Luxury Brands Gain Momentum in China Despite the Global Slowdown Knowledge
Zegna isn alone. Even while Wall Street was still reeling last November, LVMH (the French luxury group with products ranging from accessories to spirits) reported double digit sales growth during the third quarter of last year, according to LVMH 2008 Annual Report. The company has seen growth in China, led by high end leather goods brand Louis Vuitton (LV). And, while wine and spirit connoisseurs around the world are showing restraint in purchasing pricey bottles, in China LVMH has reported sales of Hennessy cognac, and the country was the largest market for the luxury spirit in 2008.
And the fourth largest population of the world wealthy will live i mi adidas n China by the year 2015, says a mid July report by McKinsey, titled, China Wealthy. According to the report, as of 2008, there were 1.6 million families in China with household incomes of over US$80,000. By 2015, it estimates that number will jump to 4.4 million, growing by up to 16% per year over the next five to seven years. luxury sector will benefit most if this trend continues, says Jeremy Cheung, managing director (HK) of China luxury consultancy Impact Asia Limited.
In response to continued and growing sales, luxury brands are investing in China. French fashion brand Herm announced plans late last year to open three to four new stores across the country during the next three years. Italian fashion house Versace is investing more than US$56 million to increase its presence in Asia, with a specific focus on China, and is slated to open 11 new stores across the region this year, according to statements by former chief executive Giancarlo Di Risio. The company gave its first fashion show in mainland China in November last year, at Beijing Legation Quarter, the former residence of the American ambassador that has been turned into one of Beijing trendiest venues.
Luxury buyers in the third group have salaries that belie their combined purchasing power and are mainly office workers making roughly US$600 or more a month. According to a recent survey conducted by China Market Research, more than 70% of respondents in this demographic said they will open their wallets more in the coming six months versus the last six, according mi adidas to Rein. The survey results also indicate at least a 20% increase in market consumption in this demographic, especially in cosmetics.
As recently as five years ago, many companies saw China as a dumping ground for last season styles, says Kress. But as the Chinese started to travel, they quickly learned there was a difference between what they saw on shelves at home and what was on offer in boutiques abroad. Their growing economic power forced luxury brands to take notice. Now, accounting for slight adjustments to suit local tastes, Chinese shoppers in Beijing will find the same clothes hanging on the rack as in designer boutiques in Tokyo.
The Chinese market of the future may very well resemble the current market of Japan, which has developed a more individualist, Western way of consumption, Kress adds. Previously brand slaves, Japanese consumers are now mixing and matching Uniqlo and Hermes garments in any way they see fit, an evolution that is indicative of an economy that has developed enough that a significant portion of people mi adidas make their living from creative industries. These consumers will want to express their individuality through their consumer choices, he says.
These luxury jewelry brands are also constantly on tour in different cities in China, organize o mi adidas nline customer clubs and communicate with them regularly by sending art magazines and newsletters all effective marketing strategies that other companies can learn from, says Ye.
It certainly takes more than price strategies to win the hearts of China wealthy. brands belong to an exclusive few in any society, and it is especially so in China, says Zhang of Wharton. consumers of luxury products are very conscious of their social status and class, and they consume those goods to feel different and sophisticated. They surely can afford to pay for those feelings meaning a low price strategy is not the way to go.