How far would luxury brands go to woo the rising middle class and nouveau riche in China? Numerous articles have reported that China will become the world’s second biggest luxury goods market, overtaking the United States in just a few years. When consumers in the US and Europe are scaling back their spending on unnecessary luxury pieces, China’s rising middle class and nouveau riche are shopping at full gear around the globe for status badges.
So how far would luxury brands go to woo the rising middle class and nouveau riche in China? Hermès, the mother of all luxury bags and the ultimate symbol of status in the minds of many Chinese, gave its answer yesterday. Mao Yuping, currently CEO of Precious Gold Holding Ltd and long-time girlfriend of former Shanghai real estate guru Zhou Zhengyi, posted a picture of a custom-made Birkin bag – a Birkin embossed with China’s national flag – on her Sina Weibo account, China’s most popular microblogging service. The picture soon went viral with almost 20 thousand reposts and some 4 thousand comments so far. “It was so kind of Mr. Jing Daily: The Business of Luxury and Culture in China. Jiang Qiong'er (2nd L), Paolo Roversi (2nd R) and Jean-Pierre Raffarin (Image: Ding Yu for Jing Daily) With China’s luxury goods market now well-established as a leading global player, the country continues to see the growing presence of top international brands promoting their names while simultaneously investing in local trends.
Beyond simply looking to appeal to Chinese shoppers by flogging the same items found in Paris or New York, however, some brands are putting more of an emphasis on looking to the past to uncover and repurpose traditional aspects of Chinese culture and strike a deeper chord with China’s rapidly evolving high-end consumers.
One such brand that combines ancient and modern Chinese culture is Hermès-linked, Shanghai-based Shang Xia, which formed in 2008 and opened its first location at Shanghai’s Hong Kong Plaza in 2010. Hermes CEO Patrick Thomas (Image: Ding Yu for Jing Daily) Roversi, Raffarin, Jiang and Thomas at the opening (Image: Ding Yu for Jing Daily) Inside Hermès China – Part I. One of the earlier luxury companies in China, Hermès came to the Chinese market in 1997 and now has 19 stores in the country. The brand plans to launch a fifth Hermès global store on Huai Hai Road in Shanghai in 2012.
Hermès sales has been stellar with a 20% sales increase in the first half of 2010, mainly driven by China sales – where sales have increased 100% year-on-year in the past several years. Leo Lui, President of Hermès China, reveals why Hermès is succeeding in China and how they plan to capitalize on the soaring Chinese luxury market. Stellar Profits China is one of the three largest luxury markets in the world and Hermès is very profitable there. China was relatively spared by the global financial crisis in 2008, Hermès China sales remain stellar with strong double-digit growth.
Largely due to the Chinese government who have made many improvements, “Beijing is now the most modern capital in the world after the Olympics, with greenery. Growing Chinese Customer Sophistication. Inside Hermès China – Part II. Hermès’ success in China is driven by strong market dynamics and a carefully crafted strategy that promote superior customer attention and brand education which we covered in Part I. We continue our look inside Hermès China’s competition, growth strategy and views on China luxury trends.
Competition Competition among luxury brands in China is becoming fierce. Hermès differentiates itself from other luxury goods brands such as Gucci and LVMH by its size. Hermès is much smaller, focus much more on customer service and brand image, and of course their top-notch products. Much have been speculated about competition from rising local brands. “The cake is too big. China Luxury Market Trends China’s luxury market has been growing rapidly. Many Chinese are successful with their own business and usually want to show-off their success. The Chinese consumers prefer accessories like handbags, silk scarves, and watches because they are symbols of success that can be attained much faster.
Related Posts. Plush - Hermes sees no slowdown anywhere. Paris- French luxury goods group Hermes has seen no sign of weakness in demand, even in Asia, unlike peers who have highlighted flagging demand. Chief executive Patrick Thomas said trading remained strong in South Korea, Taiwan and also in China where other luxury brands such as Burberry, LVMH's Louis Vuitton and PPR's Gucci have posted slowing sales growth. "Globally, we do not see any slowdown anywhere... including in Asia," Thomas told Reuters in an interview on Thursday. Hermes, known for silk scarves and Birkin and Kelly handbags, said third-quarter sales rose 15.7 per cent at constant currencies to 849 million euros (S$1.3 billion), up from 13.4 per cent in the second quarter.
October was in line with the third quarter, Thomas said. Revenue from China was up 27 per cent in the three-month period, with the country now accounting for about 25 per cent of group turnover against 19 per cent last year, he said. Sales growth. Hermes Raises Growth Target as China Demand Boosts Sales. Hermes International SCA (RMS), the French maker of silk scarves and leather goods, raised this year’s sales-growth target after first-half earnings beat estimates on Asian demand for luxury products. The maker of Birkin and Kelly bags’ annual sales growth excluding currency shifts “could be around 12 percent,” it said today in a statement.
The Paris-based company last month said it targeted annual revenue growth of 10 percent. Hermes, in which LVMH Moet Hennessy Louis Vuitton SA (MC) owns a 22.3 percent stake, is seeking to tap growing demand for luxury goods in Asia, where wealthy clients continue to increase spending on items such as Birkin bags. Sales in the region, other than Japan, rose 25 percent in the half-year, led by China, Singapore and Hong Kong, the company said. The report was “good and reassuring,” said Thomas Mesmin, an analyst at Cheuvreux in Paris. Hermes rose as much as 4.1 percent in Paris trading and was up 2.1 percent at 228.45 euros as of 9:36 a.m. Close Open. Hermès Thrives in China, Banks on Exclusivity. French luxury house Hermès saw its sales in Mainland China rise 28 percent during the first six months of this year, according to brand CEO Patrick Thomas, and it seems like the brand will continue to enjoy a steady ascent. “China is doing very well. The share of men’s and women’s products is gradually balancing out, and we would be recording stronger sales there if we were able to deliver more products, in particular leather goods,” Thomas said.
However, the luxury label is taking caution as it tries to balance its supply and demand – while Hermès would like to sell more, it also wants to maintain its exclusivity. “We must avoid the risk of trivializing the brand. Some brands are much too present in certain countries. If we have stores on every street corner, it’s not very good for our image,” he added. However, the label remains sure of its ability to attract customers. [wwd]photo credit: hermès Related Posts « What Do the Chinese Ultrarich Want? China Gets Angry at Overseas Luxury Shopping Trips - China Real Time Report. 业内人士爆料洋奢侈品在中国利润吓死人|奢侈品|中国|利润_新浪女性_新浪网. Understanding China's growing love for luxury. By Yuval Atsmon, Vinay Dixit, Glenn Leibowitz and Cathy Wu Stride through China's gleaming new high-end shopping malls and glitzy boutiques and expect to see shoppers on a mission.
China's swelling class of wealthy consumers have the cash, and are willing and able to spend it on what, just unitl a few years ago, was well beyond their reach. Today, luxury goods are the de rigeur symbols of wealth and social status in China. The world's priciest and most prestigious luxury brands are scrambling to erect massive retail shrines in urban China's toniest shopping distrcits. There's a reason for the rush: while many other markets are flat or shrinking, luxury goods are booming in China. Who are China's luxury consumers?
To answer these questions, McKinsey conducted an extensive survey of more than 1,500 luxury consumers across 17 cities in the spring of 2010. For the rest of the report, download the attached PDF. Photo: Flickr/miandadr. Which Luxury Brands Really 'Get' Digital Marketing In China? China's Premium Car Market Set for Huge Growth.
With strong growth in Tier-Two and Tier-Three cities, in addition to Tier-One cities such as Shanghai and Beijing, the luxury carmaker is adding dealerships deep in China's interior. Chengdu, the capital city of Sichuan province, is a good example. Three years ago Porsche sold just 20 cars a month in the city; today it sells over 80 a month. As a result, Porsche is adding a second Porsche dealership in the city this year. Map of Porsche Dealerships in China (August 2011) Source: Porsche China "The achievement of Porsche in mainland China has been a significant factor in the success of Porsche across the world in the last ten years. Case Study Two: Lamborghini For luxury carmaker Lamborghini, China is now its largest global market.
"As of July 2011, China has already overtaken the US to become [Lamborghini's] largest market in the world", Wilson Lee, head of operations at Automobili Lamborghini China (ALC), told IHS Automotive. China Set to Become Globe’s Top Luxury Car Market. Mercedes opened the world's first standalone AMG Performance Center in Beijing. Demand for luxury vehicles in China will make it the world’s second-largest market for expensive vehicles by 2016, and number one by decade’s end when it will likely surpass the U.S., according to a new study by the consulting firm of McKinsey & Co.
But industry analysts and planners caution that several obstacles could delay or completely short-circuit the boom in automotive demand in China, both on the mainstream and luxury level. Free Subscription! Sales of premium vehicles will probably equal that of all of Western Europe by 2020, as incomes continue to rise in what is now the world’s second-largest economy, according to McKinsey & Co. Deliveries of upscale autos will probably climb to 2.25 million by 2016, according to McKinsey’s estimates, and will reach 3 million by 2020.
Nissan considers China so important that it recently set up new headquarters for the luxury brand in Hong Kong. Paul A. 胡润百富 — hurun.net. 胡润百富 — hurun.net. Luxury goods: style rises in the east. China’s Chic and Wealthy Snubbing Popular Luxury Brands? Louis Vuitton is in a predicament: the brand is very popular in China, but it may become a victim of its own success. “In China, Louis Vuitton is seen as the brand that even your ai-yi, or domestic helper, can afford,” an anonymous retail consultant recently quipped. But shoppers are becoming more candid. “I have two Louis Vuitton handbags but I no longer carry them although they are still in fashion,” said Daisy Liu, a 31-year-old employee at a multinational cosmetics firm. Instead Liu now gravitates toward Hermes and covets a Bottega Veneta lambskin bag. Of Louis Vuitton, she said, “I don’t think the brand fits me any more.”
Now that China is situated as the world’s third largest luxury market and is poised to overtake Japan and the United States for the number one spot within the the next three years, buyers are learning to become more discerning. Vincent Liu, a partner at the Boston Research Group, echoed the sentiment, saying, “In the past, it was just a checklist. Related Posts. Are These Three Reasons Behind China’s Luxury Slowdown? With luxury sales declining in first-tier cities and flashy, showy brands taking an especially hard hit, many experts are trying to explain this change in China’s once red-hot luxury market. One field expert has come up with three interesting (and valid) possibilities as to why brands like Louis Vuitton and Burberry are facing tough times. 1. A Decline in Chinese Mistresses The custom of wealthy men keeping a xiao san, which translates to “little three” and refers to the third person in a relationship, is something that has burgeoned since more money and power has become available to private individuals. 2.
Giving corporate gifts has become a past time among wealthy Chinese looking to make friends and influence people. 3. Part of the decline is nothing more than quickly changing preferences: logos and bling are now tacky to many sophisticated Chinese consumers. [cnbc] Related Posts « Coach Launches E-Commerce in China Mikimoto Invests in China and Mobile Growth » The Desire to ‘Trade Up’ Keeps China Luxury Strong. The Harvard Business Review (HBR) says that China will surpass the United States as the second-largest market by 2015, accounting for $87 billion (23 percent) of a $379 billion personal luxury market, and that by 2020, it will have a 40-percent share of the pie.
Analysts insist that this rise upward will be driven by “the growing number of middle-class and affluent city dwellers” looking to “trade up” into a luxurious lifestyle focused on individuality, and possibly improving upon the so-called American Dream in the process. With the burgeoning of all sorts of luxury brands in the country, the Chinese are becoming more impatient with their purchasing.
They are embracing the “now” mentality so popular in America by opening up credit cards. HBR reports that in 2005, fewer than 50 million credit cards were issued. By 2010, the number had risen to 221 million. By 2020, credit card companies will be looking to triple even this number. [hbr] photo credit: chanel Related Posts.