As China's love for extravagant goods appears to be dwindling, luxury brands may want to look into other emerging cities for growth, new research suggests.
Istanbul, Mumbai and Mexico City are expected to provide the "most promising prospects" for luxury firms to expand their brand in the coming years, according to research firm, WealthInsight's latest study.
Given that the global economy is shifting more towards emerging markets, the report explores the market growth potential that luxury brands could see in 10 emerging cities. To come to its conclusions, WealthInsight used its database's latest forecast and interviews with luxury consultants, suppliers and affluent consumers living in chosen cities, including Tel Aviv and Jakarta.
Demand for luxury goods is expected to shine for Istanbul, as the Turkish city expects to see a high increase in high net worth individuals (HNWIs) – who have $1 million or more – by 2019 to 65,000, up from 58,000 currently.
The city was also home to 1,110 ultra-high net worth individuals (UHNWIs) in 2014, beating Shanghai's number of 1,095. It also receives a boost from affluent Middle Eastern tourists and an increasing growth in the female working population.
India's thriving financial hub, Mumbai, also topped the recommended list, with the city expecting to see up to 138,500 HNWIs enter the city by 2019, attracted by many factors including its already prospering luxury scene and Bollywood.
Gucci, Burberry and Chanel have currently set up camp in the city, profiting from the city's rising middle-class population and wealthy expatriates. Mexico City was also considered high up for its affluent population and emerging middle class.
Overall, for luxury brands to truly thrive in these emerging locations, companies shouldn't focus on tourists but rather the type of people living in these regions, the report suggests. As affluent customers visit these brands frequently, their faith in the brands should be reaffirmed as they visit more often, rather than tourists who most likely won't visit a city specifically for its luxury goods.
While Kuala Lumpur, Lagos and the Vietnamese city of Ho Chi Minh City may all have a smaller luxury market, the firm argued that these cities should be eyed as future areas of opportunity by brands.
Local wealthy residents who live in the selected emerging cities are the "source" and "driver" of demand for luxury goods, Dr Roselyn Lekdee, economist at WealthInsight, told CNBC via email, and local residents choose to buy luxury brands to "showcase their financial status and success."
"Emerging cities have strong potential of luxury consumers and profitable prospect for market expansion. With the significant rise of the middle class, urbanization, women in work and the love of luxury, emerging cities have become a key target for luxury brands. Driven by a strong desire to show off financial stability and success, luxury brands and wealth in emerging markets have become inseparable," Lekdee said.
Overall, the firm expects the luxury market size of the chosen 10 emerging cities to reach $62.6 billion by 2019, more than double from its 2014 estimate of $29.41 billion.
WealthInsight's suggested that Shanghai, renowned for its love of luxury, would see a slowing in growth, unsurprising from the country's economic slowdown, while Bangkok was another traditional market to be affected, showing a potential shift from brands' to enter new avenues in the future, in light of China's slowdown.
Commenting on the report, Dr Roselyn Lekdee, said in a statement that there was a clear sign luxury goods were "on the rise" in emerging cities, and now brands should use this opportunity for future avenues.
"This is a strong message for luxury brands to carefully formulate their expansion, client and marketing strategy to capture local demand, if they want to remain competitive."
—By CNBC's Alexandra Gibbs, follow her on Twitter @AlexGibbsy.