Asia

Ritz-Carlton Expands Its Presence in China

Isaac Mostovicz writes that that brands are continuing to expand their presences in China ...

The luxury market in China has been steadily rising, as Chinese consumers look set to create a rise in luxury goods sales of 25 percent this year.

According to a Bain & Co. study from earlier this year, as second and third tier Chinese cities become ’destinations’ for Luxury brands, China will become the third-largest luxury market in the next five years.

As reported by the Wall Street Journal,

“Bain predicts the worldwide growth trend will continue for the next few years, with sales rising between 5% and 6% each year to between 214 billion and 221 billion euros by 2014.”

This prediction is leant weight by the news of brands such as luxury hoteliers Ritz-Carlton Hotel Co. expanding their presence in China. A recent article by Luxury Daily on the Ritz’s expansion notes that this is taking place as part of a $2 billion expansion. Ritz-Carlton already has eight hotels in China, and has made the decision to expand based on there being a growing affluent population that is beginning to reward itself with luxury goods, services and travel.

A Ritz-Carlton spokesperson said:

“Given the focus on China right now, there is no small secret that China is an emerging country when it comes to lots of different things… there is a huge amount of the population that is now on the move and starting to travel. There is also an equally large population following purchasing behaviours into a luxury market.”

As each Chinese city is very different, none of the Ritz-Carlton hotels in the country are the same, but rather are “culturally relevant”, with the locale reflected in menus and services.

Alongside the news of Ritz-Carlton’s expansion, it was announced today that US luxury bag maker Coach will be listing shares in Hong  Kong as it seeks to raise its profile among Asian consumers. This follows successful flotations by luxury fashion house Prada, and luggage provider Samsonite.

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Asia and Luxury Spending

Isaac Mostovicz writes that a slowdown in the Chinese economy could have a knock-on effect on the Luxury industry...

A MasterCard survey on Consumer Purchasing Priorities has placed shoppers in Singapore, Japan and India among the Asia Pacific region’s top luxury consumers. According to the survey:

“Singapore (57%), Japan (50%) and India (46%) lead other countries in terms of ownership of luxury goods; nearly half of the consumers there own at least one luxury item worth more than US$500.”

According to the survey, Indians are more inclined to own jewellery; Singaporeans prefer luxury watches, jewellery and designer clothes and leather goods and Japanese consumers favour designer clothes and leather goods and luxury watches. MasterCard Worldwide Senior Vice President Porush Singh said:

“This survey shows that luxury shopping varies dramatically across emerging and developed markets. As with other recent surveys, it is the most buoyant and resilient economies that can afford to spend on luxury items and India and Singapore would certainly fall into that category… Luxury shoppers remain loyal to their brands, even when the economic climate isn’t favourable.”

It is perhaps worth noting that China was not one of the countries polled.

China has been a key area of growth for luxury markets in recent years, although an article published today on Wall St Cheat Sheet claims that according to a recent Bloomberg poll, 59% of global investors believe that China’s GDP will gain less than 5% annually by 2016, compared to a 9.5% gain last quarter, with the majority believing this slowdown will occur over the next two to five years.

According to Affinity China,

“China has grown its number of millionaires from 300k in 2006 to over 1 million today.  In fact, Chinese luxury consumers are on average 20 years younger than luxury consumers in the US or Japan.”

If the luxury market in China dows slow, this may have negative knock-on consequences for the luxury industry that has been trying so hard to appeal to Chinese consumers.

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Why British Luxury Brand Mulberry is Soaring

Isaac Mostovicz writes that that Mulberry is another example of luxury brands going from strength to strength...

Mulberry Group, the British luxury apparel and accessories brand, has become the worlds best performing fashion retail stock, according to Bloomberg.

Their bags, such as the ‘Alexa’, have become iconic, and expansion in the US and Asia has seen Mulberry’s stock rise by over 500 per cent in the last twelve months, whilst the companies profits have quadrupled to £17.1 million.

This recent Forbes article suggests that Mulberry would do well to follow in rival brand Burberry’s footsteps and bring newer technology into stores if it is to continue expanding throughout Asia.

Whether Mulberry becomes more tech-dependent or not remains to be seen, but one thing is certain – they are another brand demonstrating that luxury sales have not been diminished by the recession, and that luxury brands are now poised to be stronger than ever as they are further immersed in the booming Asian markets.

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Luxury in India takes centre stage

Isaac Mostovicz writes that India's dominance in Asia's luxury market is beginning to attract major players in global luxury...

New reports suggest that India’s luxury market is growing and maturing quickly. Earlier this week Forbes reported that the luxury boutique hospitality association, Relais & Chateaux, recently launched in India.

Relais & Chateaux president Jaume Tapies said:

We currently have 40 members in Asia and I’m confident that we can reach 100 in the next three years. We started looking at India in 2007 and enrolled our first member two years ago. We plan to add five more members in the next 18 months. My big surprise in coming to India was when I saw the deep understanding there is for what we stand for.

Mr Tapies’ findings about India are not surprising. I’ve written previously about luxury real estate in India taking off, and luxury automakers fighting for dominance in the Indian market.

What Mr Tapies’ findings do mean is that more major brands in the luxury industry are taking notice. What started as a small drip of interest at the end of 2009 has turned into more of a torrent.

Mr Tapies’ quote “I saw the deep understanding there is for what we stand for” is very interesting, too. Relais & Chateaux is for the discerning luxury customer. Considering the price point for their rooms, it’s clear their primary target market are Theta personalities. Much of India’s newly-wealthy class could be considered Thetas.

Thetas are concerned with truthfulness and denounce fakes. The screening process to become a member of Relais & Chateau is a long-term assessment to determine whether the hotel is “real” or “fake”:

We have a team of nine inspectors who visit the property incognito and submit a technical report to the board which makes the final call. Typically, the process takes a year. We have to be scrupulous as 1.5 million people trust Relais & Chataeux every year. Collectively, our properties do 750,000 room nights annually at an average room rate of 345 euros.

Relais & Chateaux is catering to those in India who, now with greater incomes, are becoming hyper-aware of how they are perceived by others, especially those they believe to be part of the social class that they wish to belong.

The people who stay at these hotels know the rigorous inspection process that member hotels undergo. Because this is such public information, it adds to the allure for an Indian Theta.

When they book a reservation to stay at a Relais & Chateaux hotel, they are likely to tell their friends and colleagues. They need people to know that they are able to afford to stay at such an exclusive hotel in their home country.

As more major luxury brands take notice of India’s heightened luxury profile, it could inspire neighbouring Asian countries to take notice and make some changes.

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China’s Lambda personalities opt for nontraditional investments

Isaac Mostovicz writes that China's growing presence in the global luxury industry could have implications in the Western world...

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Being wealthy is one thing, and being art-buying wealthy is another. Luxury Insider reports that ultra-rich Chinese are beginning to throw their considerable status and wealth around in nontraditional (for Chinese) markets such as art and wine.

The article features a very interesting quote by Kevin Ching, CEO of Sotheby’s in Hong Kong:

“We saw a big surge in Chinese buying in categories that they were not familiar with. We have now seen mainland buying – not in huge quantities – of Western, Impressionist and contemporary art.”

This tells us that wealthy Chinese people are buying items because of their real and perceived worth. They are seeking to become a part of the small circle of western art buyers who spend large sums on buying art. Essentially they are taking cues from the Lambda personalities who they count as their friends or colleagues.

The article also has some key figures that further illustrate China’s growth into a global luxe powerhouse, a crown that once belonged to Japan.

For the first time in Sotheby’s 10-year history in Hong Kong, mainland buyers accounted for nearly 40 percent of Sotheby’s Asian sales during last autumn’s auctions. That figure represents a two-fold jump from 18 percent in the fall of 2008.

Does this newfound interest in expensive art signal a dimming interest in diamonds in Asia? It’s hard to say at this point.

What’s certain is that China’s rapidly growing economy is major impact on the local luxe industry, and that impact is reverberating on the other side of the globe, causing a mad dash by Western’s luxe labels to get a foothold in this booming new luxe market.

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Luxury’s Asia fascination continues

Isaac Mostovicz writes that forced portfolio diversity is painful now for luxe brands, but in the long run they could be better because of it....

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Appearing in Slate Magazine earlier this week was a feature about the luxury market’s continued move into Asia.

The article starts out by explaining what many already know, and indeed what I’ve written about previously: That the current markets — including Japan – have hit a wall. These rapidly receding markets have forced many luxury brands to diversify their market portfolios. Often, this means investing in uncommon Asian markets.

As more individuals in Asia accumulate enough money to satisfy their daily needs and begin to have confidence in their long-term prospects, they’re interested in demonstrating to themselves, their neighbors, and anyone they happen to meet that they, too, have joined the club. In a very real way, Asian buyers are getting both the best-made product they can finally afford and an aspirational brand at the same time. They’re making a leap from the 19th century to the 21st.

In effect, what we’ve got is a continent of newly-wealthy Lamda personalities who are keen to set themselves apart from their peers by displaying their new status with luxury buys.

There’s pain right now in being forced to diversify rather than doing it out of a larger strategy, but in the long-run these brands may be better off for it. Once the recession comes to a close, buyer confidence will return.

If enough time and resources are put into developing the Asian market, by the time the West comes back into the fold, luxe retailers will have greater market penetration and additional revenue streams in places they otherwise would not have had.

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Asia’s luxury market regroups in the face of recession

Isaac Mostovicz writes that Asia's luxury market is in flux as it searches for a different kind of customer...

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The global recession has caused many luxury brands to re-think the way they do business and cater to affluent clients. Across Asia brands are decamping from once-profitable markets such as Japan and turning their attention to emerging luxury markets.

For example, Japan, once seen as a luxury hub of Asia, has seen Gianni Versace SpA announce plans to close its Japanese stores, pull back from the market and re-think their strategy in the face of declining demand.

Meanwhile China has seen its standing as a luxury hub in Asia increase. Bloomberg reports that in China luxury-home sales almost tripled in September from a month earlier. The luxury car market in China is also doing well. Reuters reported earlier this year that Mercedes-Benz saw a 52 per cent increase in sales in June from a year earlier.

Luxury brands are also beginning to focus on non-traditional markets.

In Mongolia, luxury brands Louis Vuitton and Ermenegildo Zegna will open shops in the capital’s main Sukhbaatar Square. According to the New York Times, Mongolia has a per capita gross domestic product of about $1,800 in 2008. Because of that, the luxury market is extremely niche. Brands are betting that niche will want to spend money on luxury items.

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Book: Cult of the Luxury Brand

Isaac Mostovicz writes...

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The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury – published earlier this year by Radha Chadha and Paul Husband – looks at how Western brand retailers are increasingly meeting their bottom line by marketing to Asian consumers.

The authors cite the fact that over half of the revenues brought in by Western luxury brand retailers comes from Asia.  Japan’s market is the biggest, but the authors show how China’s and India’s markets are propelling this trend forward.

Among other topics, the book shows how fickle luxury trends can be, and traces the history of luxury fashion over the last century.  Around the turn of the century, during the Belle Epoque, most sales came from a small elite of European upper classes.  A handful of Asian cities such as Tokyo, Shanghai, and Hong Kong, took part as well, only to disappear again after Japan’s losses sustained during the second World War, with the austerity introduced by China’s communist regime, and the nationalistic tendencies of a newly independent India.

This book also shows how luxury retailers have gone about democratising the must-have luxury fashions which middle-class housewives, schoolgirls, and mistresses swoon over today across Asia.  It also looks at how these trends will continue to evolve in the future.

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