get them to spend it here," says Chow.
Three-quarters of China's luxury consumers buy gifts for their significant others, while half buy them for family and a third for business partners, according to a survey of 1,057 Chinese buyers last year by public relations firm Ruder Finn.
The most popular brands for gifts? Louis Vuitton, Cartier and Hermes, says Hurun Report.
Luxury a 'showy platform'
The rapid growth of China's wealthy, and their love affair with luxury goods, have transfixed high-end retailers. Many have already blanketed China's largest cities with shops and have set their sights on midsize cities in recent years.
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