luxury emerging market

Diamonds are Forever… in China, at least

Isaac Mostovicz writes that the Chinese luxury market goes from strength to strength, even as demand in the Eurozone languishes...

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.”

 

 

 

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The “Made in China” quality gap closes

Isaac Mostovicz writes that "Made in China" is coming to stand for high quality, artisanal and crafted ...

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.

 

 

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