A growing trend among Chinese people is to spend their Spring Festival holidays abroad. The large numbers of Chinese tourists are now a major factor on overseas consumer markets. The major luxury brands are in the front rank of those welcoming the Chinese guests.

　　HARD TO SAY NO TO THE CHINESE MARKET

　　Ms Yang is a white-collar worker from Shanghai. During the long vacations, she and her family usually go to Hong Kong for shopping. “Judging from the accent,” she says, “about 90% of the customers in the shops selling LV and other luxury brands are from the mainland, among which there are many Shanghainese.”

　　Armando Branchini, general secretary of Alta Gamma, an association of Italian luxury goods companies, told reporters during the second session of the Luxury Innovation Summit, “The demands of Chinese consumers are rising rapidly, and many of them tend to buy luxuries overseas, where they are cheaper. In Hong Kong, for example, people can usually save about 25%.”

　　According to statistics from the Shanghai Overseas Tourism Office, from January 15 to 28, the total number of people from the city going abroad through travel agencies was 64,334, an 11.59% increase from the Spring Festival period of last year. In total, 3,128 groups were organized, which was also a significant increase.

　　Aaron Fischer, a consumer market analyst with independent researcher CLSA, explains that 30% of the global luxury goods market is driven by tourism. Therefore, every holiday season is a cause for excitement among the major luxury brands.

　　It isnt only CLSA that has noted the great potential of the Chinese market. Reports from several other research institutions show the irresistible lure of the Chinese luxury goods market. Data from the World Luxury Association shows that by the end of last year, China accounted for 28% of worldwide consumption of luxury goods. Bain Capital, a leading international strategy consultancy, estimates that in 2012, Chinas trade in and consumption of luxury goods will surpass that of Japan, to rank first in the world. Alberto Milani, president of Buqi Lahti, an Italian jewelry-maker, cited a survey he had conducted which found that 57% of Chinese respondents expressed a willingness to increase their expenditure on luxury goods, much higher than in the US （6%）， the UK （7%） and Italy （9%）。

　　NEW EXPERIENCE OF LUXURY BRANDS

　　Luxury goods consumption in China enjoys a favourable macro-environment for it to blossom. Apart from the steady economic growth of recent years, urbanization has been accelerating continuously and a new generation of young consumers has emerged. However, overseas luxury brands, if they are to earn money in this huge market, have to play it cautiously.

　　The cake may look very appetizing, but its not so easy to swallow. Some brands, having made a bold entry into this arena, suddenly find their traditional marketing modes are not suitable. The fact is, this newly-emerging market has its unique features.

　　Although the purchasing power of Chinas wealthy elite is comparable to that of their counterparts in the developed countries, it is premature to think of significant luxury goods sales. Qu Kaijun, CFO of the ENZO Group, says that it will take a long time to cultivate the Chinese market, since a brand needs adequate exposure and coverage before it becomes popular. That said, there are some recommended approaches. “It is advisable to try to explore different families under a big brand name to cater to different target consumers,” Qu says.

　　Many international luxury brands fail to prepare properly for promoting their brands. Pablo Mauron, general manager of the China division at Digital Luxury Group, points out that although there is a functioning online sales market in China, most luxury sellers reject this approach. He also notes that Baidu.com, although it handles 70% of Chinas online searches, accounts for only 40% of luxury brand advertising, which suggests a missed opportunity.

　　Besides, international brands need to improve their after-sales services in China. John Chattock, a partner with KPMG LLP, says that his customers, as well as himself, are often dissatisfied with the after-sales services offered for many imported luxury goods in China. In his opinion, the Chinese market is vital if luxury brands are to maintain their global reputation.

　　A KPMG report recommends that overseas luxury brands create more interaction with young consumer groups by means of new technology, including micro-blogs and other newly-emerging online marketing platforms.

　　The report also reveals that the number of luxury brands recognized by mainland consumers has increased from 45 to 57. This is a reflection of that fact that markets are becoming increasingly crowded, which means the competition is bound to intensify. All brands, old or new, will have to work harder to earn popularity.

　　EXTERNAL STIMULUS

　　During the Spring Festival holidays in 2012, Chinese tourists spent in excess of US$7 billion on overseas luxury goods markets. The figure has been the cause of considerable controversy. At a time when the domestic economy is facing challenges, such robust luxury goods consumption inevitably upsets some people.

　　But does luxury goods consumption really harm the domestic economy? Experts caution against over-reacting. They argue that the expanding consumption of luxury goods may actually establish a benchmark for the domestic luxury industry and promote its upgrading.

　　Zhu Heliang, director of the Chinese Brand Research Centre at Capital University of Economics and Business, points out that expenditure on luxury goods in China is less than 100 billion yuan （US$160 billion） annually, which accounts for just 4.5%-5% of total imports by value. He estimates that in the years to come, China is likely to experience several major influxes of imported luxury goods.

　　Zhu believes that imports of high-end consumer goods can stimulate the upgrading of the domestic industry. He cites the example of home appliances. In the 1980s, home appliances were imported in large quantities. Based on the prevailing income level of the average family, they could be classified as luxury goods. Yet the products modernized lives and triggered a demand increase, which led ultimately to the rapid development of the domestic home appliance industry.

　　LOCAL BRANDS GOING ABROAD

　　Another phenomenon worth noting is that more Chinese luxury brands are making their way onto the overseas market.

　　For example, C Jewelry, a leading player on the Chinese jewelry market, generated considerable interest at Paris Fashion Week with its fusion of tradition and innovation and western and oriental cultures. Ruan Xizi, the founder of C Jewelry, told reporters that the company plans to establish branches in seven different regions worldwide beginning this year, the first in Paris.

　　Coincidentally, there has been a decline in the reputation of international brands. Some European and American brands, including Prada and LV, were originally hand-made on a limited scale. However, having been sold in Hong Kong and produced on a mass scale in China, they have gradually lost their aura as luxury goods. Some of these brands have become commonplace in the larger cities and are now found in smaller cities, where they are sold in hundreds of outlets.

　　SHANG-XIA, Shanghai Tang and other Chinese jewelry brands have used oriental approaches to life and values to boost their reputations. Jonas Hoffmann, a business professor at the School of Knowledge Economy and Management, thinks it is likely Chinas luxury companies will enter the international market through mergers and acquisitions. In addition, he says, thanks to Chinese handicrafts such as silk, jade and tea, a foundation already exists for the countrys luxury brands to mature.

　　GOOD OPPORTUNITY FOR CHINA

　　Zhu Heliang from Capital University of Economics and Business argues that it is a matter of regret that China, as a major manufacturing country, is so weak in developing brands. China is becoming the worlds largest consumer of luxury goods, yet it seems scarcely likely that it can develop into the strongest producer and exporter.

　　China does not have a single entry on the list of the worlds top 100 brands. Luxury goods emphasize tradition and culture, and a brand inherits its unique appeal from a long heritage and profound cultural connotations. Hu Xingdou, an economics professor at the Beijing Institute of Technology, agrees that it generally takes several centuries for a good brand to be cultivated. However, Chinese enterprises are too focused on “quick money” and are channeling their efforts into marketing with rapid returns. With the profit margins of the real economy being generally low, most enterprises arent interested in long-term planning.

　　Ding Liguo, founder of topretailing.com, believes the time is right for Chinas high-end industry to grow up. Europe used to be the international centre of luxury goods production, but with the European economy facing extreme difficulties, Chinese enterprises should make the most of a rare opportunity to grab a larger share of the market. They can do so by establishing joint ventures, acquiring stocks, developing designers and marketing concepts, and so on. Again, Chinas home appliance industry serves as a good example. During the past decade, by working together with American, European and Japanese manufacturers it could move from imitating and learning to achieving significant development.

　　If China is to cultivate luxury brands, Hu Xingdou argues that the government should offer companies preferential policies. Currently, enterprises with the largest sales volume are state-owned, but their advantageous position is based on monopoly. This situation is unsustainable in the long run. The only way to develop and protect leading brands is to mould reliable quality, and to do this, privately-owned enterprises are the answer, but they clearly need more support.