A recent article in China Daily reports that for the first time, the e-commerce luxury market in China has exceeded 10 billion yuan (USD 1.59 billion.)

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The article, citing research by the firm iResearch Inc., sees this success looking set to continue expanding at 30% year on year over the next several years.

Previous blog posts have discussed the seemingly unending Chinese love affair with luxury goods, and this research shows that sales through luxury brands online have surged by nearly 70% compared with 2010.

However, although growth looks set to continue in the future the market is by no means as developed as it could be. As of last year, the turnover of luxury goods accounted for only 1.41 percent of China’s total online shopping industry.

“So far, China’s online luxury market remains small. We are waiting for it to explode,” Chen Xiao, founder of the luxury goods selling website ihaveu.com, told Chinese-language newsmagazine, China News Weekly.

High tariffs, consumption tax and import duty all contribute to the market being currently underdeveloped. Whether this is set to continue or the Chinese love for luxury will overcome these barriers remains to be seen.

Previous posts on this blog have discussed the necessity of emotion in luxury marketing, and the jewellery retailer Pandora is the latest to demonstrate a good understanding of this.

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Unity Marketing’s fourth “Luxury Tracking” survey has ranked Pandora as the second most popular jewellery brand amongst 1,200 affluent consumers, just behind Tiffany & Co (which recently executed its own emotion-charged marketing campaign, What Makes Love True.)

More established brands like David Yurman and Bulgari were left behind as even other brands considered “mass” – e.g. L’Oreal Paris and Amazon.com are slowly making inroads with luxury consumers, the report found.

This is significant, if only because Pandora’s mainstay item is a silver charm, which consumers are able to add to a bracelet or necklace to create a personalised piece of jewellery.

This approach gives customers the ability to customise a one-off piece that others are unlikely to be wearing and something that is totally personalised.

From the point of view of Janusian thinking, where there are two opposing worldviews, Pandora’s approach appeals to the Lambda personality. Lambdas are more likely to make choices based on how a product will help them stand out, and be unique versus Thetas, who long to fit in and seek affiliation.

Pandora jewelry allows the personality of the wearer to shine through rather than be overtaken by the brand, showing that the company understands its target market.

Luxury Daily reports that Hermès, the French fashion retailer, is to demonstrate the craftsmanship and history behind its brand through a new exhibition in London opening later this year.

Hermès official image for Leather Forever exhibit

The Hermès Leather Forever exhibit will demonstrate the antiquity and provenance of the brand, founded 175 years ago this year, and is the latest step in terms of demonstrating to affluent customers that its price points are reflective of the quality of its product.

Hermès has initiated several campaigns of late around its provenance. It has created a microsite called Hearts and Crafts that examines the detailed craftsmanship and quality of its products through biographies and interviews with the craftsmen, from the leather-cutters to the silk-drawers.

The site also hosts a documentary, which tells the story of the many people who contribute towards the creation and manufacture of Hermès products.

Of late, even high net worth customers who may not be directly affected by the economic downturn question the quality behind some of the prices charged for luxury goods – so this campaign aims to reassure and establish Hermès as one of the ultimate quality brands.

Chris Ramey, president of Affluent Insights, Miami commented: “Authenticity is one of the platforms for luxury. Hermès will continue to emphasize their craftsmanship, history and quality because it’s part of their DNA.”

Within Janusian thinking, this campaign will appeal to those of a Lambda mindset – who see an item’s value not in terms of price, but in terms of the time invested.

A recent blog post on JanusThinking.com looked at the seeming imperviousness of the Chinese luxury goods market to the economic slowdown.

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The Financial Times reports that the luxury car market is travelling in the same direction, with cars speeding out of showrooms despite challenging fiscal times.

Carmakers’ robust financial results seem to demonstrate that it is the emerging markets’ taste for luxury vehicles that are driving this trend. Bentley saw 37% sales growth last year, with BMW, Mercedes-Benz, Audi and Porsche also firmly in the driving seat when it came to sales outside the Eurozone.

Europe, however, is not seeing the same level of demand. Austerity measures, taxes on high-income earners and a firm crackdown on tax evasion mean slowing sales in the sector.

The blog claims that in Italy, tax evaders are reportedly returning luxury cars such as Ferraris to avoid the unwelcome attentions of tax officials – it relates one anecdote of a wealthy driver in Milan keeping his tax returns in his car to prove to suspicious police that he’s paid the necessary dues.

The slump in luxury sales adds pressure to the Italian automotive market as the economy continues to slow down. But whether popular in Italy or not, it’s clear that luxury cars like Ferraris remain firmly in fashion in emerging markets.

In the wake of diamond producer De Beers’ recent profits, an article in Finance Asia states that even a recession will not impact the growth of the global luxury market.

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The research company CLSA predicts that whilst the rest of the world is tightening its purse strings, the global luxury market will increase by 8% during 2012, largely driven by the appetite of the Chinese for luxury items – where it is predicted to grow by 25% by the end of the year.

“We think that the demand for luxury goods in China and Asia is driven by the rise of the middle class, and that is a structural story,” Aaron Fischer, Asia-Pacific head of consumer and gaming research at CLSA, told FinanceAsia in a telephone interview last week.

Fischer added that even if the economic slowdown were to impact the Chinese market directly, this would have no impact on their consumption of luxury goods.

Fischer’s team carried out this analysis based on the Japanese market, which in the past experienced a very similar explosion of luxury goods consumption. However, it acknowledged that the Chinese market has far more room for growth due to the increased number of outbound Chinese tourists travelling to luxury European hotspots like Paris, London and Milan.

Hong Kong has attracted multiple IPOs from Prada and Samsonite amongst other international luxury brands, all attracted by the successful Chinese growth story. But not all Chinese are welcoming the increased presence of luxury brands in their country, as it does highlight the growing income gap between rich and poor. Reportedly, Beijing has put in place controls around luxury advertising, asking companies to remove words such as “luxury,” or royal from their marketing materials.

Yet there’s no doubt that China is still one of the strongest markets in terms of demand for luxury goods – with Latin America, the Middle East and other emerging markets following not far behind.

“I don’t want to rule out Latin America and the Middle East. They are attractive markets as well,” Fischer said. “And over time there’ll be more opportunity in India and Indonesia, and some other Southeast Asian countries like Vietnam.”

The Evening Standard reported recently that luxury brands are set to benefit from a series of notable events taking place in London this year. From the Queen’s Diamond Jubilee to the biggest sporting occasion of 2012, notable high net worth retailers such as Burberry, Walpole and Selfridges are all hoping to see sales increase as they take part.

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Luxury department stores Harrods and Selfridges are also gearing up for increased footfall from the influx of international visitors expected in London around that time.

Walpole, the body created to promote the British luxury industry, will hold a Jubilee Pageant along the Thames and is joining forces with the Queen’s bank Coutts and Getty, the photography agency, to host an exhibition of photos with the Queen – some of which have never been seen in public before. The exhibition will move around London, stopping at suitably luxury venues including Claridge’s in Mayfair.

Stacey Cartwright, Burberry’s finance director, said: “Due to our heritage anything that celebrates Britain is good for us. The jubilee will be a key time in the UK this year.”

Previous blog posts have discussed the cachet of luxury British brands abroad; with the world’s eyes upon London during this key time, UK luxury retailers look set to profit from the celebrations.

A recent article in the Financial Times describes an evolution that Chinese consumers are undergoing. As the country begins to encourage domestic spending, attracting consumers at home has become a priority for retailers – who are finding that their own consumers are some of the most difficult to please.

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And it’s not just within the luxury sector, when consumers are buying big-ticket items such as handbags and cars. Food, electronics, gadgets and homeware are all being scrutinized with an increasingly eagle eye.

Tesco, the UK retailer, says the Chinese middle class is “becoming increasingly sophisticated in the quality of products they purchase”, including buying more foreign and high-end brands.

The Chinese appetite for fake goods seems to be diminishing, too. Escada, the women’s designer clothing group conducted a survey which found that Chinese consumer willingness to buy fakes has diminished, from 31% in 2008 to 12% by 2010.

Despite an appetite for luxury carrier bags in the past, as salaries increase and tastes become more cultured, a cheaply-made item with a designer logo is no longer good enough. The middle class is attracted to provenance, to an appreciation of quality, to the story or time invested behind the product.

Within Janusian thinking, this posits the Chinese as moving towards the Lambda mindset – seeing an item’s value not in terms of price, but rather, in terms of craftsmanship. They’re interested in the time that it took to make – whether it’s unique, and overall the quality of the item – rather being attracted to the glitz of a fake logo.

A recent article in Marketing Week describes how the luxury goods sector, as one of the few within general retail that has endured the muted financial environment, is marketing itself to its customers. Brands such as LVMH continue to post excellent profits and consider their outlook for 2012 as “excellent” whilst ordinary high street retailers struggle.

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As a result, more and more brands are reaching upwards to try and appeal to these high net worth consumers. But some marketers claim that there’s no secret formula to attracting the attention of luxury purchasers – and that tried and tested is the best way forward.

Peter Cross, business partner of Mary Portas at the retail branding agency Yellow Door comments that while luxury purchasers are now more open to value purchases and more discerning of what they actually buy, traditional luxury marketing is still very much at the fore.

“True luxury is still based on exclusivity, rarity and scarcity,” he says.

By making their most valuable customers feel special and singled out – for example, through special “gifts” that may not be available to other consumers – marketers are able to generate emotions of goodwill, rarity and exclusivity – as well as word of mouth from their customers.

Looking at this from the point of view of Janusian thinking, it could be argued that this classic “exclusivity, rarity and scarcity” tactic will affect one type of Janusian personality differently to another.

Lambdas, who seek achievement and uniqueness as an ultimate end goal, are likely to be very influenced by an individual, personalised gift or product as this will help them to stand out against the crowd – a key goal for Lambdas. Thetas, on the other hand, who generally seek acceptance into their social crowd, may find this technique attractive as it will help to establish themselves within their specific social class.

Within luxury marketing, one size does not fit all and marketers must remember that overarching “rules” may not suit every brand when considering a tailored strategy.

An article in Luxury Daily reveals that Stella McCartney has debuted its first fragrance in nearly ten years, L.I.L.Y, via a mobile application and partnership with retail department store Selfridges. Using augmented reality app Aurasma, consumers will be able to access content related to the new perfume – and Selfridges has also provided iPads instore for those shoppers that don’t have smartphones or iPads to access it. The department store will also have interactive windows featuring a film by British artist Dan Tobin Smith where shoppers will be able to “edit” the film themselves by moving around.

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The campaign is also geo-targeted – through the fragrance’s Facebook page, consumers can check in to Selfridges on Foursquare to win exclusive prizes and “like” the page to win free samples. Then, when these customers are actually in-store, they can use the app on their smartphones or the provided iPads to activate a 3D display of a behind-the-scenes video or a large animation of the L.I.L.Y bottle.

Aurasma technology appears to be the latest means of multichannel for luxury brands to connect with their consumers. Net-A-Porter used the app to promote its new Karl by Karl Lagerfeld collection, where consumers could interact with window displays in New York.

Emmet Shine, founder and president of Gin Lane Media, New York which created the campaign commented: “Real 360 degrees is being in the hands of a user anywhere at any time, in person, to online to a combination of both.”

Tapping into customers’ emotions by making them “part of the story” as with the brand interaction through store windows is key. I have argued previously that luxury marketers must focus on the human characteristics that drive consumers. By a simple characterization of consumers into two personality types – Theta and Lambda, marketers will better understand how consumers behave according to their values, unconscious motives, and desires.

A recent article in the Financial Times discusses how Western retailers are attempting to capitalise on the Chinese love affair with luxury and woo high net worth consumers from that region.

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To coincide with the Chinese New Year, Affinity China, a luxury club for the wealthy Chinese organised a tour of New York where several brands “hosted” their high net worth visitors – among them Mont Blanc, the pen maker, which treated the shoppers instore to a recital by Lang Lang, the Chinese pianist.

These kinds of tailored experiences are just one of the ways that upscale Western brands are trying create and nurture relationships with affluent Chinese shoppers – and are discovering where the differences in these consumers’ attitudes lie.

Even when luxury stores accommodate Chinese shoppers by hiring Mandarin speaking staff and accepting the China UnionPay credit card, there are still contrasts. China engenders a “natural distrust” of overeager sales associates and many of the rich guard their privacy carefully – meaning that the cosy relationship Western luxury brands try to initiate with their most affluent customers is not a viable route.

Furthermore, as the desire for more flashy means of demonstrating their wealth recedes, there are many Chinese millionaires who are now interested in the provenance of their goods – or rather, what justifies the high price tag attached to them.

As per previous posts on this blog around the Lambda / Theta distinction of luxury shoppers, these kinds of Chinese consumers could be classed as Lambda – who see the item’s value not in terms of price, but rather, in terms of craftsmanship.

Victor Luis, president of Coach’s international business comments of these shoppers: “They are interested in understanding the history of the product, how it’s made, the quality, how to take care of the leather. ”