The Shift from a Local to a Global Consumption Pattern in the Drivers of China's Luxury Consumption

This research paper aims to identify and discuss the main drivers of why luxury spending growth in China has moved from a local to more of a global consumption pattern.A PEST analysis has been applied to investigate China's contemporary luxury industry by separating the context into political, economic, social, and technological dimensions.A comprehensive and in-depth understanding of China's luxury market has been gained by examining China's luxury market reports and articles between 2011 and 2016 from Bain & Company, McKinsey Company, and KPMG.The results of this investigation and analysis provide up-dated information and an understanding of the events in China's luxury market and consumption.This research is valuable for assisting and alerting global luxury companies in China to adapt to this new trend and rethink their marketing strategies in China.Additionally, this research will encourage further research into the domino effects triggered by this shifting pattern. Introduction1.1 Background.China's economy has grown astonishingly since the implementation of the Economic Reform and Opening-up Policy in 1979 (Morrison, 2015).With the rapid growth of the gross domestic product (GDP) during the last decade, China has become one of the major global economic powers (Morrison, 2015).McKinsey and Company (2013) predicted that the number of upper middle-class Chinese, defined as those with an annual income between 106,000 and 229,000 RMB, will be 54% of the population, in contrast to only 14% of the population in 2012 (Barton, Chen, & Jin, 2013).Due to China's rapid economic development and the growth in household disposable income during the past twenty years, China has also witnessed a dramatic change in luxury consumption (Atsmon et al., 2011; Luxury Market in China, 2015).The economic reports for 2015 reveal that 2015 witnessed the greatest amount of international luxury consumption, with Chinese consumers spending approximately 116.8 billion USD on luxury items, which accounted for 46% of the overall international luxury consumption.However, according to Bain and Company's annual report (2015, para.1),"China's luxury market declined by 2% to 113 billion RMB in 2015".Simultaneously, approximately 91 billion of luxury goods were purchased outside China, which accounted for 78% of all Chinese luxury purchases in 2015 ("Purchase Aboard," 2015).The negative growth of luxury consumption in China in recent years and the shift in China's luxury market from a local to global consumption pattern has aroused both worldwide interest and concern. Statement of the Problem.Previous articles (such as "China's Hotels," 2014; "China Crackdown Could," 2013; "Marketers Remain Bullish," 2015), state possible reasons for the sluggish luxury growth, including slower economic growth, turmoil in China's stock market, the anti-corruption campaign, and crackdown on governmental officials' extravagant spending.These may be some of the reasons for China's recent decrease in luxury consumption.Few of these essays use holistic or comprehensive methods to address other vital drivers which may have contributed to 2nd International Conference on Modern Management, Education Technology, and Social Science (MMETSS 2017)