According to a recent KPMG market report, an increasing number of middle class Chinese consumers are buying luxury cosmetics outside of the mainland.
The report entitled ‘The Global Reach of China Luxury’ highlights increased overseas travel as driving the trend to which global luxury brands are subsequently adapting their business strategies, both in China and in their home markets.
The findings are based on a survey of 1,200 middle class Chinese consumers from across 24 cities with a minimum household income of RMB 7,500 (USD 1,190) per month in tier one cities and RMB 5,500 (USD 873) in others.
Meanwhile, 56 percent of respondents said they prefer to purchase well known luxury brands, while 69 percent separately indicated they would pay a premium for well known, popular luxury brands.
“Those travelling overseas increased to 71 percent of survey participants in 2012, from 53 percent in 2008, a significant change.”
Benefitting from the trend
The report also notes overseas luxury brands with a presence in China as benefitting from this trend, particularly some of the domestic Chinese brands that have or are planning to establish overseas operations.
A majority of survey respondents (72 percent) were found to have purchased luxury items during overseas trips, with cosmetics, winning one of the top spot.
In terms of cosmetic and perfume purchases, a majority (60 percent) of respondents said Hong Kong, Taiwan and Macau were their top locations; a significant increase from 43 percent in 2009.
Mainland China was voted their second choice, while Europe also saw a marked increase due to the rising number of travelling Chinese, up from 3 percent in 2009, to 20 percent in 2012.
Chinese consumers are also reported as distinguishing amongst countries of origin and associating certain countries with particular products.
“There is a continuing strong association towards European heritage brands such as France for cosmetics and perfumes and Switzerland for watches.”
Challenges still remain..
Although this survey comes as somewhat good news to certain cosmetic companies, Nick Debnam, Asia Pacific Chairman and a partner with KPMG in the region reminds that; “As increasing numbers of Chinese travel overseas, brands need to measure the impact of their business strategies both in Mainland China and the travel segment.”
He goes on to explain that it is no longer just about doing business in China, but that it is also crucial for luxury brands to target the global Chinese luxury segment. "Brands need to therefore align their branding and marketing strategies both in China and for the rising number of travelling Chinese consumers."