China and high-end goods: they’re a combination made in money heaven. That, at least is the current view of the industry, of much of China’s population and of course of the global stock market. You can see why.
Look at UK fashion company Burberry. Not long ago it was a relatively staid UK brand. Today it has a market capitalisation of ￡5.9bn with a recently reported 39 per cent rise in profits. And the likes of Louis Vuitton, Gucci and Prada regularly report sales up more than 40 per cent in China. The boom seems unstoppable. Prada has 22 stores in China already and late last year said it intended to open another 50 over the next three years.
And it isn’t all about handbags and bangles. It’s about expensive cars too. The likes of BMW and Audi have stormed into China and fast reaped the benefits of a high-profit market in which customers want all the extras. Already 60 per cent of the rise in sales at BMW and 74 per cent of the rise in sales at Audi so far this year are accounted for by China. And overall China is forecast to make up about 50 per cent of the total sales of Audi, BMW and Mercedes by 2015. Given that there were practically no cars on the road in China 30 years ago, that’s quite an achievement.