Luxury China E-Book

Michel Chevalier

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2011

Seitenzahl: 281

Beschreibung

A guide to reaching and profiting from China's expanding luxury consumer class China's growing consumer base and expanding economy means more disposable income for more Chinese citizens. The Chinese market for luxury goods is expected to expand from $2 billion this year to nearly $12 billion by 2015. Today's biggest global luxury goods retailers expect China to make up a large and ever growing portion of their customers, and those businesses are responding with new stores and investments in China. Luxury China gives readers-particularly professionals in advertising, marketing, and the luxury brands industry-a deep look into the future of the Chinese luxury goods market and shows them how to tap into China's tremendous market potential.

Leseprobe

CONTENTS

Foreword

Introduction

Chapter 1: Challenges and Market Size

The size of the global market

The size of the Chinese mainland market

The outlook for different market segments

Accessible vs. top luxury

Is China a profitable market?

The impact of the financial crisis

Case Study 1: Alfred Dunhill

Company history

Products

Business development in China

Richemont

Main competitors

Collaboration and events

Summary

Major issues

Chapter 2: The Chinese Luxury Client

Who are the Chinese luxury clients?

Differences in the luxury consumer profile

Chinese attitudes towards luxury goods

Chinese shopping patterns

Conclusion

Case Study 2: Shanghai Tang

The product

Development in China

Collaboration and events

Major issues

Chapter 3: Chinese Consumer Attitudes Toward Luxury

Conspicuous consumption and the Chinese elite

Luxury products: In-depth interviews and profiles

Dimensions to position luxury consumers

Towards a consumer typology

Managerial implications of attitudes and behavior

Conclusion

Case Study 3: Rolex in China

A brief history of Rolex

Marketing strategies

Rolex in China

Major issues

Chapter 4: How to Distribute in China

Operational Framework

Business analysis

What to look for in a Chinese distributor

Case Study 4: Shiatzy Chen

A brief history

Development in China

The product

The store

Collaboration and events

Major issues

Chapter 5: Retailing and Licensing in China

Where to go

Duty-free activities

Licensing

Conclusion

Case Study 5: Louis Vuitton in China

A brief history

LVMH in China

The market

Chinese consumers

Building a strong brand

Building a retailing network

The retailing network in China

Product portfolio

Major issues

Chapter 6: Communication and Advertising

Communication overview

Outdoor media

Celebrities and events

Communication models for advertising luxury brands

Case Study 6: The War of the Spirits

The alcohol culture in China

The main competitors

Distribution

Marketing strategies

Advertising and sponsorship

Major issues

Chapter 7: Brand Protection and Counterfeit Activities

Counterfeit activities in China

The mentality of copying

Brand protection in China

Brand-protection cases in China

Conclusion

Case Study 7: Liuli Gongfang: Breaking into Luxury by way of Glass

The company

The product

Development in China

Marketing communication

Major issues

Appendix A: China: A Collection of Markets

Appendix B: A Profile of China’s Leading Cities

Appendix C: China’s Magazine Market

Appendix D: National Television Audience Ratings (as at 24 September 2008)

Appendix E: Brands with Approved Well-Known Trademark Status

Bibliography

Index

Copyright © 2010 John Wiley & Sons (Asia) Pte. Ltd.

Published in 2010 by John Wiley & Sons (Asia) Pte. Ltd.

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The photographs in this book are sourced by Pierre Lu and Michel Chevalier and reproduced with permission.

The authors would like to show their appreciation for the support of the National Natural Science Foundation of China (Key Project No. 70832001, Research on the Chinese Urban Consumer Behavior: Exploration From the Perspective of Identity and Social Identification).

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Library of Congress Cataloging-in-Publication Data

ISBN: 978-0-470-823415

This book is dedicated to our wives, Sophie and Qian Qian

FOREWORD

Why a book about luxury in China? Because China will become in a few years the number one market in the world, given its large population and the growing buying power of the Chinese. It will therefore become a very strong market for top European brands.

China will also become for every luxury business the center of their Asian development. In the future, many products will be developed with a specific Asian target or at least, an Asian interest. This approach will integrate as much as possible the desires of clients in Shanghai, Beijing, and Hong Kong.

The Chinese zone will therefore become more than just an important market for French and Italian brands and will become a priority and, in part, a secondary source of inspiration.

Many new ideas and trends will originate from China. It will become more and more difficult in the future to develop products and brands without taking into account what is happening in Beijing and Shanghai, understanding how women in Hong Kong like to dress or how Taiwanese clients or even Chinese people living abroad view sophistication, fashion, and luxury.

As indicated in this book, it is obvious that China is becoming more than just a luxury market. It will develop into a major source of new brands and new products. In the long run, China will probably become a major supplier of new ideas, new talent and new brands in the luxury field.

This is why Christian Dior considers China as a major market and approaches China from a product side as well as from a creative side. A clear indication of our interest in Chinese creativity is the recent exhibition held by Christian Dior at the Ullens center in Beijing. We asked major Chinese artists, painters, sculptors, photographers and plastic specialists to give their interpretation of the Christian Dior brand using its dresses, its aesthetic values, its ‘iconic accessories’ and the ambiance of its boutiques as sources of inspiration. We asked the artists to share with us and with the general public what makes Dior a synonym for luxury.

What gives Dior this unique aura is a very special combination of passion for elegance and the never ending quest for contemporary beauty. This quest is a major source of creativity for the House of Dior and China is, without doubt, a source of inspiration and challenges.

The merit of this book, Luxury China: Market Opportunities and Potential, is that it is the first one to clearly indicate and to substantiate the fact the China has become a priority for the most dynamic brands and it gives very clear indications about the way in which the market should be developed.

Sidney Toledano

President and CEO

Christian Dior Couture

INTRODUCTION

Luxury china? Why do we believe there is a need for such a book? Let us explain what we mean by Luxury China.

A luxury product has to have a strong artistic content. It must be the result of craftsmanship; and it must be international. The raison d’être of a luxury brand is to be selective and exclusive. But how exclusive and how selective? For us, Lacoste and Hugo Boss are luxury goods because they provide sophisticated fashion products in an environment which generally remains controlled by the brand owner for sales in self-standing stores, department stores and multi-brand stores.

Is luxury very different from top fashion?1 For some analysts, the two terms are quite different: a textile and accessories brand, for example, might start out as a fashion brand and would only be given the status of a “luxury” brand when it has achieved some stability and a quality of “timelessness.” According to that view, a new fashion brand has to be creative and come up with new ideas, new concepts and new products for every season, in order to attract the interest of the consumers. However, as it develops “classical” models that sell year in and year out, becoming permanent best-sellers with a signature style, its status will move from fashion to luxury. While this distinction between fashion brand and luxury brand is a valid one, it is also misleading and possibly even dangerous. It is misleading because even if it has achieved “luxury” status, a fashion brand such as Chanel or Dior must still come up with new designs each season, and present them in new ways, in order to retain customers’ interest. It is also dangerous because it implies that a luxury brand does not have to innovate to the same extent as a fashion brand, which obviously is not the case.

But at this stage, rather than pursuing this theoretical discussion of the most adequate definition, it may be more productive to describe the different sectors of activity that we will be examining here, as follows:

The exclusive Ready-to-Wear category, for women and men, which includes, of course, all the selective fashion brands such as Chanel, Valentino, Burberry and Versace; the more traditional brands such as Lacoste and Hugo Boss, as indicated above; and also Ports 1981, which is quite selective in its approach to product and distribution, particularly in China.The luxury jewelry and watches segment is clearly part of this world and is very important in China.Perfumes and cosmetics, when sold through selective distribution channels, are clearly luxury products, even if they correspond to low-priced items.Fashion accessories brands are run as sister brands of fashion brands. This category includes handbags and leather goods, and also shoes, belts and any other element of a woman’s total “look”, such as glasses, writing instruments, lighters and so on. For men, it also includes ties and shirts and other elements of their wardrobe.Wines and spirits are the only examples of luxury products available in supermarkets and food outlets. But the product concept and positioning of wines and spirits require a level of sophistication that sets these products apart and makes them an important part of the luxury sector.While luxury automobiles, luxury tourism and private banking are also clearly part of this luxury category, we will not address them directly in this book because they require very different distribution strategies.

In this book, our definition of “China” is, for the most part, restricted to the mainland, which requires quite different distribution and promotional tools from those used in, say, Hong Kong, Macau or even Taiwan.

But why address the topic of luxury in mainland China at all? The answer is simple enough: in the last decade China has become a very major economic power, with an annual growth rate in the region of 10% and, allowing for differences in Purchasing Price Parity, will soon surpass the United States in the volume of products it manufactures and services it delivers.

For luxury goods, China has certainly become a very important market, as we discuss at length in Chapter 1. As Bernard Arnault said in November 2005: “We knew [China] would someday be the biggest market in the world. Whether it would be in 20, 30, 40 years, it was irreversible.”2

So, in what sense is this a challenge? China is a very difficult market. It is the most populous nation in the world, with 57 cities of more than one million inhabitants. Where do you start and how do you deal with such a powerful and diversified country when you want to begin distribution operations here? As we will see in chapters 2 and 3, while Chinese consumers are very interested in luxury products and major luxury brands, it takes time and money to convince them that they should buy a given brand rather than another.

Is it easy to be profitable in China? If large brands have a relatively easy time of it,3 medium brands undoubtedly find it more difficult to build the necessary volume to offset the minimum costs of operation and of advertising and promotional investments. And smaller brands face the difficult challenge of investing in brand communication and awareness to be able to gain a foothold in this huge market. But profitability is only one part of the issue. Given the very impressive growth of the luxury market in China, a brand must invest heavily in new stores, new inventories and new accounts receivables to keep pace; and even for profitable brands, major cash injections are often required to increase their local investments.

But the challenge is not merely financial and economic. Developing Chinese activities requires a strong understanding of the way business is conducted and of the basic cultural values and reactions of 1.4 billion inhabitants.

Our regular contact with foreign brands operating in China and with Chinese brands planning to expand their operations worldwide has prompted us to describe in depth this very specific market and to give indications of the best ways to operate. The opportunities on offer in this rapidly expanding market are such that it deserves very special attention and very special investment.

We believe this book will be useful both for executives already operating in China or for those looking at opportunities to start activities here. But it is also addressed to all analysts, journalists and scholars who are interested in luxury brands in general and in the Chinese market in particular.

The objective of this book is to give a better understanding of the Chinese luxury market. We provide a general analysis of the Chinese market and its potential, and describe what we consider the key to successful operations in China. The first chapter deals with the market size. This has not been an easy chapter to write because in this huge country, information is sparse and difficult to obtain. But we wanted to give an idea of the market potential and see if the economists and journalists who are presenting China as the second luxury market in the world, behind Japan, are right.

The second and third chapters describe the Chinese consumers. In Chapter 2, we have gathered all existing information about customer spending power and purchasing behavior. We have shown who is buying luxury goods and to what extent each customer group develops purchase patterns. We have focused particularly on the up-and-coming middle class which, in China like in every country in the world, is the primary source of business potential for the luxury market. In Chapter 3, we have focused on the attitudes of Chinese customers toward luxury and on how the purchase of expensive luxury items fits with traditional Chinese culture and accepted standards of behavior.

In Chapter 4, we explain the different ways to enter the Chinese market, be it through a subsidiary or, at the beginning at least, through a distributor. In a market which is changing very fast and which is very new to the luxury business, we felt it was necessary to explain who the major distributors and professionals of the market are. Chapter 5, outlines the considerations for retailing and licensing in China.

In Chapter 6, we examine what makes China different from other countries and concentrate on the specific communication tools that are the most effective there. In the last chapter, we speak about brand and design registration systems in China, of brand protection and of the best ways to curb counterfeit activities which remain an important area of concern for major brands.

At the end of each chapter, we present a business case of luxury brands operating in China. The aim here is to show different approaches to the Chinese market and to communicate how the diversity of situations and market positions fit into that complex luxury market. The case studies have all been written from outside sources and with no specific arrangements or agreements with the brands concerned. In each case, we describe the brand’s major achievements to date and discuss the specific business challenges and opportunities.

One of these case studies deals with Louis Vuitton, which is probably the leading luxury brand in China. We describe its positioning and its retail strength and the way it has learnt, over time, to deal with the Chinese consumer. But if there is a lot to learn from big success stories, it is also important to describe cases of brands that are not so successful at the worldwide level and this is why the Alfred Dunhill case finds its place here. A masculine brand, which has done well in the United Kingdom and in Japan, it started very early in China, and is moving up rapidly. The issue here is what it should do next and how this may change the company focus at the worldwide level.

We have also decided to present Chinese brand cases, because we believe China will, in the long term, be a major source of luxury brands. The first of these studies concerns Shiatzy Chen, a brand originating from Taiwan, which has worldwide potential, provided it can develop strongly in mainland China and is able to adjust its product offerings to the needs of an international market. Liuli Gongfang, which might be described as the Chinese equivalent of Daum, is another case in the same category. Also originating from Taiwan, it is very strong in mainland China.

Three other cases offer a mix of Chinese and worldwide activities. In “The War of the Spirits,” we look at the competition between major foreign alcohol brands and local traditional Chinese products. The Rolex case study examines the brand’s position in a market where Omega has established an extremely strong success story. Shanghai Tang is a brand created by a Hong Kong Chinese businessman, with a Shanghai label, belonging to the Richemont group, and managed from Shanghai by a French executive. This brand conveys a strong Chinese image, but one which is somehow internationalized and geared almost exclusively to foreign customers through establishing a very upscale European style, while maintaining a strong Chinese outlook.

In the appendices, we provide details of all the major cities, with special profiles of Beijing and Shanghai. There are details, too, of magazine audiences, of television channel ratings, of city sizes, that are necessary to operate in China and which we hope may become an indispensable handbook for the Chinese luxury executive.

If this book convinces the reader of the real opportunities of the Chinese market for luxury brands and conveys the diversity of winning marketing strategies to establish a brand in China, we would have met our objectives.

What is certain is that a luxury brand which is absent from, or has only a weak presence in, the Chinese market in 2015 or 2020 will simply no longer have claims to being a worldwide brand.

ENDNOTES

1 For this discussion, see Michel Chevalier and Gérald Mazzalovo’s Luxury Brand Management: A World of Privilege, John Wiley & Sons, 2008.

2 Quoted in Thomas (2007): 306.

3 Christopher Zanardi Landi, the CEO of Louis Vuitton in China, has been quoted as saying that the company has “never lost any money in any store in China” (see Thomas, op. cit.: 306.)

CHAPTER 1

Challenges and Market Size