Companies finding it difficult to establish a niche, increase market share

China is continuing its march toward becoming the largest luxury market in the world. The nation is now seen as a second home to many of the world's top brands, with everything from cars, handbags, watches, clothes and fine wines now sold in China.

Related readings:  The dichotomy of luxury market  Top luxury brands compete to tap China market  China to pass Japan as top luxury market in 2012  Luxury goods industry rebounds

Every year this market has grown more crowded, and it is becoming harder for luxury brands to tap into this market. The competition to grab a share of the Chinese wallet is immense now for luxury players.

A new survey by KPMG titled, "Luxury experiences in China", has highlighted the increasing brand recognition among Chinese consumers, at 57 brands this year compared with 45 last year.

Luxury brands are finding it increasingly difficult to find a niche and build market share. Amid rising competition, brands need to be innovative and explore new marketing avenues to stay ahead.

These findings are based on a survey of 1,200 consumers in 24 tier-one and tier-two cities across China, conducted by market research company TNS. Respondents were between 20-45 years of age, earning a minimum of 7,500 yuan (798.6 euros) per month in tier-one cities and 5,500 yuan elsewhere.

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.

Emotive factors such as "experience" and "self-reward" have now emerged alongside status-seeking and needs-based factors as key drivers. They also continue to place a lot of importance on the heritage of luxury brands.

We see signs of a new wave of luxury collecting and connoisseurship that is particularly evident among the wealthy in tier-two and tier-three cities. While the past year has seen an explosion of interest in fine wine, the survey suggests that jewelry, fine art and antiques also have strong growth potential.

With increased opportunities for Chinese to travel overseas, and many people now investing in more luxurious residential properties, there are a wider range of environments in which people can choose to consume and experience luxury. Lifestyle expenditures on health and beauty treatments and spas are also rising.

In terms of the most popular brands, French, Italian and Hong Kong brands have emerged as the top choices for purchases by China's luxury-conscious consumers.

The survey found that consumers in China increasingly associate various countries and regions with particular products. French and Italian products grabbed the first and second positions, while Hong Kong products are the third most popular.