Economic Forum - Global Economic Analysis & Reports

The global financial crisis in 2008 has made a certain impact on China’s real economy, dealing a blow mainly to its exports yet consumer confidence remains stable. The financial crisis has also forced countries around the world to refocus their attention on the issue of unbalanced global trade. Asia, in particular China, has to transform from an export-led economy to one that is driven by domestic demand. It is believed that state policy in China will continue to support and encourage domestic consumption.

As a matter of fact, China’s economy is still growing at a relatively fast pace. People’s income continues to rise and their pent-up consumption power has yet to be unleashed. As people’s living conditions improve, their requirements for the quality and style of consumer goods (such as clothing, shoes and leather goods) are becoming higher. Since in an affluent society, leather goods are not merely a daily necessity but also a symbol of quality of life, it can be expected that leather goods consumption on the mainland will further increase. To many mainland consumers, Hong Kong brands stand for guaranteed quality, trendiness and taste. Hong Kong companies should take advantage of such good reputation to develop the potential of the mainland leather goods market.

The Hong Kong Trade Development Council (HKTDC) had conducted a survey on leather goods consumption on the mainland in 2003. The latest survey was carried out in 2009 in 13 mainland cities to identify the latest leather goods consumption trends and analyse the advantages of “Hong Kong brands” in the mainland market. It is hoped that the findings and recommendations of this report can serve as useful reference for Hong Kong companies wishing to enter the mainland leather goods market.

The 13 cities covered in the survey conducted in the second quarter of 2009 are Nanjing, Shanghai, Hangzhou, Ningbo, Harbin, Shenyang, Beijing, Tianjin, Dalian, Wuhan, Chengdu, Chongqing and Guangzhou. A total of 3,250 consumers including employees, housewives and students who have lived in the surveyed cities for at least two years and have purchased leather goods in the 12 months prior to the survey were interviewed. The findings are summarised as follows:

• The main reasons given by respondents for buying leather goods are practical needs and wear and tear or loss of existing products. There are also some who make purchases to keep up with fashion trends. The major selection criteria for buying leather goods are guaranteed quality, comfort in wearing/using, and good workmanship. Some consumers also attach importance to brand image and brand origin.

• Overall, mainland respondents are most influenced by mainland fashion trends, followed by trends in Hong Kong and Western Europe. Among all the cities surveyed, Guangzhou, Shanghai and Chengdu are more influenced by the leather goods trends in other regions.

• In the 12 months prior to the survey, the average spending on leather goods was Rmb1,992. The spending in all cities is basically proportionate to the per capita income of that city. The budget for buying leather goods in the coming 12 months is Rmb1,851. Cities where consumers expect to increase their spending on leather goods include Tianjin and Guangzhou.

• Most consumers have the habit of visiting leather goods stores, with the majority of them visiting leather goods stores at least once a month. The shopping time is mainly during weekends and public holidays. Department stores are the most popular shopping spots, the main reasons being the availability of a wide variety of brands and guaranteed quality. Consumers are generally satisfied with the customer service of leather goods sales channels and leather goods stores.

• TV/radio commercials, newspaper/magazine ads and promotional stands at shopping malls are the most effective promotional or marketing vehicles.

• Overall, mainland respondents find Hong Kong brands trendsetting, unique in character and fashionable in style. The majority of them are willing to pay a premium of up to 49% for Hong Kong brands over mainland brands which offer similar product quality.

The following are our recommendations:

• Most respondents are receptive to new brands and are willing to pay a premium for Hong Kong leather goods brands. Hong Kong companies should capitalise on this advantage and clearly define their market positioning and target customers. By so doing, they can effectively build up their brands.

• Product-wise, Hong Kong leather goods brands should target the mid-range market and foster a new consumer culture by offering Hong Kong styles, Hong Kong brands, Hong Kong designs and Hong Kong management that suit local consumer preferences.

• Where sales channels are concerned, department stores are the most popular shopping spots. Hong Kong companies may consider setting up points of sale together with other leather goods brands in the same department store. This can draw more customers and potentially offer a greater overall return.

• In terms of promotion, Hong Kong companies can boost brand penetration through TV commercials which, coupled with store promotions, could produce unexpectedly good results.

• As consumers are attaching more and more importance to quality and service, Hong Kong companies should strengthen, or ask their mainland retail outlets to strengthen, the sale and after-sale service for their leather goods in addition to maintaining good product quality.

Consumer habits vary from city to city and among different consumer groups. Hong Kong companies should offer the right products to meet local market demands.

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This new report is available at HKTDC's Retail Outlets. It can also be purchased through the HKTDC Book Shop section in the HKTDC's trade portal: www.hktdc.com.