Episode 05 : Luxury Goods | business english podcast
|China is the 3rd largest market in the world for luxury products. It’s growing rapidly as more and more people join the middle class and have enough disposable income to afford such goods. The first tier cities of Shanghai, Beijing, and Guangzhou have seen the most investment of retail luxury goods. Many analysts believe that the second tier cities of China should not be neglected by luxury retailers. In addition to the increased wealth in China, changing cultural attitudes are helping drive the demand for luxury products. In past generations it would be embarrassing to spend too much on a particular product. Now, it is seen by many as fashionable to spend freely to display your wealth and success. Young professionals earning $350 USD per month are often willing to spend more than one month’s salary on their cell phone. It’s becoming a very image conscious society and people often feel pressure to buy luxury goods to avoid losing face. The increase in buying on credit and the reduction in savings rate will also help fuel the growth of luxury goods sales.
Key vocabulary and phrases that are discussed in the podcast:
Luxury goods: a good at the highest end of the market in terms of quality and price. BMW, Gucci, and Armani are examples of luxury brands.
Middle class: This basically describes the people who have enough money to live comfortably and spend money on entertainment, but by no means are rich. Having enough money to go on vacations, and buy nice things sometimes is middle class.
Disposable income: There are different definitions for this but here is one. The money that is left after all the necessary expenses have been paid. Eg. House payments, rent, bills, tax, basic food and clothing. Any money that you can use to go on vacation or buy nice but unnecessary things is called disposable income.
First tier cities: The 3 wealthiest cities in China. Shanghai, Beijing, and Guangzhou.
Second tier cities: The next group of wealthy cities. Eg. Chengdu, Ningbo, Dalian.
Changing cultural attitudes: The youngest Chinese generation is much more concerned with material wealth and social status than that of the older generations.
Buying on Credit: Buying things using a loan. Using credit cards or bank loans. This is becoming a lot more common in China.
Reduction in Savings rate: Historically, the savings rate in China has been very high. The youngest generation in China, however, is spending a much higher percentage of their income. They often borrow money from their parents or grandparents.