The evolution of China’s luxury market
With an estimated 2.5 percent growth rate for 2013, the Chinese luxury market is slowing down. However, the perception should be nuanced: a deceleration is not a crash. Although the Americas are predicted to see a higher growth rate than China this year, Chinese travelers are spending more abroad.
That luxury demand is not decreasing, but evolving was a conviction shared by the 80 Chinese luxury experts, brand professionals and designers participating in the sixth edition of Insight Shanghai on October 24th and 25th. The two-day conference and workshop provided firsthand insights on the evolving sense of luxury with Chinese characteristics. Here are some key findings.
2012, the Chinese government obliged officials to limit certain practices like hosting lavish banquets and gift giving, and adopt less conspicuous lifestyles. The official ban came soon after the Chinese blogosphere expressed its anger with seeing government officials photographed flaunting luxury watches and bags. The newfound frugality of the China elite had a strong impact on a limited number of categories: watches, banquet catering, flowers, and teas, but it has found an echo in people’s minds.
Mr. Wang Hua from KEDGE Business School introduced his speech by saying “nowadays, being ostentatious is tasteless in China.” Fu Jiong, design professor at Jiaotong University confirmed this, saying that for him the “bad taste” of Chinese nouveaux riches provokes today more irony than envy. Meanwhile, sociologist Lu Xiaoming emphasized the growing interest of well-educated intellectuals and the new middle class in the refined lifestyle of the scholars of ancient China. At that time, he told, playing music for oneself, drinking wine to speak to the Muses, and enjoying natural landscapes were considered the ultimate luxury pleasures. One can hardly imagine today’s Chinese executives playing guqing while looking at misty mountain landscapes or declaiming poetry, but the aspiration is on the rise.
As luxury perceptions are maturing, consumers are placing more value on the soul and intrinsic qualities of luxury items. Thus, they are becoming a bit tired of amassing luxury brands and logos and pay more attention to quality, scarcity, and craftsmanship. Perhaps, the idealization of frugality and culture reveals a bit of snobbery from the new Chinese business executives and academics present at the event. Indeed, the best-selling iPhone 5 in China is gold-plated, and 59 percent of luxury consumers prefer brands to express their social superiority, according to cosulting company Bain.
Digital luxury is growing fast and the mélange of luxury codes and technology values inspired new types of indulgence and niche: Introducing recent developments of online luxury, Fu Jiong mentioned Only Rose, an online flower boutique on Taobao which guarantees that rose bouquets can be sent to one person only. Mr Luo Zhenyu, a former journalist at CCTV, discussed online talks shows about literature, and provided book reviews and read extracts. He also discussed the rise of personal reader services: once the privilege of the emperors, today, such a services cost 500 RMB per year (around 60 euros) to club members.
Will Chinese brands emerge within this fast-moving luxury market? According to Chinese specialists, the development of domestic luxury brands is more likely to flourish in the product categories where China has heritage know-how to rejuvenate and to brand. Still, for Mr. Wang, MBA Professor at KEDGE Business School, the potential candidates have to enhance their competencies in design creativity, quality control, branding, retail operations, and management. A partnership with overseas luxury houses or foreign designers can accelerate the process.
The same day, participants were invited to play and develop their own potential brand concepts around traditional Chinese products such as furniture, medicine, porcelain, or tea. A few interesting ideas came to the fore: a modern tea house for the over-stressed elite of China; an exclusive Chinese medicine brand based on confidentiality and word-of-mouth; a tableware brand mixing Western and Eastern design influences, and, last but not least, a furniture brand customizing heritage furniture with a modern twist. The Chinese character used to brand this later idea, hui was an auspicious metaphor for the event. The character means “to go back” but it has the appearance of a spiral.