Many observers wrongly assume Chinese want to be middle class, like the Americans once were. They are wrong, explains Shaun Rein in the Wall Street Journal. Chinese want to be rich.
While investment by global brands has traditionally been highest in Tier 1 cities, explains Shaun Rein, managing director of the China Market Research Group, these days, most growth is happening in Tier 3 cities — defined as medium-size cities such as Dalian that are highly entrepreneurial. And it’s luxury that sells.
“The concept of an emerging middle class in China is a myth, says Rein. “In the U.S., blue-collar workers are happy to shop at Macy’s [department store] for life. Here everyone wants to be rich. It’s why middle-class brands like Marks & Spencer and Calvin Klein haven’t done well.”
Louis Vuitton has 17 thriving stores in Tier 2 (in developed capital cities such as Chengdu) and Tier 3 cities in China. That’s a good measure of the “luxury readiness” of smaller Chinese cities. Swarovski crystal can be be found in about 200 shops spanning 35-40 Tier 1 through Tier 4 cities (such as Jinhua). Luxury brand consumption is linked directly to the development of cities and commercial real estate, specifically malls and shopping centers.
Shaun Rein is a speaker at the China Speakers Bureau. When you want to share his insights at your meeting or conference, do get in touch.