NEW YORK, United States — Making economic predictions isn't easy these days, what with key indicators slumping one day and then bouncing back the next. But even as the global economy keeps market observers and analysts on their toes, there is one thing that everyone seems to agree on: the pre-eminence of the Chinese economy.
Last month, the Chinese government announced that it was depegging its currency from the US dollar, allowing the Yuan to appreciate within a defined band, slowly abandoning the exports-led growth strategy which has made Chinese goods cheaper in the global market in recent years. But now, as Western economies stop and start, the Chinese government is looking to sustain its growth by stimulating demand at home. Last week the IMF made projections that China's growth rate will slow somewhat next year from over 9.9 percent in 2010, to 9.6 percent in 2011.
But still, for luxury goods companies, China offers the biggest opportunity for luxury brands in a generation.
According to the latest research from luxury thinktank L2, based at New York University, founder Scott Galloway said in an interview with Bloomberg TV, "when you look at the sheer size of incremental revenue that the Chinese market offers, especially online, you could hit singles in every market, but as long as you connect with the ball in China, your shareholders are going to be just fine."
The numbers are staggering. Galloway and his team report that 840 million people will be online in China three years from now, which means there will be more people online in China than the US, Europe and Japan combined. More than 80 percent of Chinese luxury consumers will be under the age of 45, a digitally savvy, voracious online consumer.
"You couple that kind of growth online with the fact that you have a younger more digitally native consumer, and you have the largest channel anywhere...for luxury goods, the online channel in China might be the biggest market worldwide in five to ten years," says Galloway, with a luxury market growing at 15 percent per year.
For further information on L2's China Digital IQ research, you can download the full report or register a free webinar from L2 to be held this Wednesday, 14 July at 10am Eastern time, 3pm London time.