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Jun
2015

City Report Kunming

Kunming is the capital of Yunnan Province, and in the first group of cities in the country to be classified by the government as one of China’s historical and cultural cities. It is the only mega city in Yunnan Province and the third largest in the southwest region after Chengdu and Chongqing. The city is the centre of focus for political, economic, cultural, science & technology and transportation in the province. It is also a port city, aviation and gateway hub connecting Southeast and South Asia. Because of its temperate climate which remains between 3 ~ 29°C, and is the smallest annual temperature difference for a city in China, Kunming is known as the ‘Spring City’.

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Economy

The GDP of Kunming in 2012 was 301.1 Billion RMB, a growth of 14.1% compared to 2011. Industrial added value increased to 100.8 Billion RMB, growing by 15.6%. Tobacco, the heavy mechanical industry, biological resources, information technology and tourism are the five major industries of the city. From a industry perspective,

value added in 2012 increased by 15.5% for the tobacco industry, metallurgical 18%, while the electrical and mechanical industries decreased by 2.2%. The Total retail sales of consumer goods were 149.38 Billion RMB, an increase of 17.5%. And per capita disposable income of urban residents increased 17% reaching 25,240 RMB.

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Luxury retail distribution

There are four primary business districts in Kunming, among them the Qingnian Road district is considered as young and fashionionable. Many large shopping malls selling both international and domestic well-known brands of clothing, accessories, shoes and cosmetics are established here including the Golden Eagle International Shopping Centre, the New World Department Store and the Parkson Shopping Centre.

The Baita Road business district is synonymous with high-end commerce in Kunming. The Gingko Group, a leader in luxury retail in Yunnan province, has opened two twin department stores (Baita and Huidu) and one international shopping centre in the district. Although the area does not benefit from high footfall, the effective conversion rate is good.

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The Gingko Group Stores: Baita and Huidu

Opened in December 1997, the Gingko Groups Baita store covers 12,000 sqm over 5 floors. In 2007, the group added the Huidu store across the road which added a further 45,000sqm of retail space.
Brands in the two stores includes: Armani, Hugo Boss, Coach, Versus Versace, Dunhill, Bally, Hugo Boss, Daks, Canali, Max Mara, S.T. Dupont, Montblanc, Rolex, Omega, Girard Perregaux, Blancpain, Bvlgari and Cartier.

The Gingko International Shopping Centre

5 minutes drive from the Baita store is the Gingko International Shopping Centre, which opened in December 2004 covering 11 floors and a total area of 28,000 sqm. Current luxury tenants are Louis Vuitton, Burberry, Salvatore Ferragamo, Ermenegildo Zegna, Ralph Lauren, Versace, Dunhill, Piaget, Vacheron Constantin, IWC, Hermes Watch and Omega.

The Gingko Shiguang department store

The Shiguang store opened in December 2009 covering an area of 30,000 sqm across 3 floors. As the latest shopping mall of Gingko Group it was not opened in any of the traditional business districts because the group wanted to create a new business district of their own. International brands in the store are Louis Vuitton, Cartier, Gucci, Bally, Max Mara, Hugo Boss, Tiffany&Co, Tod’s, Trussardi, Versace Collection, Escada, Harry Winston, Breguet, Omega, DKNY, Max&Co, Diesel, and Shanghai Tang.

The Golden Eagle International Shopping Centre

The national high-end retailer Golden Eagle Group opened its international shopping centre in the heart of the Qingnian Road district in 2007. With an area of 33,700 sqm it was the largest shopping mall in Kunming at that time. Brands in the centre include: Hermes, Givenchy, S.T.Dupont, Gucci, Salvatore Ferragamo, Aquascutum, and Ports 1961.

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Consumer attitude

The wealthy of Yunnan are as to be expected, the major driving force for luxury consumption in the city. In the early days these consumers like others across China bought luxury goods in order to own quality and stylish products without any idea of the brands themselves. But in recent years, luxury consumers have grown rapidly in number to include private business owners, urban wealthy, white-collar workers and second generation rich.

“Consumers now buy for the brand, especially the new rich who are eager to lose their old rustic appearance. Luxury products particularly clothing and bags with big visible logo’s are their symbol of wealth.” Li Feilong, the president of Kunming Supercar Club.

Not only the rich are obsessed with luxury brands, the increasing numbers of affluent middle class are gradually becoming the backbone of luxury consumption in Kumming. These are people aged 28 to 40 with high incomes who care about fashion, but unlike the very wealthy they are more concerned about the price.

“I only bought a wallet at the beginning, but after using it you will know why it is called luxury. It is fantastic and I have rarely used mass brands after that. Those luxury goods are like drugs, after accumulating enough wealth I would like to buy more.” Miss Wang, a 32 year old Account Manager in a Bank.

Editor’s view

Although Kunming will never be a rich city like the coastal cities in the East and in 2012 only ranked 46 in GDP with 301 Billion RMB, luxury brands is still optimistic about the market in Kunming. Tobacco, tea, minerals and of course property has created a lot of real HNWI’s, according to the 2013 report of Hurun, Yunnan has 6,500 people with assets of over 10 Million RMB and 600 people having over 100 Million RMB. As the only megacity in Yunnan, all the wealthy people in the province travel to Kunming for shopping.

According to the analysis in ‘The 2013 H1 Brand Reach Review’, Kunming ranked top 15 in the brand density index in all 4 sectors, the highest being the luxury auto sector which ranked 7th. Almost all the luxury car brands that entered China have a dealership in Kunming including Lamborghini, Aston Martin, Ferrari, Maserati, Bentley, Jaguar, Porsche and Rolls-Royce (opening soon). Within the small city area, luxury cars can be seen everywhere.

Overall, as the second largest luxury market in Midwest China, Kunming is still a primary and developing market. In addition to the wealthy, returnees, university teachers, bank staff and enterprises executives also contribute to the market. Notably, the main purchasing power for luxury goods comes from neighboring cities, and most of the wealthy are not in fact Kunmingness.


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