Chinese Luxury Market looks after its own

Isaac Mostovicz writes that home-grown Chinese brands may have the opportunity to overtake their European counterparts in the near future...

A recent article in Black Friday Magazine talks about how, for the first time, luxury Chinese brands could be overtaking overseas companies in terms of popularity with their domestic audience. The old guard of Hermes, Gucci and Louis Vuitton could see themselves ousted by Chinese luxury brands like Shanghai Jahwa United, which sells highly regarded yuan perfumes, and Eve Group, which offers luxury menswear to high-profile customers such as martial arts actor Jet Li.

Image courtesy of Stock.XCHNG

The article goes on to discuss how Chinese consumers are becoming more interested in reattaching themselves to their country’s heritage and culture, so there could be significant opportunities for domestic brands looking to take a slice of the $33 billion luxury market.

“China’s manufacturing was very backward 30 years ago, and consumers worshiped and pandered foreign goods and ideas,” Jahwa Chairman Ge Wenyao said. “Foreign products are still good but the aura surrounding their brands is no longer there.”

A previous post in this blog talks about the new standard for “Made in China” goods, where brands are committing to providing quality goods for its domestic consumers. It will be interesting to see if China is able to produce some home-grown luxury brands that in time will appeal not only to the Chinese audience but have global allure.


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Suits you, Sir: How the men’s luxury market is excelling

Isaac Mostovicz writes that affluent consumers in overseas markets are key to the emergence of the men's luxury market ...

An interesting article in the Financial Times described the rate at which the luxury men’s market has expanded of late – to the point where it is beginning to outperform the women’s luxury market. According to the 10thedition of Bain & Company’s luxury goods worldwide market study, men’s items now make up half of the luxury market – in no small part down to the appetite of male consumers from emerging markets like Asia, and particularly China.

Men's luxury lifestyle emporium Heartless

 “In Asia, the development of men’s wear is extremely rapid, and in China we expect an organic growth close to 20 per cent for most of the European luxury names,” says Thomas Mesmin, a luxury goods analyst at CA Cheuvreux.


But it’s not just emerging markets that are seeing the of explosion of the luxury men’s market. Globally speaking, theUSbrand Coach has seen its men’s business double over the last year, and eventually men’s sales are expected to make up 15% or more of their total sales.


Hermes reports similarly spectacular expansion in its men’s categories. Meanwhile, major retailers and department stores are making plans to create exclusive areas for men’s luxury accessories and footwear – including Harrods and French retailer Printemps.


Alexis Morout, COO of footwear designer Christian Louboutin, has similarly positive projections for the future growth of their men’s business, commenting: “The men’s business represents today less than 5 per cent of our overall business, but could easily become 15 to 20 per cent in the near future.”


The Bain & Company study also reported that the luxury market continues to perform strongly in all categories, with apparel experiencing 8% growth in 2011, driven by both menswear (9%) and womenswear (7%).


With plans to trial men’s only concept stores by Gucci and Bottega Veneta in China, it will be interesting to see if this is a long-term evolution in consumers’ buying behaviour or if it remains a buying trend more exclusive to emerging markets.

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Chinese Luxury – In The Bag?

Isaac Mostovicz writes that that the luxury market in China is still worth watching, despite a slowing in expansion...

A recent article on Wall Street Journal talks about a surprising new trend picking up speed in China – creating fake bags. Nothing new here, you might think, but these bags are not made of fabrics or leather, but rather are fake brand carrier bags.

Image from Bloomberg news

The article says

“The ability to flaunt Gucci and Chanel shopping bags has long drawn Chinese shoppers to luxury labels. But now China’s high-end showoffs are figuring out that there’s no need to spend thousands of yuan for a bag that’s available online for a mere fraction of the price.”

This clearly shows something about the value that is placed on luxury items in the country.

However, according to this Financial Times article, brands are becoming more cautious after a prolonged period of agressive expansion in the country.

The article reports:

“Some brands are making conscious decisions to reduce the pace of expansion and focus more on store performance improvement,” said Bain&Company in its latest report on China’s luxury market. The management consultants say growth gradually softened in the fourth quarter and quote luxury brand company executives as saying they are only “cautiously optimistic” for next year as they “don’t have enough visibility”.”

However, this is not because Chinese consumers are not buying luxury goods – the article goes on to say that Chinese consumers are still buying, but are choosing to do so abroad as it gives them better value for money.

It will be interesting to watch what happens to the luxury market in Asia as it goes seemingly from strength to strength.

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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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Luxury car makers look to diversify to buffer from the economy

Isaac Mostovicz writes that luxury car makers are having to diversify and look to new markets if they are to insulate themselves from future financial turmoil...

Luxury car makers are increasingly showing two faces to consumers – one mean, one green – according to this recent Wall Street Journal post titles “Retooling Luxury Cars for a Younger Generation”.

The article explains that as well as building an array of high-horsepower performance cars, makers are also bringing out ‘green’ cars such as the electric BMW i3 – a concept car made of aluminum and carbon fiber. These vehicles will no doubt appeal to younger, more environmentally conscious luxury consumers who still want to buy premium goods.

BMW i3

Many of these new ‘green’ vehicles are built in a different manner, requiring money to innovate, which in turn requires customers to keep buying traditional cars, as the article highlights:

“To pay for expensive no-petroleum car technology, European luxury marques must keep their traditional clientele happy and [paying] big money for fancy cars for as long as possible.”

Luxury car brands are now more than ever looking to Asia for growth, where there is growing demand for these vehicles, and they hope that this will insulate them from any possible dips in European spending. I have written before about the growing luxury market in Asia, particularly in China. Diversification is now important in insuring that brands are safe from any downturns, although the market looks to be recovering, set to rise this year by almost thirty per cent.

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Appealing to China’s High-end Buyers

Isaac Mostovicz writes that that luxury brands now have to go above and beyond to target China's luxury consumers...

Innovative new ideas are the key to winning the heart of China’s luxury buyers, according to this article in The Australian.

Luxury internet-retailer Yoox has teamed up with Fed-Ex to launch a service that will see delivery men wait on the doorsteps of luxury consumers whilst they try on their purchases and decide if the product is worth keeping, or if they want to send it back.

To stand out in this competitive market, luxury brands now have to go above and beyond in terms of marketing and products. Examples of this include giving customers private driving lessons with F1 drivers, hosting star-studded fashion events and instant-messaging fashion advisors to help with questions of size and fabric.

These examples are all part of a larger trend of offering special perks and exclusive services to China’s consumers, as they become sophisticated world leaders in luxury consumption.

Luxury Homes in Spain says of this article...

China is eager to proove to the world that it is the top luxury goods consumer and it certainly is the country to watch out for in the coming years, as its economy booms.

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Luxury websites are falling short of the Chinese market

Isaac Mostovicz writes that that luxury brands are going to have to keep up with technology if they are to remain at the top of China's luxury markets...

A recent report by a research company has found that many of the American and European luxury brands that are making huge profits in China are failing to deliver an online experience that appeals to an increasingly technologically savvy Chinese market.

Sales of luxury goods in China are growing fast, with the sector set to be worth £9.3 billion by the end of 2014. China is expected to overtake Japan as the global largest consumer of luxury goods in 2015, and in 2020 the Chinese luxury consumer base is predicted to double to 160 million people.

The Chinese are also going online in unprecedented numbers, and by 2015 there is set to be over 750 million internet users in China, with a significant number of these accessing the internet on mobile devices. Increasing access to the internet and rapid developments in technology are seeing Chinese consumers finding new means of purchasing online.

In order to make the browsing and buying experience as engaging and appealing as possible to consumers, brands are going to have to bring newer technology into stores, on mobiles and to people’s homes. Luxury brands are going to have to be innovative, creative and at the cutting edge of technology, or they risk being left behind.

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China, Mulberry and the end of “luxury shame”

Isaac Mostovicz writes that that the culture of "luxury shame" is officially over...

Share prices at Burberry and Mulberry are currently at record highs, while private equity is looking to buy any luxury brands that hoist a for-sale sign. In stark comparison, the high street is struggling financially.

As high profile retailers such as Jane Norman and Habitat go into administration, British luxury brands are going from strength to strength, both at home and in global markets. They are particularly thriving in China and the rest of Asia, and it is forecast that the Chinese luxury sector is set to be worth £9.3 billion by 2014, almost double its current worth, with Britain on its heels with a predicted worth of £9.4 billion by the end of 2015.

A recent Sunday Times article describes how a two-tier economy has emerged from the recession and suggests the stall in the high street and the parallel lift in luxury stems from the economic confidence of shoppers. Whilst poorer segments of society might be feeling less optimistic about consuming (with public spending cuts affecting them alongside food and fuel inflation) the richer segments of society are feeling more confident after the recession and are back to spending their money on expensive items.

It seems clear that the culture of “luxury shame”  – where bankers’ wives would ask for their designer purchases to be packaged in plain paper bags – is officially over.

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Luxury on the rebound

Isaac Mostovicz writes that that investment in luxury items are on the up again, particularly in developing markets such as China...

If we needed further proof that the world’s super-rich have rebounded from the financial crisis, we need look no further than this recent article in Reuters showing that the demand for art, watches, vintage cars and other luxury items expanded in 2010, with collectibles such as boats and jets accounting for almost a third of these investments.

Whilst taste and personality – whether they are Lambda or Theta, for example – determines what each individual will enjoy investing in, certain items such as artworks are more likely to be acquired for their potential to gain value.

The demand for diamonds has benefited from rising prices of raw materials, as they are seen as a particularly safe investment.

This demand has partly been spurred on by wealth in growing economies, particularly those in Asia (see my recent post on Chinese luxury bathrooms), which are reviving markets in ‘investment’ pieces as well as dictating the luxury goods that are manufactured in the first place. With Asia surpassing Europe in number of millionaires for the first time ever last year, it is clear that to see new luxury trends emerging we must cast our eyes East.

Luxury Homes by VAPF says of this article...

China is fast becoming the world’s top luxury good consumer, and the fact that they idolise the European way of life means that they are purchasing all things that symbolise a proximity to European citizens, including luxury homes in Spain, a favourite holiday home destination for many Europeans.

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