Milan Station, a Hong Kong-based secondhand luxury handbag chain, is gearing up for its initial public offering (IPO) in Hong Kong next month, aiming to raise about HK$400 million ($51.48 million), according to a source close to the matter.

The source said that the purpose of the IPO was to raise funds in order to expand into the Chinese mainland market. Besides running its secondhand handbag business, Milan is also planning to launch its own brand handbag.

Milan Station currently runs 13 chain stores, two of which are in Beijing, one in Macao and 10 in Hong Kong.

"The mainland luxury handbag market is developing at an annual growth rate of around 15-20 percent," Ouyang Kun, head of the China Office of the World Luxury Association, told the Global Times on Wednesday, adding that the market was worth around $1.2 billion last year.

In the Chinese mainland, there were 383,000 people with a net worth of at least 10 million yuan ($1.526 million) in 2010, while in 2009 the number was 331,000, according to the 2010 China Private Wealth Report released by Forbes China and China Construction Bank in December last year.

"Handbags are usually the first luxury accessory purchases for the rich," Ouyang said. "And the next steps will be buying luxury clothes, shoes, jewelries and watches."

However, Ouyang said he thought the secondhand luxury handbag market would have much more space for development in second-tier cities rather than first-tier cities like Beijing and Shanghai.

According to a luxury market study released by Bain & Company in November last year, the second- and third-tier cities will continue to be a "new" battleground for luxury goods in the future.

"Chinese people will continue buying luxury handbags," said Ouyang. "And I don't think the trend will change in the near future."

Milan Station refused to comment when contacted by the Global Times on Wednesday.