Prestige 100®: China

This video highlights results from our second-annual China IQ report, measuring the online competence of prestige brands on Chinese platforms. Over the next 15 years the global addressable market for luxury goods is expected to grow by 600 million consumers, provoking growth forecasts 2.2 times GDP. Much of this growth is to come from one market: China. In 2000, the Chinese market accounted for a fraction of luxury sales globally. Year after year of double-digit growth has resulted in tens of millions of Chinese consumers armed with disposable income and a voracious appetite for luxury goods. In 2009, China overtook the United States to become the second largest luxury market. By 2015, it is projected to overtake Japan, and become the largest luxury market. The algorithm for success in China is different: The Chinese luxury purchaser is much younger. McKinsey reports that 73 percent of Chinese luxury consumers are under the age of 45, and upwards of 45 percent are under the age of 35, suggesting that the majority of prestige purchasers are digitally native. In the U.S., the average female prestige consumer registers household income of $150,000 and spends $3,000 annually on handbags. In contrast, the average female prestige consumer in China makes $17,000 and spends $2,000 annually on handbags. Often these purchases occur after two to three months of research and consideration, most of it done online. With 75% of wealth creation expecting to occur of Tier I cities, luxury companies also face huge challenges with brick and mortar build-out expediting the shift to e-commerce. Finally, increasing wariness of counterfeit merchandise, coupled with significantly lower prices abroad, has led to 56 percent of Chinese luxury purchases occurring outside of China, suggesting that a brand's digital marketing investments on the Mainland drive sales in Shanghai, Beijing. New York, Paris and Hong Kong. Digital in China is also different. Not a single global Internet l