Luxury goes online to reach Chinese consumers

Isaac Mostovicz writes that luxury brands are expanding online to tap into China's new wealth...

Just last week Emporio Armani opened online sales through its own website in one of world’s fastest growing markets for luxury brands, China.

With sales increasing by 20% last year, China is the second largest market for luxury goods, and is set to overtake Japan for No. 1 in just a few years according to consulting firm Bain & Co.

It may perhaps seem delayed that luxury retailers are only just tapping into a nation of shoppers that have undoubtedly embraced the Internet (Chinese shoppers online have doubled over the last year), and are also eager to mark their new wealth by buying luxury labels.

Despite the availability of many Western brands being limited to in-store purchasing, a September 2010 study done by consulting firm McKinsey shows that affluent Chinese consumers prefer foreign brands: 52% of consumers whose annual income exceeds RMB 250,000 (USD 36,765) trust foreign brands more than Chinese ones.

Online sales may therefore seem a lucrative opportunity, however many luxury brands are still reluctant to start selling to consumers via the Internet, fearing they risk brand value since most consumers use the internet to search for discounts.

While the booming retail scene in China has led many Western brands to set up shop and expand their business in the country, will Emporio Armani’s move prompt other luxury retailers to take the plunge and sell directly to Chinese consumers online?

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