A recent survey found that half of China’s urban residents say they prefer buying luxury items online because prices are cheaper than franchised stores.

While this fact is very interesting, and suggests that more companies should make an effort to offer their wares online in China, interest in luxury in general in China is growing rapidly. The Chinese are buying more luxury cars and SUVs than ever before — 500,000 will be purchased this year, compared with 98,000 five years ago. Luxury companies are opening stores (Louis Vuitton opened two flagship stores on the same day in Shanghai earlier this year) or are thinking of opening stores (Harrod’s comes to mind), and luxury hotels (like the Waldorf Astoria Club Hotel) are popping up all over the place.

All this suggests that marketers from the west are beginning to understand how the Chinese interact with luxury, but a great deal more can be done to enhance sales and the experience of buyers. The key is understanding how individuals interpret luxury, and this often comes down to understanding culture.

Photo by gruntzooki

In my previous blog post, I talked about China’s young luxury population and the Chinese consumer pyramid. We also looked at how Tom Doctoroff’s ‘Confucian Conflict’ model of Chinese mentality parallels with my own Theta-Lambda theory on luxury consumption.

Acknowledging the fact that of course not everyone can fall neatly into one category and certainly, I am not saying one should be completely Theta or Lambda. What is still peculiar but altogether fascinating here though is the fact that Chinese consumers, if not all, but majority of them have this Theta-Lambda duality ingrained within their consumer consciousness. If we look at the study below, it might perhaps shed some more light on this:

Added Value did an interesting study where they had two variables which defined where a country was placed in terms of luxury. One axis was from maintaining to transforming lives, and the other was from inner to outer motivation. And in the transforming and inner motivation you have Japan, then you have the UK, which is about maintaining inner motivation, the US is in maintaining and outer motivation, and China in transforming and outer motivation. So Japan is about confidence – ‘don’t be shown up’, the UK is about pleasure and knowing, USA is showing you know/status and China is about showing and status but also moving forward in society.

Here we can see that the UK has a more Theta-like tendency; being more comfortable in the sphere of knowing and belonging with others, whilst the USA possesses more of a Lambda tendency; more motivated by externally displaying knowledge and status. China’s showing and status is a Lambda quality; showing off what you have achieved and differentiating yourself by being one of the few to be on top of the pyramid. However, status to the Chinese can also be interpreted as fitting in, belonging with your fellow peers. As Doctoroff puts it, you can’t be blatant in your ambitions, you can’t ‘crash through the gates’ because there are rules to observe and follow. You can say this is the Chinese way of being a Lambda but in the fashion of a Theta. It is then not surprising that what makes a ‘luxury’ brand in China are its benefits externalized.

Luxury, says Doctoroff is a tool, a means to an end and because the luxury segmentation in China is so diverse, it becomes a more important tool than ever. This again goes back to idea of the Chinese’ ‘Confucian Conflict’, of wanting to ‘play in the game.’ This statistic by TNS shows this difference in perception of luxury goods:

According to TNS, 64% of Chinese think luxury brands denote success, and only 1% think they denote superficiality.

In China, luxury brands are synonymous with success, yet they do not share in the western fear of fake luxury taking sales away. Instead, a brand that is copied substantiates the brand’s luxury status. However, because luxury goods are synonymous with success, it becomes even harder for someone to pull off wearing a fake.

Anybody that has the money to buy a luxury brand would not be caught dead with a fake.

…

Chinese can tell very quickly if something is real; it would be a huge loss of face to be discovered with a fake.

In order for luxury brands to succeed in the Chinese market, they must have mass media exposure, must be big and omnipresent and in the right stores in the right locations. Physical presence is also important so you must have an overseas marketing department; you cannot import your content and it cannot be done digitally. Education of your luxury brand to the public is also imperative, as well as the ability to demonstrate innovation of your luxury brand. The idea of a mass media exposure on the public very much hones into Theta personalities, because it’s telling them that everyone else will have this and in following this trend, you desire to belong with this group of people. But it also appeals to the Lambda side of the Chinese consumer because it is so in your face and because the public would have been educated of this particular brand, they would know just how successful you are.

In summary, we’ve explored Doctoroff’s Chinese model of mentality, his ‘Confucian Conflict’ and found how very important it is for a luxury consumer in China to exercise this when buying luxury goods. In addition to this, we have also seen how this ‘Confucian Conflict’ comprises of essentially the same two parts as my Theta-Lambda dichotomy, but here they co-exist in a more symbiotic relationship, and what’s more, it is the majority of the China’s population who subscribe to this luxury, symbiotic mentality.

Photo: Flickr

I came across a very interesting piece by Tom Doctoroff in the Huffinton Post. Titled ‘The Confucian Consumer and Chinese luxury: FAQs’, it explores the differences of the Chinese mentality on luxury goods and how establishing a luxury brand in China should also be implemented in an approach that is reflective of this. China’s continued economic growth and effect on the global market has become so prominent that it has become a recurring theme in many of my blog posts, with looks at its effect on the diamond market, property market, auto market and even art market. Therefore, Doctoroff’s FAQ comes at an opportune time to explore the mentality behind China’s booming economy alongside my theory of the Theta-Lambda relationship.

According to Doctoroff, China’s luxury population is very young because it is a very ambitious society. The Chinese adhere to an ideology which he calls the ‘Confucian Conflict’, regimentation vs. ambition for innovation. This conflict is very similar to the Theta-Lambda persona. China’s regimentation parallels Thetas’ own importance on comfort, affiliation and belonging, while Lambdas’ search for challenge, achievement and differentiation are synonymous with China’s ambition for moving forward.

Unique to this Chinese mentality is their desire to maintain this conflict, this ying-yang balance.

Individualism in China (in the sense of society encouraging individuals to define themselves outside of that society) doesn’t really exist here. But on the other hand, ego – the demand for acknowledgement – is very powerful.

Doctoroff further says that luxury goods in China are a sign of the consumer’s intention to ‘play in the game’, to become a potential competitor for that spot at the top. What we are seeing here is a very strong Lambda trait of that need for acknowledgement.

Despite having this ‘Confucian Conflict’, Doctoroff describes what can only be a Chinese consumer pyramid. At the top you get your most elite, but to stay on top, he must have reached a high level of mastery and connoisseurship that he can ultimately demonstrate and manipulate however he wants.

An example would be Audi 8, where you’re establishing a parallel between the craftsmanship and attention to detail and ancient Chinese art. So again, it’s for somebody that has truth and ultimate mastery.

This somebody could well be a Theta because of its high emphasis on truth, unity and brilliance. Next down the pyramid are men who are moving forward whilst in the middle of their journeys. Then we have the independent women and at the widest point, we have the youth.

So for the people on top – and this gets back to the resolution of the Confucian Conflict – it’s about a need to tick competitors away who are angling from below to maintain their position at the top. It’s a way of subtly exerting power and control…So then you move into new luxury, and these are people that need to demonstrate they shine through, but always through substance – because they can never be superficial. Their complex is that they need to move up the hierarchy, but their ambitions can’t be too blatant. This is not a space where you crash through gates; rules are sacred. So it’s a way of demonstrating progress, a reassurance that new money doesn’t need to be uncouth.

Again, this model of behaviour takes parts from both Theta and Lambda personalities. You are ambitious and seeking achievement in the highest form possible, yet you are not ostentatious in the respect that you still observe social boundaries and rules for fitting in, if still only in appearance. This is very different to trends in Western culture where society encourages individualism and western marketing reflects this. It is for this reason that a western marketing approach to China’s consumers will just not work. You can’t have a ‘western individualistic messaging’ approach to a culture where individualism is not emphasized or in existence.

Photo: Flickr

Luxury cars stole the spotlight at this year’s Beijing Auto show, despite its original, intended focus to be aimed at green technology. The article on Merinews describes the shift of attention as being due to car makers’ response to the unanticipated, phenomenal, economic growth in China’s auto market.

Ian Robertson, BMW head of Sales said, “Nobody anticipated the growth here. Growth rates [like this] happen once in a lifetime in mature markets. Here, they’re happening every year.”

Last year China’s auto market outsold the US by a staggering 13.6 million vehicles in comparison to US’ 10.4 million. In particular interest to these car manufacturers’ is the amount of luxury cars being sold in China. The LA Times has the figures:

Although many of those vehicles are stripped-down economy models, the nation’s wealthy are fast developing a taste for pricey cars.

Luxury car sales in China were up 66% the first three months of 2010 compared with last year, according to J.D. Power and Associates.

Mercedes-Benz has seen its China sales more than double so far this year compared with 2009.

BMW announced at the event that it was boosting its sales target in China from 100,000 to 120,000, which would make the country its third-largest market. The company sold 90,000 cars here last year.

This is not the first time China’s potential market has sparked car companies’ interest, we saw BMW, Audi and Aston Martin all take advantage of this as well as highlighted China’s growing presence on the property market and also talked about the continued, growing trend in Chinese consumers heading west to buy luxury goods.

Favourite cars among these luxury Chinese consumers are Ferrari’s 599 GTO, Porsche’s Panamera 4 and Mercedes Benz’s SLS AMG. People choose these sorts of cars for their features, and the most popular include cars with more legroom and footstool in the rear, Bang & Olufen Speakers, ambient lighting with rotating colours, walnut folding table, 10.2 inch LCD screen and massage chairs. These backseat features take precedence over the driver’s seat because it is the preference and style of Eastern buyers to be chauffeured around in what Audi A8 project leader, Matthias Mueller calls ‘statement’ cars; ‘It has to show you’ve made it.’ Popular buyers in this market appear to gravitate more towards Lambda personalities, because not only do they get the extravagant interior of the car but also the show-stopping exterior that Lambdas would immediately attach a back story to. A story of success, achievement and accomplishment and in a manner that is so hard to miss. Thetas would also love these luxury makes as it not only provides discreet opulence within but also maintains their desired standing among China’s elite community.

Photo: Flickr

There’s an interesting report in The Wall Street Journal about the current state of the luxury property market in Hong Kong.

According to the report, the market is seeing a surge in sales, and the prices are high.

Demand for ultra-luxury property in Hong Kong has been growing strongly in the past few years, pushing prices in the segment to dizzying levels because of a scarcity of supply—particularly of townhouses and detached houses in urban areas—and the rising wealth of some buyers in mainland China looking for investment opportunities. Luxury-property prices in the city soared about 50% last year, compared to a nearly 30% rise in the market overall.

China’s presence in Asia as a leader in luxury has been a long time coming, and has been reported on in the mainstream media with increasing frequency.

In February it was reported that London’s luxury property market was experiencing an up-tick in sales. I blogged about it back then, but made no mention of foreign buyers because there was no evidence to suggest it.

This report, however, says that Chinese buyers are flocking to London to buy luxury properties.

Some of the mainland Chinese buyers who are thought to be driving up the price of luxury property in Hong Kong are also having an impact on high-end property further afield. China’s super-rich are particularly active in London, attracted by depressed property values and the decline in the value of sterling. Earlier this year, Hong Kong billionaire Joseph Lau, chairman of Chinese Estates Holdings, paid US$54 million for a six-story mansion in London’s Belgravia district that reportedly features its own cinema.

I did, however, blog about the recent trend of Chinese people heading west in search of luxury goods, a trend which appears to be continuing.

Do these developments constitute a “rebound” of the luxury market to previous levels? Hard to say. What we can be sure of is that the industry is recovering both globally and locally, and doing so quickly.

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.

The race for the hearts and minds of China’s luxe car buyers is on, as Aston Martin joins BMW and Audi in upping production and overall presence in China.

The China Daily reports that Aston Martin opened its flagship China showroom in Beijing this past week.

The store, located at 66 Jinbao Street, Chaoyang District, is more than twice as big as Beijing’s other two Aston Martin stores and is the largest in Asia Pacific. The 500 sq m showroom will display seven of the luxury vehicles each costing roughly 1.3 million yuan.

Given that Aston Martins are typically more expensive than BMW, Mercedes or Audi vehicles, this move suggests that the demand is outstripping supply. This points to a new opening in the market for the super-rich.

While the entire article is interesting, because it further illustrates the growth in luxury goods and demand in Asia, there’s one quote in particular that is quite revealing of the way luxe brands are thinking about China.

Matthew Bennett, regional director for Aston Martin Asia-Pacific, said the following:

“(Beijing) has a growing appreciation for luxury goods and an authenticity of a product, that’s what we’ve been seeing. … ”This is the place to be.”

The phrasing is interesting, too. The “authenticity of a product” suggests a targeting of the Lambda personalities, who prefer both high quality and an air of exclusivity to their purchases.

Another statistic worth noting is that about 80 Aston Martin vehicles were sold in China last year. Even upping that number to 100 would allow Aston Martin to retain its shine of exclusivity.

Here’s an interesting story about China’s pursuit of luxury goods. Agence France-Presse (AFP) is reporting that increasingly high numbers of wealthy Chinese people are traveling to luxury capitals such as Paris to purchase goods that are discounted.

I wrote previously that the global economic downturn has caused luxe companies and retailers to put products on discount in order the move product. It appears that the Chinese, who have become more involved in the Asian luxury market, are going where the deals are.

The AFP article offers more detail:

The Chinese bought tax-free goods worth 158 million euros (222.5 million dollars) in France in 2009. That was an increase of 47 percent from the level the previous year, according to Global Refund, a company specialising in tax-free shopping for tourists.

The article also notes that this has been part of a larger, growing trend:

Tax-free shopping by Chinese tourists has been increasing for the last two years, rising by 39 percent in 2007 and 23.3 percent in 2008. They now represent 15 percent of sales and 13 percent of transactions.

More Chinese people are going abroad to buy high-ticket items, which suggests a growth in the number of people who might be considered Theta personalities in China.

Year on year increases in the number of Chinese traveling abroad to do this kind of shopping suggest the figures will continue to grow. What will be interesting to watch is the impact this has on China’s burgeoning luxe market.

TIME Style & Design has just come out with an in-depth report on affluent consumer tastes from around the world. The print edition (unfortunately not available online) delves into the appetites of European shoppers—the Spaniards, Italians, French, British, and Germans—who now are considered some of the wealthiest consumers in the world thanks to a strong euro.

Did you know that Italians own more brands than any of their counterparts and outspend them on watches and jewellery? Or that Spain has the highest percentage of “uber lux” consumers, those with high incomes and luxury-market activity?

It is fascinating to juxtapose the tastes and psychologies of EU neighbours, but TIME adds some more food for thought in its online exploration of luxury in the top emerging economies of China, India, and Russia. What does luxury mean to these three countries who for the first time in decades are finding the economic freedom to afford such indulgences?

For China, who accounts for 12% of global luxury sales, luxury is in demand. Designer watches (66% of affluent consumers bought a watch of an average $2,253 in the last 6 months) are high status symbols, as well as skin-care products. The Chinese consumer will spend up to $280 on a skin-care product, which is almost 3 times as popular as make-up.

In India, the luxury market could grow as much as 25% in the next 3 years. Menswear brands top the most well-known luxury list, which is no surprise as many women still wear saris. Interestingly, local brands, such as Park Avenue, Allen Solly, and Reid & Taylor, also rank high, but considering previous high import taxes, it’s no surprise foreign brands aren’t more prominent yet.

And for Russians, with a heightened sense of brand awareness, flaunting one’s economic status is what luxury is all about. While Russians crave luxury fragrances, it’s jewellery that really whets the appetite: Bulgari, Cartier and Tiffany & Co. top the list of most widely owned brands.

It appears as if there are ripe markets to break into and hungry consumers to feed—something luxury retails are well-ready to capitalize on.

Beijing’s luxury shopping market is now competing with Shanghai and Hong Kong as the world’s luxury brands flocked to newly opened stores, in time for the Olympics.

China has come a long way. A luxury consumer market that did not exist 20 years ago is now seemingly on an unstoppable path to dominate top-end retail. China is already the world’s third largest luxury goods market, behind only Japan and the U.S. It is predicted to become the world’s largest by 2015. Beijing’s high-end retail space has expanded by 89 percent in the last two years, according to the real estate service agent Jones Lang LaSalle. There has already been five new mid- to high-end retail projects opened in Beijing in the first half of this year, with a further 24 expected by the end of the year.

Before the Olympics Games, Beijing’s luxury retail market tended to be low-key, especially in contrast with its rival Shanghai. Luxury shoppers would even go as far as swapping the buttons on their designer suits for plain ones to avoid questions about the source of their money. Now we see Beijing leading the way with 3 million square feet of luxury commercial space being developed since 2007.

However, with such a wide variety of high-end shops in Beijing, retail observers have commented that brands are facing a growing challenge to stand out and create a niche for themselves. With the post-Olympic cool down some luxury brands may find it harder to succeed as China’s 300,000 millionaires  increasingly embrace the lifestyles and buying habits common to the world’s wealthier nations, attracting every luxury brand into Beijing and thus flooding the luxury goods market.