Isaac Mostovicz writes that Chinese consumers will buy more luxury goods online in the future, according to a new report ...
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.
Isaac Mostovicz writes that a new study indicates that people tend to buy high status items when they are feeling low....
Shopping therapy is joked about as means to get over something upsetting, but new evidence actually backs up the claim that we buy to make ourselves feel better.
Researchers at London Business School and Cornell University studied people’s shopping habits in according to whether they had had their ego threatened or not. The researchers took a group of students and had them take a computer test. One half of the group were then told they were in the 88th percentile; a perfect performance, while for the other half, they heard that their “spatial reasoning and logic ability was in the 12th percentile”; meaning that they weren’t so smart. Later, when asked to choose between an exclusive, high status pair of designer jeans and normal, everyday jeans, those who’d had their ego threatened were substantially more likely to pay more for the luxury jeans, and were 60% more likely to intend to purchase the jeans with a credit card. Having one’s ego already bruised, they were less keen to endure further psychological pain by parting with hard cash, it seems.
The study, published in the journal Social Psychological and Personality Science, explores the desire to combat self-threats through compensatory consumption and the relatively pain-free process of paying by credit. This may have been a factor for the consumption levels and accompanying debt that led to the crippling of the global financial markets in 2008. With that in mind, buying luxury should be done in your best spirits when you are happy and relaxed with your purchase, rather than as a reaction to some self-doubt. The negative scenario is that threatened individuals seek to consume high-status goods to feel better about themselves, but in turn do themselves more wrong when the debt builds up.
Isaac Mostovicz writes...
As the royal wedding approaches, luxury brands in the UK are looking forward to a consumer splurge in quality statement pieces.
Since the announcement of Prince William’s marriage to Kate Middleton, all eyes have been on the bride-to-be who has frequently been pictured wearing items from upmarket retailers Reiss and Whistles. These brands are at the top of the UK fashion chain, and via the “Kate Middleton effect”, consumers are expected to make a shift toward the pricier end of the high street. The £399 Issa dress that Kate Middleton wore in her engagement photo was an instant sell-out, for instance.
Premium fashion is expected to enjoy the strongest growth in the clothing sector, increasing 29% over the next three years, and the wider clothing sector is expected to report 9% real growth. These figures represent a change in consumer behaviours: now the trend is to buy fewer, higher value items, and an ageing population places more emphasis on quality and service than price.
The domino effect of Kate Middleton wearing popular, yet recognisable as being the upper-end of the high street fashion, clothes, is an example of Thetas following and making up the crowd. Here is a woman who will be the future Queen of England, who represents the modernisation of the English monarchy, who is wearing clothes that any person may wear. Taking part in this fashion trend is all about taking part in a piece of English history.
Isaac Mostovicz writes that US luxury consumers are loosening their purse strings, with some restraint...
An ongoing research project of wealthy individuals is showing signs that luxury consumers in the US are feeling more willing to spend their cash.
During the recession, for the wealthiest people in society there was a feeling of unease about spending money, leading to dismal sales figures for the luxury sector. Gradually people are starting to ease up and spend more. Over the last year, the stock market has made some big gains that have helped provide a more stable financial setting to these high net worth consumers. Also, as the economic situation of the rest of America improves, there is less guilt and self-consciousness around flaunting wealth. During the downturn, there was perhaps a greater sense of community, of “we’re in this together”, and to swan around in a new luxury car would look distasteful.
Now that the things are on the up, the luxury consumers are back out in force, which is actually crucial to the economy’s recovery. In America, consumer spending is responsible for about two-thirds of the nation’s economy.
Although they are spending again, there are some lessons learned from the nation’s hard economic times. Consumers are still looking for good deals and refraining from the very high-end items, such as luxury yachts.
Isaac Mostovicz writes that luxury concierge services are accommodating every aspect of a customer’s needs…....
What if you could get whatever your wanted whenever you wanted it? Quintessentially is a private member’s club with a global concierge service that is available 24 hours a day, 365 days a year, to fulfill the needs of customers who crave that extra bit of luxury in their lives.
Quintessentially boasts a team rooted in the luxury lifestyle industry to provide any sort of service required, from tickets to top sporting events, VIP access to the most exclusive clubs and shows, or last minute table reservations at the hottest restaurants in town. They have 60 offices around the world and 40 sister businesses, covering every aspect of the luxury lifestyle market, from property, rare art, fine wine, fashion, luxury travel, adventure travel, philanthropy, film premieres, spas, theatre – the list is endless.
Instead of the usual chocolate and flowers for Valentine’s Day, Quintessentially offered members something they could cherish forever. With the help of some of the world’s top writers, customers could write something meaningful and then record that song using state of the art technology in an international recording studio, where top-notch producers and sound engineers collaborated to then record a personalized song.
Quintessentially is just one of many clubs around the world that mark a new trend in luxury, where if you can put up the money for membership, the world really is at your fingertips. High-end concierge services would be particularly appealing to Thetas who can boast membership to these sort of exclusive groups that are reserved for a minority of the world’s population. Lambdas will also enjoy these groups as they can provide access to events and experiences where they can connect with others.
Isaac Mostovicz writes that the recession blues is over for Dubai, where the luxury market is back in full swing...
The luxury market is showing further resilience, and contradiction, from the economic crises spanning the world. In the Middle East, amongst high unemployment and rising food prices, one city is displaying a resurgence in its luxury retail sector.
Dubai was not immune to the financial crisis, and retailers reported a 45% decrease in sales in 2009, but thanks to demand by wealthy Emiratis and tourists from Russia, China and India, business activity in the UAE private sector hit an 18-month high in January 2011. Back to indulge in their luxury delicacies, Dubai is back on track to regain its position as the second most attractive city in the world for retailers.
Chocopologie is one of the retailers that is ready to get Dubai back on the up. The chocolatier claims to sell the world’s most expensive truffle “La Madeline au Truffe”, selling for $272 a piece. Other truffles include the Antoinette, a dark chocolate heart dipped in white chocolate and French rose water.
Other products making a comeback include Dior mobile phones in a jeweled finish, and calf-skin leather bags, both from Dubai’s Rivoli Group, and platinum Breguet Double Tourbillion Classique Grand Complication watches, priced at over $440,000 apiece. Auction houses Sotheby’s and Christie’s are also wanting a slice of the pie in Dubai, where they have seen some of the biggest sales.
Isaac Mostovicz writes that Kim Jong-Il seems to have expensive tastes...
The luxury choices of political leaders around the world don’t often come under scrutiny because they aren’t made public — leaders don’t want their constituents to feel that they are favoring a particular luxury company or worse, wasting state resources on luxury goods. So it was interesting to see coverage of Kim Jong-Il’s luxury preferences on the Wall Street Journal’s Wealth Report blog recently. According to reports in the Chosun Ilbo, Jong-Il prefers Italian shoes by Moreschi and Martell Cognac. His suits are made from Scabal cashmere that costs $300 a yard (it takes 4 yards to make a suit) and he wears Omega watches. A North Korean defector said that his luxury consumption is so great that Jong-Il’s personal expenses take up 20% of North Korea’s budget. This may be hyperbole from a defector wishing to put Jong-Il in an unflattering light, but as Robert Frank notes, however much Jong-Il spends, it’s probably in stark contrast to what the average North Korean, who makes about $1900 a year, spends.
That Jong-Il is aware of such luxury brands within North Korea may be a sign of how pervasive global luxury marketing has become around the world.
Isaac Mostovicz writes that the wealthy are spending again...
There have been a flood of reports lately on the increase of spending and of the return of the rich. To reiterate what Daniel Gross of Slate said, “The truly rich never went away…” “The corridors of wealth and finance are alive with new optimism” says New York Times columnist Rob Cox. Stock prices doubled in the past year for Whole Foods; high-end real estate is also recovering: the number of homes sold over $2 million in 2010 was higher in its first quarter when compared with figures in 2005. And Tiffany’s global sales went up 22 percent, with Saks up 6.1 percent and Nordstrom up 12 percent. Jason Notte from Mainstream noted some of the things sold this past month.
…a 7.64-carat blue diamond sold for more than $8 million, a 48,000-square-foot home in Bel Air, Calif., went for $50 million and Picasso’s “Nude, Green Leaves and Bust” painting brought in $106.5 million.
I have already talked about the Picasso painting in an earlier post of mine. Notte also alludes to the American Express report about people buying because they are happy (which I’ve also covered). Notte says that spending has become increasingly hobby-orientated, with 14% of affluent car lovers making up for more than 40% of automotive spending, 9% accounting for 39% of high-end clothing and the 9% crediting 42% of all travel spending.
We’re also seeing a rise in luxury e-commerce. According to Ben Klayman at Reuters, May saw luxury items, jewellery and products as the fastest-growing sales categories in the U.S retail sector, though sales in apparel and electronics suffered. Consumers are enjoying and valuing their money more but also expecting more.
The Luxury Marketing Council has found that high-end US consumers are largely disenchanted with the level of service provided within the luxury sector.
Complaints range from understaffing to insufficient knowledge of products and their advantages over competing items — increasingly important as wealthy and affluent customers become connoisseurs of their categories of choice and perform increasing amounts of research.
Gregory Furman, chairman of the Luxury Marketing Council says that there is a “great sense of relief among the high-end consumer that the worst is over.” While consumers may be feeling more leisurely towards luxury spending, Gross points out that it ‘may take another year to two of solid growth, market gains, and healthy bonuses before they start to party like it’s 2007.’
Isaac Mostovicz writes that a 'deliciously conventional' Picasso goes for an exceptional price...
Pablo Picasso’s Nu au Plateau de Sculpteur or ‘Nude, Green Leaves and Bust’ recently sold for a whopping $106.5 million, overtaking the world record set by a previous Picasso piece, Garcon a la Pipe which sold for $104 million in 2004. This is surprising considering it was only predicted to bring in $70 million, and even more so, says Graham T. Beck of The Awl because it has “everything to do with the lowest common denominator” and is “deliciously conventional.”
Agreeing with this is unimpressed New York Times art critic Holland Cotter:
“Nude, Green Leaves and Bust” and other paintings from its period are old and easy, art as usual. They keep to the known, the pleasure zone; they keep old orders firm, artist over subject, man over woman, woman as thing, a pink blob with closed eyes.
Whether you agree with this or not, Beck is quick to point out that it does not matter:
…when it comes to the auction block or the firehouse cookout, the proof isn’t stewing in the pot or penned on the critic’s page but in the dollars paid or the stumpy little fingers of the Napoleonic chief who never calls my name no matter how much salt and cheese I spill into that bubbling pot of ground round.
Putting aside Beck’s chocolate chili parody, what is important here is that Beck seems to suggest that the value of the painting cannot be endowed by a critic’s or professional’s assessment but by its final purchase price. Certainly, want is a crucial factor in determining the value of an item. The more an item is wanted, the more valuable it is and consequently, the more money spent. This reminds me of an old blog post of mine on Damien Hirst’s Diamond skull when I asked:
When the value of a piece is as astronomical as For the Love of God, does the focus necessarily have to shift from art to investment?
Here, it is the $106.5million which has shifted our views from investment to art. What this shows is not only a possible revival in the art market, but also a change in luxury attitudes. This certainly corresponds to an earlier blog post of mine about a new breed of luxury consumer. Roberta Smith of the New York Times is going along the right lines when she questions the coy art of the mystery bidder:
Strictly enforcing one’s privacy — at a time when so much goes public as fast at it happens — may be the ultimate public display of power, and thus the most erotic…
We look on, gape-mouthed, as the figure rises and then clamor to know. We think we are the observers, but actually we are the observed. It is Buyer X who is most in control and who therefore derives the greatest pleasure from the actual transaction. Anonymity only makes it that much more pleasurable and voyeuristic.
If this is true, luxury consumers and their reasons for buying are becoming ever more complicated and dynamic.
Isaac Mostovicz writes that there's more to explore on the dual Theta-Lambda mentality within the Chinese luxury market...
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.