LUXURY GOODS SLOW TO DEVELOP IN CHINA.

As consumer markets develop in China, the inevitability of luxury consumer goods is increasingly realized. Chinese consumers are faced with two problems the most conspicuous of which is disposable income. According to a recent report in the International Herald Tribune only a very small fraction of China's huge 1.3-billion population lives in households with an annual income in excess of US$30,000. This amounts to only 4.7-million households. The Tribune was reporting on a survey by an analyst from J. P. Morgan who made a September "China Luxury Goods Tour". The second problem Chinese consumers come up against is that many of luxury goods that make it onto the shelves of upscale Chinese stores are imported. These are well-known brands in the world's established consumer markets, but virtually unknown to Chinese consumers.

In addition, with some of these brands cosmetics is an example usage patterns are not well established. Most any woman over 40 will not have a history with, say, mascara. So young women have no one from whom to learn product use. In established consumer markets, consumption patterns are reinforced by advertising. Where product use is concerned, the advertising can be easily targeted to segments of the market that need detailed education.

But, even though print media in China is expanding, targeted outlets are still difficult to find.

And there exists a subtle stumbling block for those consumers who want to know more about the luxury items to which they are attracted. The attraction is often based on a certain aloofness that luxury projects. Luxury implies that one is already admitted to an elite class where everyone knows, so to speak, the correct fork to use for a particular course at a sophisticated dinner party. If this information has to be "learned", then the luxury product is less approachable.

This makes it difficult for the luxury marketer to develop a brand identity and market position. Some marketers have chosen to reach luxury oriented consumers through free-standing stores. Flagship outlets in major cities, often in hotels, have had a certain amount of success.

J. P. Morgan reports that China's retail sector has a number of challenges for foreign firms.

Finding the right location poses a problem, as does the process of applying for and being approved for a retail license. China has yet to streamline processes and procedures to meet the demands of modern markets.

Finding and training local employees is also difficult. There is no "mall" culture to provide the population with the rudiments of what it is to go into a customer service oriented store and buy something.

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