Growing Demand In China’s Interior, Other Asian Countries Should Counterbalance Tepid Consumption Elsewhere
Although Chinese consumers have shown a taste for foreign luxury brands, domestic labels will present stiff competition in coming years
As a result of the fast-paced development of China’s eastern coastline and special administrative regions, only recently have major luxury brands made it to the country’s vast interior region, where a number of second- and third-tier cities remain relative blank slates. Since so many companies are only reaching these areas now, the spread of luxury brands in China has become a regular news story. This has only intensified over the last year, as formerly free-spending Japanese and American customers have thought twice about luxury goods while emerging customers in places like the BRIC countries and relatively fast-growing economies like Vietnam become more regular (and brand-loyal) buyers. Nonetheless, the luxury sector is still experiencing only modest growth one year on from the onset of the global economic slowdown despite their best efforts at wooing new customers.
If many recent articles are correct, though, what we’ve seen over the last year — severe as it has been — should only prove to be a blip in the grand scheme of luxury revenues. From Financier Worldwide:
Sales of designer shoes, handbags, and beauty products have weathered the financial storm particularly well. At the end of August, French cosmetics company L’Oréal reported higher than expected profits of €1.37bn for H1 2009. In June, Hermès revealed it was farming crocodiles in Australia to feed demand for its coveted £4000 Birkin bag. Around the same time, Mulberry announced that its handbag sales had recovered, climbing 21 percent in the first 10 weeks of the new financial year. Shoe supplier Kurt Geiger, which operates in upmarket department stores across the UK, also reported double-digit growth in profits for the first five months of the year.
Bain & Company predicts that trading in the developed markets will remain tough for the rest of the year, with growth of around 1 percent in 2010 before a slow recovery. However, despite the recession slowing the pace of development in emerging markets, Bain believes that, as a consequence of increasing personal wealth, growth in global GDP, and rising tourism in Russia, China, India and Brazil, spending will surge between 20 percent and 35 percent over the next five years. This is expected to aid the recovery of the luxury goods sector.
Posted in Business, China, Economy, Fashion, Luxury
Tagged asia, asian, brands, brazil, China, chinese, consumer, customer, economic growth, Economics, Fashion, global economic crisis, india, Luxury, luxury goods, middle class, russia, spending, wealth
Studies Indicate Sluggish Demand In Established Markets Will Continue As Buyers Remain Motivated In China
According to new studies, Chinese luxury enthusiasts may help buoy the global luxury market for the next few years, if not drive long-term growth
Luxury brands have had what can conservatively be called a tough year, with the global economic crisis putting a gaping wound in their profits in traditionally high-demand countries like the US and Japan, and recovery lagging behind expectations. These figures have been tempered somewhat by the potential of the Chinese market to soften the blow of falling demand elsewhere, if not counteract it completely. While it is still a bit quixotic to expect China to be the savior of luxury brands everywhere — since it is still very much a developing market — it does benefit luxury brands to plan ahead for the time when China is the world’s biggest luxury market, and start brainstorming on their long-term strategy for sustained growth as well as strong brand loyalty.
This week, Harvard Business looked into the Chinese luxury market, digging through statistics to discern whether this market truly is all it’s cracked up to be. While their findings suggest that hyperbolic enthusiasm about the Chinese consumer is unwarranted — as we’ve written before — they do remain bullish about the potential of this populous and fast-moving market:
New research from McKinsey & Co. indicates that, by 2015, China will be home to the world’s fourth-largest population of wealthy households, an estimated 4.4 million. McKinsey also reports that presently, about 80% of China’s wealthy are between the ages of 18 and 45 (versus 30% in the US). Jing Ulrich, the chairman of China equities at Morgan Stanley, was recently quoted in Forbes as saying of China, “With the global recovery unlikely to be smooth, domestic demand is likely to remain the primary engine of growth in the remainder of 2009.” In a Wall Street Journal op-ed last year, Zachary Karabell argued that “the rise of the Chinese consumer is the only thing standing between them [global companies] and a decline in their business.”
Posted in Business, China, Culture, Fashion, Investment, Luxury
Tagged branding, brands, China, chinese, consumer, Fashion, internet, Luxury, marketing, markets, online
Ongoing Negotiations Over Acquisition of French Brand Pierre Cardin Shows Chinese Luxury Brands Have Sights Set On Rapid Growth
Pierre Cardin has become one of the most recognizable and coveted foreign brands in China since entering the market in 1978. Photo (c) CRI English
Mixed signals surround the rumored takeover of the Pierre Cardin brand by two Chinese groups, which would — if true — illustrate the speed with which Chinese companies hope to attain global reach and influence. Early reports appeared to suggest that an acquisition of only Cardin’s China operations was imminent, but statements by the brand’s China director, Fang Fang, insinuated that the company was open to the idea of a wholesale takeover of its global assets. Although Pierre Cardin himself has denied these rumors, the story is making waves in the Chinese and global business press.
As one of the first western brands to enter the Chinese market after the government initiated its “opening and reform” policies in the late 1970s, Pierre Cardin carries significant brand equity in China, a point which gives this story extra importance in the grand scheme of Chinese luxury branding. As the AFP pointed out today, the acquisition of the Pierre Cardin brand by a Chinese company would be, in the mainland at least, considered a point of pride:
Posted in Business, China, Culture, Fashion, Investment, Luxury
Tagged beijing, branding, brands, China, chinese, Fashion, Luxury, pierre cardin
High Street Fashion Companies Opening New Locations Throughout China, Mirroring Strategy Of Major Luxury Brands
China's female consumer segment is spending freely, even during the global economic crisis Image ©Reuters
Recently, as consumers in developed countries have cut back, Western retailers have had to retool their growth strategies to include more store locations in emerging nations. We have recently seen the Barbie franchise open its flagship store in Shanghai, and now H&M has opened its first Beijing location, joining 14 other locations in the mainland. With the opening of these new stores, joining other global retail empires like Zara, Levi’s, and Uniqlo and luxury brands like Burberry in expanding in the China market, it is clear that China has become a critical part of all retailers’ growth plans. As ARC China reports, the grand opening of H&M’s Beijing store enticed hundreds of fashion-hungry Beijingers:
Posted in Business, China, Culture, Economy, Fashion
Tagged barbie, beijing, brands, China, Fashion, female, h&m, levi's, Luxury, shanghai, uniqlo, vera wang, zara
Asia Accounts For Largest Share Of World’s Luxury Market, Even As Global Financial Conditions Remain Grim
The Financial Express writes on the $80 billion global luxury market, which has fallen on hard times in the last year in most markets, yet continues to perform admirably in emerging economies and in East Asia. As the financial crisis wears on, and target markets in developed countries hold back, luxury brands have adapted quickly. Rather than courting reluctant customers, luxury brands have refocused their attention more to the world’s most populous nations, China and India, as consumers with the means to purchase luxury products in these countries continue to do so even as the rest of the world hunkers down for what could be a protracted recession.
Posted in Business, China, Economy, Luxury
Tagged beijing, branding, brands, chengdu, China, hong kong, india, Luxury, nanning, shanghai, wenzhou