A decade ago, The New York Times recalls, hardly any luxury goods were for sale in the lobby of the Sheraton hotel Chengdu, or in the Renhe Chuntian hotel nearby. Now, however, dozens of brands and boutiques fill both locations, as well as the Yanlord Landmark mall, opened in 2010, and Maison Mode. With the luxury markets of tier-one cities now fully mature, brands are expanding into tier-two locations, of which Chengdu is a favorite. But with two new high-end malls expected to open within two years, Chengdu – and second-tier cities more generally — faces the possibility of oversaturation.
“China’s tier-two cities are becoming extremely important. It’s the natural evolution of the market. In Beijing or Shanghai, consumers were already spending a good amount of money five or six years ago. But now consumers in tier-two cities are spending to show off their wealth,” said Max Magni, a principal at McKinsey in Hong Kong. According to Magni’s firm, China recently surpassed Japan as the world’s top consumer of luxury goods. China’s repositioning has a lot to do with the growing spending in China’s second- and third-tier cities.
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