• by Patricia Pao , March 7, 2012

Since 2009, we have had the privilege of being able to survey the attitudes and usage behaviors of China’s newly minted billionaires towards designer handbags, watches and fine jewelry.

One of our key findings is that affluent Chinese love their handbags. Year after year, almost 90% of respondents reported purchasing a designer handbag over the past 12 months. Even more impressive is the fact that approximately 70% said that they purchased 2+ handbags over the past 12 months.

And these shoppers are brand loyal, with over 80% of respondents reporting that they owned more than one handbag from the same brand.

Louis Vuitton, Gucci and Coach consistently rank as the top three brands purchased. Importantly, their handbags have enabled them to sell other branded merchandise. While handbags were their first purchases, the majority of purchasers from each brand reported owning accessories, small leather goods, shoes and ready-to-wear from these brands.

So how do these companies engage the affluent Chinese customer?

• Offer entry price points. Coach especially has been successful at offering price points below $1,000.
• Provide wide but shallow assortments. When it’s gone, it’s gone. This insures variety and that the buyer will not see herself coming and going.
• Offer limited editions. The Chinese are very status conscious and buy luxury goods to stand out.
• Start them young. The single-child policy has spawned the “Little Emperors” who are doted and fawned upon by their parents and grandparents. These “Little Emperors” often have six income streams (two parents, four grandparents), thereby insuring them plenty of disposable income.

And how do they get the affluent Chinese to buy more?

• Discounts are the affluent Chinese preferred promotional vehicle. Over 60% of our respondents said that they were most motivated by discounts.
• The Chinese love to bargain. I call it “The Art of the Deal.” It makes them feel proud of their purchases.
• It’s important to note that offering a discount is more important than the actual size of the discount. I once toured a market with a newly minted billionaire and watched for over 20 minutes while he bargained to receive $2 dollars off of a $20 blanket!
• As most luxury goods manufacturers do not offer discounts, they need to offer gifts. However the gift needs to be unique and desirable and can’t be purchased. One of the best gifts I have seen was a Louis Vuitton snow globe where the inside was a trunk and the “snow” was LV logos.

The bottom line: luxury goods manufacturers need to take note: Handbags are the anchor of your business.