The Market

China is a focus for almost every luxury and fashion business, but despite rapid growth and an insatiable hunger for foreign luxury brands, few brands have successfully entered the market; this is due to a multitude of barriers, including intense government regulations, high import taxes, language barriers, a unique set of cultural and aesthetic values, and a diverse population. There’s no way to completely understand the market unless you are Chinese, live in China, and actively research it, but hopefully the articles below will help you get started.

3.20.12 – What’s So Wrong with Conspicuous Consumption (Helen Zhou, Chictopia)

As Chinese consumers’ tastes change and customers become more discerning, brands and companies are rushing to keep up. With explanations on past consumer habits as well as some predictions of future consumer behavior, this article offers some interesting insights into the psychology behind luxury consumption.

From the article:

“I present to you what is perhaps my favorite bit of criticism on this whole Chinese conspicuous consumer nonsense, as written by a Chinese journalist in China, who doesn’t dance around the beat in polite little raps but spells out in true blunt Chinese form just exactly what his and everyone else’s problem is: “To most people, the idea of the ‘Chinese luxury consumer’ evokes two different images: One wears a well-tailored Armani suit, has his own office in a nice building, speaks fluent English, and travels to Europe every year for a one-month-long vacation; the other sloppily dons a Pierre Cardin suit and a Gold lion belt, and speaking Mandarin with a thick accent, barks at a Hong Kong store clerk, ‘I wanna buy a Rolex gold watch.’”

2.23.12 – Caruso to Produce High-End Chinese Clothing (Luisa Zargani, WWD)

In a move not dissimilar to Hermes with the creation of Shang Xia, Caruso is venturing into the risky yet potentially profitable business of creating a luxury Chinese brand. By providing SheJi-Sorgere with support in know-how and manufacturing, Caruso hopes to create an international label with roots firmly in both China and Italy.

Umberto Angeloni

“In an interesting juxtaposition, SheJi-Sorgere, a new high-end Chinese men’s power brand launching next month, is being produced by an Italian manufacturer, Caruso SpA, which specializes in luxury and sartorial men’s wear.”

2.9.12 – LVMH Buys Stake in Domestic Retailer Ochirly (No Author Attributed, Jing Daily)

As a strategic move to reach more middle class consumers in China, one of the fastest growing demographics, luxury mega-conglomerate LVMH buys a stake in a local retailer Ochirly. Although a risky move, the payoff could be huge for the group, as starting brands and retail operations in China have proved difficult.

Ochirly has about 200 retail outlets across the Chinese mainland

From the article:

“The China market has obviously been pretty good to the luxury consortium LVMH Moët Hennessy • Louis Vuitton S.A., which posted forecast-beating 22 percent global growth in 2011 due heavily to Chinese spending both at home and abroad. Currently, dozens of LVMH-owned luxury brands, including Hublot, Chaumet and Loewe, are expanding into second- and third-tier cities in inland China, shrugging off concerns about a potential slowdown in Chinese spending this year. Placing a bet on greater consumption among China’s growing middle class, this week LVMH announced plans to take a 10 percent stake in the domestic Chinese fashion retailer Ochirly in a deal said to be worth US$200 million.”

2.7.12 – China Luxe Growth Seen Staying Strong (Casey Hall, WWD)

Although there are fears of China’s development slowing down, most industry insiders remain optimistic about growth of the luxury sector on the Mainland; however, most people recognize that China can’t continue to develop at such neck-breaking speed.

From the article:

“Despite fears of a slowdown in the growth of China’s luxury retail sales, there’s still plenty of optimism about business prospects for 2012, the Year of the Dragon.

Though China’s economic growth rate is expected to slow this year — the Organization for Economic Cooperation and Development is forecasting that China’s annual gross domestic product growth rate will slip to 8.5 percent, the lowest pace in 11 years — analysts said this was an inevitable decline after years of blockbuster gains. Two weeks ago, China said fourth-quarter GDP fell to 8.9 percent from 9.1 percent in the third quarter.”

2.6.12 – Chinese Makers Struggle to Go Upscale (Kathleen E. McLaughlin, WWD)

Although China manufactures most of the world’s products, the industry has found it difficult to shift to more high-end, expensive products as demand shifts away from mass-produced, cheap products.

From the article:

“Textile and apparel factories in China’s main manufacturing zones are looking for new ways to appeal to upscale buyers, with an eye toward replacing declining large-volume sales of the glory years with smaller, more expensive orders. Though the plan is working for some, for many, moving China-made goods up the value chain is a difficult and risky proposition.”

2.6.12 – Eyewear Fit for the East (No Author Attributed, WWD)

As China becomes the most important market for luxury brands, many designer labels have started to customize part of their product lines specifically for the Chinese market; the eyewear industry is no different, with some of the largest players adjusting their frames to fit the Chinese face and bone structure.

Ray Ban
From the article:

“To better accommodate Asian facial characteristics, Ray-Ban, Vogue Eyewear, Oakley, Oliver Peoples, Cover Girl Eyewear, Gucci, Dior, Giorgio Armani and Salvatore Ferragamo have developed silhouettes with adjusted nose pads, lens bases, temple width, angle, length and even front curvatures.”

2.3.12 – Chinese Luxury Spending Overseas Up 30%, But Tourist Priorities Changing (No Author Attributed, Jing Daily)

Over Chinese New Year, the biggest travel holiday of the year, Chinese consumers spent a staggering US $7.2 billion; Chinese tourists have become the saving grace for many sluggish retail operations in the US, France, and Hong Kong, where luxury goods are significantly cheaper than in the Mainland.

The number of mainland Chinese tourists headed overseas has increased as travel restrictions have eased

From the article:

“From Hong Kong and Seoul to New York and Paris, mainland Chinese tourist-shoppers were out in force over the 2012 Chinese New Year holiday. According to one report this week by the Beijing-based World Luxury Association, luxury spending rose 28.6 percent this year to US$7.2 billion overseas, with domestic shoppers spending a total of 470 billion yuan (US$74.6 billion) on all retail transactions within China. As the WLA added in its latest report, Chinese consumers made up around 62 percent of all luxury sales in Europe last year.”

2.2.12 – China Unveils Fresh Plan for Textile Industry (Lara Farrar, WWD)

China has unveiled a new plan to update its technology for the manufacturing sector as it aims to create higher quality, more expensive products and compete directly with the West; although unsettling for Western manufacturers, this can greatly benefit the domestic development of China’s fashion industry.

From the article:

“To combat the problem, the government is seeking a massive technological overhaul of the industry, calling upon fabric makers to upgrade everything from manufacturing technologies to producing more chemical fibers in order to “internationalize” the sector. The aim, it seems, is for the sector to be able to compete directly with more advanced textile industries in the West.”

1.28.12 – Luxury Brands Long to Bond With China’s Millionaires (Barney Jopson, CNBC)

Even though Chinese consumers continue to outspend the rest of the world, brands are finding it increasingly difficult to engage affluent Chinese for a number of reasons, primarily their increasingly discerning tastes but also cultural differences.

From the article:

“According to provisional figures from the Chinese Tourism Academy, Chinese took 70m overseas trips in 2011 and spent a total of $69 billion, an increase of 25 per cent from the previous year. They are also increasingly discerning.”

1.25.12 – Chinese Shoppers Putting Premium On “Made In USA” Labels (No Author Attributed, Jing Daily)

American-made brands are gaining traction in China with the rising middle class, as well-made yet accessible products become more sought after, although supply is still sparse in the Mainland.

Quality-minded American consumers have turned to the "Made in USA" tag; Will Chinese follow suit? (Image: A Continuous Lean)

From the article:

“By this point, it’s well established that China’s shoppers are fans of American brands like Coach, Ralph Lauren, Levi’s and Tiffany & Co., are buying Buicks and Cadillacs at an impressive rate, and are slowly but steadily coming around to Californian wines. But for smaller brands, particularly those made on a more limited scale in the US, opportunities are opening up in the Chinese market as well. In recent years, fueled by the “workwear” trend that swept through the American and European menswear markets, American-made brands like Red Wing, Woolrich, Engineered Garments, Tellason, Billy Reid and dozens more have found their niches in Western markets and Japan. Now, with the growing sophistication we’re seeing among some discriminating Chinese shoppers in top-tier cities (or those living abroad), US-made American brands may have a chance to crack the China market in coming years.”

1.20.12 – Tapping Into a New Market: The Chinese Mega Rich (Lara Farrar, WWD)

Affinity China is a new members-only concierge service for China’s ultra wealthy yet more discreet consumer. The high-end travel agency is bridging the gap between brands and increasingly important Chinese consumers by offering exclusive tours and services to its membership in top travel destinations around the world.

From the article:

“The red and gold lighting is happening, in part, to celebrate Chinese New Year, a weeklong holiday that begins Monday. But even more so, the Empire State Building will change colors in honor of the 300 or so megarich Chinese who will be inside sipping expensive alcohol at a private gala on the building’s 80th floor.”

1.10.12 – Report: Look For Second-Hand Luxury Boom In China This Year (No Author Attributed, Jing Daily)

Although China’s economy continues to grow, certain markets are sluggish and have lead experts to predict that some wealthy Chinese will cut back on spending; furthermore, some wealthy Chinese will even turn to selling off some of their old luxury goods for quick cash, creating a booming second hand market in China.

Fickle gift recipients or regular shoppers have contributed to the rise of the luxury second-hand shop in China

From the article:

“As Zhou Ting, director of the Research Center for Luxury Goods and Services at UIBE, said this week, the growing number of ultra high net worth respondents that plan to decrease luxury spending over time reflects the fact that many are highly leveraged in volatile assets like real estate and the stock market. In the face of concerns in these areas in 2012, Zhou noted, some ultra-wealthy Chinese may sell some of their high-end goods for quick cash. This, Zhou concluded, means that the second-hand luxury market should be a segment in which we see huge industry growth this year.”

1.3.12 – Shang Xia Turns Luxury To Philanthropy, Helps Children Of Migrant Workers (No Author Attributed, Jing Daily)

Hermes’ Shang Xia brand broke down its exhibition at Sinan Mansions and re-purposed the materials to build a playground and reading room for disadvantaged children of migrant workers, showing its philanthropic and socially responsible side.

Shang Xia's donated playground, designed by Kengo Kuma

From the article:

“Using bamboo, pebbles and wood reclaimed from the Bamboo House, Shang Xia had two new areas built for the Liuying Lu (柳营路) school for children of migrant workers in Shanghai’s Hongkou district: a serene “Book Garden” reading room and “Paradise” playground. Designed pro bono by Kengo Kuma, the new areas can be rearranged for study or play, and include modular study tables, bookshelves and stools, all donated by Shang Xia.”

12.24.11 – Chinese Grab Luxury Goods (Cecily Liu, China Daily)

After more than a decade of luxury, it seems like Chinese consumers still can’t get enough of foreign luxury brands. However, more mature Chinese consumers have sought out brands with domestic roots, although such purchases are still a negligible part of the overall market. However, many believe that the Chinese will quickly change brand preferences, as there is less brand loyalty, an increasing speed of fashion information, and an over-saturation of the market with foreign luxury products.

From the article:

“Chinese shoppers are spending more on luxury products abroad this Christmas, despite the current world economic downturn.

And they are buying more tax-free goods than shoppers from any other country, China Daily learned from Global Blue, the largest tax-refund and shopping services provider in the world.

In the financial year ending in November, Chinese shoppers spent $2.15 trillion on tax-free products, a 56 percent increase from the same period a year before, according to Global Blue.”

7.19.11 – Chinese Fashion Market $200B by 2020 (Evan Clark, WWD)

An article demonstrating the potential in the rapidly growing Chinese market for retailers and brands but also a lack of understanding of the complicated demographics of Chinese consumers.

From the article:

““It is not enough…for companies to assume that they can sit back and be buoyed along with the coming wave of growth,” cautioned the report, entitled “Dressing Up: Capturing the Dynamic Growth of China’s Fashion Market.” “Growth over the next 10 years will manifest itself in very different patterns from those of the past 10 years.”

It was only in the late Nineties that increasing wealth and an opening society allowed the Chinese to express their individuality through fashion, said the report, noting that companies looking to grow will need to understand demographic and retail changes under way.”

7.11.11 – Debate: Luxury Tax (No Author Attributed, China Daily)

An interesting debate on China’s new luxury tax cuts from three different points of view. I personally agree with the first opinion opposing the luxury tax cuts, as it will only fuel more unbridled conspicuous consumption, or at least in the short term, which China doesn’t need.

From the first opinion in the article:

“Many people are debating whether the government should reduce the tax on luxury products. The answer is “no”, because luxury goods are not necessities. Since consumers of luxury products are generally rich, high taxes will make them part with some of their money, no matter how small that fraction is, and help narrow the wealth gap in the country.

The consumption of luxury goods is already high in China. According to the latest report of the World Luxury Association, China’s luxury goods market was worth $10.7 billion in 2010, or one-fourth of the world’s total. Moreover, China is likely to surpass Japan as the largest luxury goods-consuming country in 2012.”

6.29.11 – China’s Appetite for Acquisitions Presents Major Opportunities for Mid-Range Brands (No Author Attributed, Jing Daily)

The Chinese aren’t only buying from brands but also starting to straight up buy the brands, with a particular focus on mid-range international brands.

From the article:

“Last month, Jing Daily covered the Fosun Group’s plans to acquire a 9.5 percent stake in Greece’s Folli Follie Group for US$121 million, a move that we said reflected the broader interest among Chinese conglomerates to buy up global brands, then re-engineer them with an exclusively China-facing focus. (A model popularized by Ports 1961 owner Kenneth Chan, who moved the company’s operations from Canada to Xiamen after acquiring the brand in 1989.) Similar acquisitions have been seen in recent years in the automotive industry (with Geely’s acquisition of Volvo being the most obvious example), the textile industry, and the fashion industry, where Chinese companies like Li & Fung have recently taken over Western brands like Cerruti.”

6.20.11 – China to Cut Import Duties on Luxury Goods (No Author Attributed, Reuters)

With many Chinese nationals shopping abroad for luxury goods and the government planning to change China from an export economy to one based on domestic consumption, many ministries within the government are championing the slashing of China’s high import tax on luxury goods.

From the article:

“The bid to keep well-heeled Chinese shoppers at home is in line with Beijing’s over-arching plan to boost domestic consumption and cut China’s dependence on exports to drive its economy, the world’s second largest.

With the new taxes, duties on imported cosmetics, milk powder, watches, clothes, suitcases and shoes are expected to be reduced or even scrapped entirely, it said.”

6.7.11 – Chinese Shoppers Spent 400% More on Luxury Goods Overseas Than at Home (Ouyang Kun, Jing Daily)

An article with staggering statistics on the consumption of Chinese consumers abroad. Chinese nationals shop abroad because at home the luxury tax adds 30-50% on most luxury fashion products, which are expensive to begin with.

From the article:

“According to the recent 2010-2011 annual report by the World Luxury Association (WLA), as of March 2011, the Chinese luxury market now accounts for a quarter of global market share, totaling US$10.7 billion, even before factoring in private aviation, yachts and luxury cars. Despite the 30 percent growth registered last year in China’s domestic luxury market, however, Chinese spending at home remains dwarfed by spending abroad. It’s an established fact at this point that–absent the significant luxury taxes, privacy concerns, and sometimes limited inventory seen in mainland China–some of the top-spending outbound tourist-shoppers do virtually all of their high-end shopping in Europe, Hong Kong and elsewhere. But an interesting (if frustratingly vague) finding by the World Luxury Association is that Asian shoppers, 75 percent of whom were Chinese, accounted for 65 percent of luxury sales in the “major shopping regions” in France, Italy and the UK from March 2010 to March 2011.”

3.23.11 – Beijing Bans ‘High Class’ Billboards (Kathleen McLaughlin , WWD)

International brands in China are allocating large portions of their budgets for advertising and marketing to propel already insane consumption habits, but the government has signaled that such brands need to do it in a more tasteful, less conspicuous manner; China is certainly not one to ideologically promote social stratification, so certain words in certain contexts will be banned from advertising in China.

From the article:

“The new policy from the Beijing Administration for Industry and Commerce was first reported in the official China Daily newspaper, which quoted a press release from March 17 about new rules taking effect April 15. The move “will target advertisements that ‘promote hedonism’ or ‘the worship of foreign-made products,’ ” the newspaper said. Thus far, it appears the actual change relates to banning the use of certain words on outdoor advertising like billboards. These include “supreme,” “royal,” “luxury” or “high class” — words frequently seen on Beijing’s multitudinous billboards”

3.22.11 – Why Beijing’s Anti-Luxury Advertising Campaign Won’t Help the Wealth Gap (No Author Attributed, Jing Daily)

Beijing is trying to curb the intense consumption habits of the Chinese with a variety of different methods for fear of making the growing wealth gap in the country even more apparent, but nothing has seemed to have slowed down the Mainlanders taste for luxury foreign products… Everyone wants to be part of the rising upper and middle classes, and conspicuous luxury fashion products serve to do just that.

From the article:

“Recently, the Chinese government announced a new law that, when put in effect next month, will prohibit outdoor advertisements that “promote hedonistic or high-end lifestyles” in Beijing — essentially code for luxury brand ads. This, as the AP notes, is Beijing’s latest scheme to “ease public concerns about the country’s widening wealth gap.” However, it’s not the only one. ”

2.28.11 – Revisiting The Prospects For “No Logo” Luxury In China (No Author Attributed, Jing Daily)

Conspicuous consumption has fueled the success of major luxury brands in China for years, but consumers are quickly becoming more sophisticated and looking for brands that offer than more than just a logo.

Chloe released a low-key China anniversary edition handbag last fall

From the article:

“Are wealthy Chinese shoppers starting to forego Louis Vuitton and Gucci for lesser-known, less ostentatious brands? That was the contention of Richemont Group CEO Geoffroy de la Bourdonnaye last week in Shanghai, where Richemont-owned Chloe held its Fifth Anniversary runway show, the company’s largest China event to date. Speaking to the AFP, de la Bourdonnaye said that while “China has been very fast at picking up the most well-known brands,” China’s more sophisticated consumers are “now looking for the brands that are not necessarily on the top of the radar screen. They’re looking for new interesting brands that bring something that other brands don’t bring.” Looking to bring low-key luxury to more of the country’s emerging second-tier cities, Chloe will open four new boutiques in China over the course of this year, adding to the 10 it currently operates, with stores planned for cities like Nanjing and Xi’an.”

1.6.11 – In Cities, Clothes Maketh the Man (Tianyu Yu, China Daily)

Menswear continues to be one of the most promising markets in China, as men see dressing up as not only a way to portray success but also to obtain it.

From the article:

“Gu Yuanjie, 31, spends more than half of his 10,000-yuan monthly salary on clothes. “I prefer sports apparel and upper-casual ranges, which make me look younger and full of vigor but I wear up-market suits that cost tens of thousands of yuan during my working time,” said the marketing manager for an international automobile firm in Shanghai.”

12.8.10 – A Decade of Change in the Chinese Luxury Market (No Author Attributed, Jing Daily)

A timeline demonstrates how quickly the Chinese luxury market has grown, from virtually non-existent ten years ago to the most important market in the world.

From the article:

“This week, the Chinese site Fashion & Beauty takes a look back at the last decade in the Chinese luxury market, illustrating how quickly it’s come so far. With major brands opening new, increasingly lavish, flagships on a regular basis, it’s easy to forget that China was a virtual blank slate 10 years ago, and that the market at that time was far more challenging than it is today. Considering the country’s GDP in 2000 was around a fifth of its current size, and that breakneck economic growth didn’t really take off until the country’s WTO ascension in 2001, this isn’t terribly surprising.”