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French, Italian and Hong Kong brands have emerged as the top choices for purchases by China's luxury-conscious consumers, according to a new KPMG report.

Consumers in the world's second largest economy increasingly associate various countries with particular products. French and Italian products respectively grabbed the first and second positions, while Hong Kong products are the third most popular. The territory's jewelry brands are popular with Chinese consumers, with several Hong Kong-owned premium clothing brands also doing well in China.

Chinese consumers meanwhile prefer domestic alcohol brands that win the top spot in this category (37 percent), thanks to the popularity of Chinese liquor. French cosmetics and perfumes sold in China (76 percent), fashion (37 percent) and bags (33 percent) notched up the highest percentages in these categories. Italian brands gained the top spot for footwear (43 percent) and Switzerland for watches (87 percent).

The new KPMG report titled, "Luxury Experiences in China" is based on a survey of 1,200 consumers in 24 tier-one and tier-two cities across China, conducted by TNS, the market research company. Respondents were between 20-45 years of age, earning a minimum of RMB 7,500 (US$1,154) per month in tier-one cities and RMB 5,500 (US$846) elsewhere.

"China continues its march towards becoming the largest luxury market in the world. Year-on-year as this market becomes more crowded, it is harder for luxury brands to enter this space. We also see rising brand recognition, 57 this year up from 45 last year. Brands therefore need to be innovative and explore new marketing avenues," says Nick Debnam, Partner and Asia Pacific Chairman, Consumer Markets, KPMG China.

The survey also finds that China's luxury buyers are basing their purchasing decisions on a wider range of factors. "Consumers increasingly choose to reward or pamper themselves as opposed to seeking higher social status via their brand purchases. Chinese consumers also continue to place a lot of importance on the heritage of luxury brands," Debnam adds.

Unique to China is the large number of relatively young multimillionaires, far younger than their western counterparts. This spells opportunities for brands using new technologies to interact with a younger consumer generation.

Digital marketing and building online sales formats are being combined with the instore experience. The survey found that nearly 70 percent of respondents said they search online for information on luxury brands at least once a month, while 30 percent do so more than once a week. While official brand websites are often used as the first point of call for specific product information, celebrity blogs and other micro blogs also play an important role when building a brand image in China. "Luxury companies therefore need to think about how their strategies reach key online influencers," Debnam explains.

"The traditional entry route for overseas brands has been through partnerships with local franchises and distributors. In recent years, as the business landscape has become more open and transparent, many companies have now fully acquired their retail operations in China, including some that have entered the market directly with a wholly foreign-owned enterprise (WFOE) model," he adds.

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