Category Archives: Luxury

WSJ: Only China Can Save Luxury Sales

Spending On Everything From Luxury Cars To Private Jets Shows Ultrarich Chinese Are Unleashing Their Inner Conspicuous Consumer

The exclusive club of "ultra-rich" in China are splurging amid the ongoing global economic doldrums

The exclusive club of "ultra-rich" in China are splurging amid the ongoing global economic doldrums

An interesting blog post today at the Wall Street Journal, where Robert Frank points out that the global economic downturn has turned a new spotlight onto a once-unlikely savior — the Chinese [ultrarich] consumer. While this group is exclusive to say the least, particularly in terms of the miniscule percentage of the Chinese population that can live up to this title, the staggering dropoff of the once mighty American, Japanese and even Russian luxury showoff has pushed the Chinese super-spender into the leading role.

Though Frank’s potential nicknames for this ultrarich group of big spenders — “Deng Xiaoblings,” for one — are a humorous take on the subject, the repercussions of an Eastward shift of conspicuous consumption and luxury shopping sprees could mean a great deal for established western luxury brands. Just as the increased buying power — and desire for diversification — seen among Chinese buyers of everything from gold to real estate to luxury cars to Chinese antiquities and contemporary arts has affected those markets and caused everyone from Bugatti to Sotheby’s to focus far more strongly on the China market than ever before, this China-bound luxury shift could very well change the nature and corporate strategies of the global luxury industry.

From the WSJ:

Purveyors of posh have a new mandate: Go East!

An updated forecast from Bain & Co. out this morning shows a stronger-than-expected rise in luxury sales for Asia–especially China. It said it expects luxury-goods sales in mainland China to jump 12% this year.

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Interview: Can China’s Luxury Brands Compete At Home And Abroad?

NPR Interview With Nicholas Lardy Of The Peterson Institute for International Economics Discusses How To Make “‘Made In China’ Mean Luxury”

High-end fashion brands like Shanghai Tang are part of the first wave of Chinese luxury brands from the mainland and Hong Kong

High-end fashion brands like Shanghai Tang are part of the first wave of Chinese luxury brands from the mainland and Hong Kong

We’ve written before about domestic Chinese luxury brands, and the way these brands are working to appeal to luxury consumers in that country by resonating on a cultural level rather than simply promoting their exclusive price-points. In the next few years, as Western luxury brands lose a little of their initial luster in top-tier markets, although they’ll probably maintain their draw in second- or third-tier markets, many analysts think there will be a great opportunity for Chinese luxury brands to squeeze into the luxury market.

In an interview with NPR today, Nicholas Lardy, “a senior fellow at the Peterson Institute for International Economics, a non-profit, non-partisan group based in Washington, D.C,” discusses how China’s burgeoning middle class (which, at more than 200 million potential customers and growing, has the potential to revolutionize buying trends) — rather than the small proportion of “ultra-rich” — will be the customers who will lead to the ascendance of Chinese luxury brands.

SIMON: Now, some of us remember when the term made in Japan was synonymous with inexpensive, dare I say, cheap goods. And of course in our lifetime that’s changed entirely. Made in Japan now means quality, particularly in the car industry. Is China trying to expand in the manufacture of high-quality items itself?

Mr. LARDY: It’s not only trying, I think it’s succeeding and it’s succeeding much earlier than Japan did for the simple reason that they’ve allowed foreign firms to play a much bigger role. We buy computers that say Dell or Toshiba and so forth – they’re all made in China. They’re made by foreign companies operating in China, assembling all the parts and components there.

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Hong Kong Apartment Is World’s Most Expensive

Five-Bedroom Luxury Duplex In City’s Mid-Levels Area Sells for US $57 Million

The world's most expensive apartment was recently sold in this building for 57 million US dollars

The world's most expensive apartment was recently sold in this building for 57 million US dollars

We’ve written before about the Hong Kong real estate market’s relatively fast rebound in the face of the global economic downturn, with exclusive properties like The Masterpiece attracting the attention of well-heeled mainlanders and Hong Kong residents alike. This week, an apartment in Hong Kong’s Mid-Levels area sold for a record-breaking HK$439 million,  or around US$57 million, and analysts expect a continued flow of money into the city’s luxury real estate markets as cash-rich individuals look to take advantage of the Hong Kong government’s recently lowered interest rates and the city’s appeal as an investment  haven.

Today, the AFP writes on the recently sold duplex, noting that the massive flood of mainland money coming into the market is exciting developers but worrying some economists who think this year’s 40% leap in the luxury property sector portends that a property bubble could be forming:

“You may see some more record-breaking prices in the luxury segment,” said Buggle Lau, chief analyst for Midland Realty.

“We have all the ingredients for a bubble coming up… With low interest rates and ample liquidity people are inclined to put their money into real estate.”

Demand from mainland Chinese investors looking to diversify their new-found wealth and snap up trophy property assets was also likely to buoy the market, said Savills’ head of research Simon Smith.

“There is quite a lot of momentum out there. If you look ahead there’s a chronic undersupply of residential units for luxury and the mass market,” he added.

Bugatti Opens First Showroom Outside France In Beijing

Luxury Carmaker Builds Showroom On Jinbao Street In Response To Growing Chinese Demand

Bugatti's choice to open a showroom in Beijing shows the company's intention to expand in the China market

Bugatti's choice to open a showroom in Beijing shows the company's intention to expand in the China market

China’s growing automotive demand has been great for automakers of all stripes, from up-and-coming budget domestic brands to the world’s most expensive and exclusive marks. Already this year, companies like Japan’s Mitsuoka Motor Co have announced their intentions to build showrooms in China, Porsche debuted its Panamera Turbo at the Shanghai Auto Show, Ferrari created a China-only version of its 599 GTB Fiorano, and Rolls Royce received 20 orders for its $250,000 Ghost after presenting the automobile in Hong Kong.

Now Bugatti, the high performance French automaker, has opened its first-ever showroom outside of France, located on Beijing’s swanky Jinbao Street. From Alibaba News:

“The opening of the show room, the first one in the world, shows Bugatti’s confidence in China‘s luxury carmarket, “said Mr Kuo-chung, President of Bugatti China. 

Kuo-chung said backed by sustained economic boom, China now has a significant number of billionaires, pointing to the annual Hurun Report which said China now has more known dollar billionaires than any other country bar the United States.

Chinese Acquisition Of Scottish Cashmere Producer Todd & Duncan “Sewn Up”

Ningxia Zhongyin Becomes First Chinese Firm To Take Over A UK Cashmere Company, Eyeing Growth Of Domestic Market In China

Ningxia Zhongyin is one of the world's top producers of cashmere fibers -- with its acquisition of Todd & Duncan, it has greatly increased its global footprint

Ningxia Zhongyin is one of the world's top producers of cashmere fibers -- with its acquisition of Todd & Duncan, it has greatly increased its global footprint

Cashmere, a major contributor to the economy in China’s mid-western Ningxia Hui Autonomous Region, has quickly become big business in China, as more companies in Ningxia attempt to move beyond producing raw cashmere and into the much higher profit-margin sector of finished product exports. Of the major cashmere producers in Ningxia, in the last few years the Ningxia Lingwu Zhongyin Cashmere Company has emerged as the most ambitious, with executives making it clear that the company wants to not only capture the lucrative Chinese domestic market but also the even more lucrative overseas market.

To secure both groups of customers, the company has set out to acquire marquee foreign brands, which have the brand history and pedigree to appeal to Chinese luxury consumers. Last year, Zhongyin made its first moves to try to acquire the Scottish firm Dawson International, a deal that ultimately fell through but showed Zhongyin’s intentions to break into the Scottish cashmere market. From China.org:

In 2008, the Ningxia-based Lingwu Zhongyin Cashmere Company entered into negotiations to take over 120-year old Dawson International, widely regarded as the world’s number one cashmere business. Although the takeover talks were called off on June 4, the bid was an indicator of the ambition of Ningxia’s emerging cashmere giants.

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Ferrari Collaborates With Chinese Artist Lu Hao On Exclusive “Ferrari 599 GTB Fiorano China”

Paint Work Takes Inspiration From Song Dynasty Porcelain

Lu Hao's one-off Ferrari incorporates many Chinese elements, from the jade start button to the cracked porcelain paint scheme

Lu Hao's one-off Ferrari incorporates many Chinese elements, from the jade start button to the cracked porcelain paint scheme

To build greater brand equity and strike a chord in the Chinese market, many companies have been known to create limited-edition “China only” versions of their products inspired by Chinese culture or history. Today, Ferrari announced its collaboration with the Chinese contemporary artist Lu Hao — “well known for his models of Beijing, his playfulness with architecture and geographical images in rapidly evolving modern China” (ArtZine) —  on a one-of-a-kind China edition of the 599 GTB Fiorano (the regular model will be limited to a run of about 12 in China). The one-off edition by Lu will be auctioned off at a charity function in Beijing later this month.

Lu’s Ferrari features a unique trompe-l’œil paint job incorporating the faint green hue and distinctive cracked pattern of Ge Kiln porcelain from China’s Song Dynasty (AD 960-1279), but some of the most fascinating elements of the “China” edition are in the car’s interior. From Auto Express:

The China edition of Ferrari's 599 GTB Fiorano features ancient Chinese accents

The China edition of Ferrari's 599 GTB Fiorano features ancient Chinese accents

The ignition button is carved from jade and insribed with the ancient Xiao Zhuan symbols for ‘engine start’, while other novel additions include a rev-counter marked with Chinese characters, a matching luggage set embroided with the route of the silk road – traditionally the most important trade routes in China – and an engraved plaque unique to each car.

New Figures On Mainland Chinese Spending Bode Well For Luxury Retailers

Pao Principle Study Shows That Luxury Market Has Less To Fear In The Next Year Than Expected

"Tiffany is King" in mainland China, according to Pao Principle. Tiffany opened boutiques in Beijing & Shanghai in 2006

"Tiffany is King" in mainland China, according to Pao Principle. Tiffany opened boutiques in Beijing & Shanghai in 2006

With luxury retailers looking for any good news in a still-tough market, studies by several organizations in recent months have shown that things are a little less ghastly than expected, particularly in Asian and other emerging markets. The newest of these studies, carried out by business consulting firm Pao Principle, indicates that recent spending trends in mainland China should please luxury handbag, watch, and jewelry producers.

From Travel Agent Central:

According to…Pao Principle, almost 90 percent of individuals surveyed had bought a designer handbag in the past 12 months. Unsurprisingly, men accounted for luxury watch purchases at a ratio of almost two to one over women.

Out of those surveyed who had purchased fine jewelry, Tiffany was king, with almost a third of Mainland Chinese who had purchased fine jewelry in the past 12 month turning to the store for their wares.  Necklaces were the accessories of choice, with “white gold” reigning supreme in overall jewelry purchases.

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