Fri, November 26, 2010
Business > Industries

Luxury customers get picky

2010-11-26 08:42:19 GMT2010-11-26 16:42:19 (Beijing Time)  Global Times

When Chinese customers wander into the Burberry store in Shin Kong Place, a mall that targets affluent consumers, they all tend to ask the same question.

"The first thing most consumers always say is, 'Show me the latest style,' rather than 'Which model is on sale?' like before," the saleswoman at the store near Beijing's East Fourth Ring Road said recently.

"They like to listen to our brief introduction on the clothes' design inspiration, rather than randomly pick out one style just because the logo can make them look rich."

Chinese mainland enthusiasm for luxury is on the rise again: The domestic luxury market growth accelerated to reach 68 billion yuan ($10.23 billion) in the second half of last year. The strong momentum continued in the first six months of this year and is expected to achieve 23 percent year-on-year growth, according to data released by global management consulting firm Bain & Company earlier this month.

Luxury brands have set their sights on the domestic Chinese market. Fifteen luxury brands surveyed by Bain including Louis Vuitton, Coach, Tiffany & Co and Omega opened 80 new stores in China this year through August, the consultancy reported.

Stores expansion

Luxury brand buyer Myra Liu, a 26-year-old magazine editor in Beijing, is excited that brands are expanding across China.

"Previously I chose the styles on the brands' websites and asked my husband to buy a Balenciaga bag or MiuMiu wallet or some other brands for me when he was on a business trip overseas," Liu said, as she showed off her black bag and pink wallet.

"It was very inconvenient, but cheaper because there was no tariff."

Tiffany & Co plans to open 25-30 outlets across the country over the next three years, the company confirmed via an e-mail statement.

"Besides continuing to open stores in Beijing and Shanghai, we also entered other cities such as Tianjin, Shenyang, Chengdu, Hangzhou, Qingdao and Shenzhen," wrote Daisy Mu, PR manager at Tiffany & Co (China).

The first Tiffany store was officially opened on November 2 in Kunming, southwest Yunnan Province, a 167-square-meter boutique in the Gingko Department Store.

Cartier also confirmed via e-mail that they would expand the number of their China stores in the future.

French premium department store chain Galeries Lafayette plans to cooperate with Hong Kong-based fashion retailer I.T to launch its first department store in Beijing about 2014, with I.T investing a maximum HK$150 million ($19.35 million) prior to opening, according to an announcement filed at the Hong Kong stock exchange last week.

Additional department store openings will follow in Macao and cities including Shanghai, Chengdu and Shenzhen.

Burberry has committed to further store openings in China after maintaining double-digit sales growth in its second quarter, according to the Financial Times.

Many luxury brand managers were encouraged by robust Chinese economic growth, particularly consumer spending, consultancy Bain reported, with many planning to invest in more stores in the future.

Choosier Chinese

She wants bags or clothes that fit "her status, temperament and character," said Myra Liu.

"I will not blindly buy a bag with a big logo," she said. "I'd like to choose a brand of a certain taste that I appreciate."

It used to be a common sight to see young Chinese women sporting Louis Vuitton bags designed for middle-aged women, Liu said.

She will not spend as lavishly as before. "The money I spend on luxury consumption each year accounts for 10 percent of my salary together with my husband," Liu said.

"I won't overdraw my purse like before."

The couple's total annual income is about 500,000 yuan ($75,250).

Status and style

"Chinese consumers' tastes have improved, and become more rational, and they purchase brands catering to their own style," said Yan Jun, president of Ecole Fashion and Luxury Consulting (Beijing).

"Previously for most Chinese consumers, luxury simply meant wealth, and people couldn't distinguish between different brands," said Yu Menghan, an editor with fashion magazine SELF.

They have developed knowledge of brands in a short time and can now appreciate the brands' "design spirit and style" - not just the logo - according to Yu.

If Chinese consumers really are becoming pickier, then luxury companies better not expect fast, easy profits as they expand, an industry watcher warned.

"The luxury makers should not think Chinese consumers will just buy whatever they offer," said Yan Jun of Ecole Fashion and Luxury Consulting (Beijing). "They each have their special and independent requirements.

"If the brand makers don't do enough market research,and simply bet on grabbing an easy slice of a developing mass market, they will lose out." For example, luxury goods consumers are younger in China than in the West, and their perspective is different, Yan said.

"Chinese will not be loyal to certain brands anymore," Yan said. "They make their own judgments."

As more brands crowd the domestic market, several brands with an undifferentiated image may meet challenges, the Bain research report speculated.

As for Myra Liu, shopping is as important as wearing luxury brands. "I'd like to de-cide myself, based on my understanding of certain brands," she said. "I'd like to choose the brands rather than being force-fed like before."

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