Luxury goods create vanity economy in China
September 5, 2013 Leave a comment
Luxury goods create vanity economy in China
Staff Reporter
2013-09-05
Luxury goods and their high quality replicas have created a vanity business of considerable value in China. The Sanyuanli leather wholesale market in Guangzhou offers the highest number of world famous luxury brands, the Guangzhou-based 21st Century Business Review reported. Around 10am every day, wholesalers from Saudi Arabia to South Africa as well as local vendors pack the market, selling handmade leather goods both original and counterfeit.After 5pm, the market is usually filled with vehicles meant for freight transport that have been sent by courier and delivery services companies.
Two days later, such products will be transported to boutiques in Beijing, Shanghai, Wuhan and even Xinjiang. In less than a month, a wide range of luxury products of varying styles and quality will appear at places like public bus stops and office buildings.
Genuine items and their replicas have jointly created a huge market for luxury products in China, the report pointed out.
Since Louis Vuitton entered China in 1992 and opened its first store in Beijing, a wide variety of luxury brands have made inroads into the Chinese market over the past two decades, the report added.
A 2012 report on luxury consumption showed that China had become the country with the highest consumption of luxury products, with its market value estimated to be 180 billion yuan (US$29.4 billion).
The increasingly growing influence of luxury goods has also given birth to the massive counterfeiting market in China.
Entire factories are set up to produce exclusively fake luxury goods, such as Burberry handbags.
It was reported that a Burberry replica factory with less than 10 workers and covering only four square meters produced hundreds of Burberry handbags a day for distribution outlets around the country. The sales of the most popular design could reach 2,000 a month.
Replicas of other brands, such as Bally Prada, Miu Miu, Coach, Tory Burch, Hermes, LV, Cucci, Chanel, Dior and Michael Kors, are also available in China.
Due to their huge advertising expenditures, luxury brands do not necessarily enjoy high profits. For instance, in 2012, the Prada Group’s total business turnover was €329.7 billion (US$434.31 billion), its gross profit rate was 72% and its pretax profit rate was only 26.8%.
Given the small and unorganized character of the counterfeit market and the constant patrol of government agencies, producers of counterfeit products can only earn slim profits.
Under such circumstances, it is doubtful whether the counterfeit market’s brisk business will continue, the report stated.
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