Letter from Shanghai by Kevin Chen |
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Kevin Chen is a Chinese national living in Shanghai. He previously worked in different parts of China for multinational firms including L’Oréal and Fuji-film, and later moved into the publishing field as a marketing director, vice president and editor-in-chief for local magazines. He is a columnist and freelance writer and his popular “˜Letter from Shanghai’ column appears monthly on The Moodie Report.com. He can be reached by email on kevinck@vip.sohu.net |
CHINA. I had just returned from India, still getting over the country’s heady variety of scents and flavours when I first noticed the babble of noise across the Chinese media. The debate was: “Can the Chinese cultivate their own luxury brands?”
Just before my trip to India, the talk of the town was of foreign luxury brand players entering China – the opening of the new Louis Vuitton store in Shanghai’s Plaza 66, the visits by Jean-Paul Gaultier and Naomi Campbell.
But now the spotlight is trained back onto the Chinese. And it’s not just a single forum in one particular newspaper. From Beijing to Shanghai, this topic is being discussed heatedly in China’s media.
Fashion is hot in China and luxury – fashion or otherwise – is even hotter. The country is now Vuitton’s fourth-largest market and it’s set to move up the rankings further. Morgan Stanley expects Chinese luxury consumers to number 100 million eventually.
And Chinese companies want a bigger piece of the top-end action. A lingerie company from Shanghai recently announced that a shopper bought one of its pieces for US$6,000.
And a Beijing-based Chinese jewellery company told the media that it wants to become China’s Tiffany & Co. It also has ambitions to open 2,000sq m shops in every major city’s most prestigious locations.
“CHINA’S MIDDLE CLASS IS RATHER PECULIAR. MOST OF THE TIME THEY LIVE LIKE THEY ARE MUCH POORER THAN SOMEONE FROM A MIDDLE CLASS. BUT AT OTHER TIMES, THEY LIVE LIKE WEALTHY TYCOONS.”
There has been a relentless barrage of news at home and abroad about luxury brands and luxury consumption patterns in China. Most excitingly, columnists and analysts believe the market is still in its infancy.
Many believe it will mirror the evolution of the Japanese market. Not just in the rapid formation of premium-minded consumers but also in the almost blind worship of luxury brands.
The attitudes shown by the Chinese towards luxury are similar to those of the Japanese. Perhaps that’s because such brands prey on the desire to “˜save face’ not “˜lose face’ and show off one’s status – all typical Eastern values.
Chinese media are optimistic about the potential for Chinese brands. Put simply their argument runs like this – didn’t the Japanese begin to build their own luxury brands while consumers were seeking those of foreign houses? Kenzo, Shiseido and Issey Miyake are all examples of local and international success stories. It will only be a matter of time before China begins succeeding with its own mini wave of luxury brands.
So where are the likely Chinese success stories?
The main ingredients of luxury products are culture, heritage, quality and price. The optimists believe that the following sectors – pottery, cigarettes and Chinese white wine – offer a rich line-up of potential candidates.
Chinese cigarettes and white wine are doing particularly well. Each of these product sectors boasts a few brands that have attained status on the market and can command high retail prices. Their direct competitors would be high quality cigars, Champagnes and top-end single malt whiskies. Cigarette brand Chung Hwa, for example, is one of the hottest names in any airport location, attracting large numbers of Chinese travellers, often outselling big-name international competitors.
A survey from an advertising company says this: The consumer of high-quality Chinese tobacco and liquor is also a Bentley or BMW driver. He is aged 40-60, a government official, or the manager or owner of a private company. Without doubt, such a person would show very strong brand loyalty.
But I don’t quite share all this optimism – at least not yet.
A real luxury brand should be one that can conquer the world. It must be popular across several cultures. In addition, it must be a single independent label that can stand apart from a category.
Everyone associates Persian rugs with being expensive and luxurious. But it is remembered as a generic sector. It is hard for us to name a specific brand of Persian rug. This is the problem for many traditional handicrafts trying to develop branded status.
As a consultant for the in-house magazine of the best Chinese white wine company, I understand the CEO’s regret that Moutai’s quality and allure does not enjoy wider recognition. Moutai is a top Chinese white wine. But today it is still consumed mainly by the Chinese. It is hard to envisage the day, for example, when Moutai can open a specialist shop in Europe.
The Chinese luxury market is at best, nascent. I remember that three years ago, a professor at an European business school said: “China’s middle class is rather peculiar. Most of the time, they live like they are much poorer than someone from a middle class. But at other times, they live like wealthy tycoons.”
In the intervening period things have changed quickly. Salaries have increased and consumption is more rational. But the phenomenon the professor described is still valid. The brands that get it right in China know how to tap into the would-be tycoon’s mind-set. Chinese brands may just have to take their place in a growing queue.
PREVIOUS LETTERS FROM SHANGHAI
Letter from Shanghai – living the Chinese luxury dream – 09/11/04
