Despite of these challenges, the luxury industry still is becoming highly attractive as the affordability of consumers is also increasing. As the middle class in the world is gaining strength and becoming more loyal to luxury branded goods, luxury industry still have a number of lucrative market segments to be catered. It was estimated in 2003, that the financial returns of luxury goods manufacturing industry globally was $ 90 billion, which crossed the $ 150 billion mark in 2007. By offering services and products to the untapped market segments, the luxury industry is expected to increase the size of its returns by $ 400 billion by the end of year 2015 (Heaney et al., 2005).
As the size of luxury branded goods industry is increasing, the format of business is also changing. Now, luxury goods manufacturing businesses are no more privately or family owned business, but transforming into public limited companies. In this manner, the luxury branded goods industry is attracting investments from all around the world which enables them to invest heavily on research and development to understand consumer behavior. Understanding consumer behavior is essential for expanding the size of luxury businesses into untapped international markets. The understanding of consumer behavior has delivered its fruits in recent years, which is evident from the dramatic expansion of industry’s size in India, China, South Africa and Brazil. Especially China has remained the front runner, where consumers are becoming more brand conscious and spending lavishly on purchase of luxury branded goods (Michman & Mazze, 2006).
Especially China has remained the front runner, where consumers are becoming more brand conscious and spending lavishly on purchase of luxury branded goods (Michman & Mazze, 2006). Being the fastest growing economy in the world, China offers the biggest market place to luxury brands. The increase in the economic development has resulted in the increase in personal incomes of Chinese consumers. Due to this, a large section of the consumers has formed a market segment which is wealthy and social stimulators, which is described as the “new rich”. This segment of the market has the tendency to live a celebrity lifestyle and satisfy their desire for expensive and sophisticated goods and services (Dubois et al., 2005). According to a research of Ernst and Young, it was estimated that by the end of 2015, China would account for 29% consumption of luxury goods and services in the world. This rate of consumption would cause China to become the 2nd largest consumer of luxury goods and services in the world. This is the reason, that heavy investments are made by luxury brands to understand the consumer behavior of Chinese consumers, so that the product and marketing strategies can be developed accordingly (Ernst & Young, 2005). Keeping in view the lucrative opportunities available to luxury brands in China, a number of these brands has installed production facilities in the country. These include Bally, Gucci, Ferragamo and Luis Vuitton. Other brands like Zara, Jimmy Choo and others are preparing their action plans to enter Chinese market as a local producer of luxury goods, to take full advantage of lucrative opportunities in the country. Beside factories in China, a number of luxury brands have their subsidiaries, operational facilities and stores in