The future perspectives of China’s luxury market and its real long term potential (part 2)

The arrival in Moscow, yesterday, of China’s new President Xi Jinping, on his first visit abroad was a huge statement on how China is changing. His wife, Peng ­Li­yuan, a former celebrity folk singer, has stolen the limelight on this historical trip, which has left a very powerful impression on Chinese at home, with social media exploding with hugely positive comments, most converging that she is the most beautiful First Lady that China ever had and of course, everyone being impressed by her beautiful smile and glamorous posture.

In case you may wonder what is the relevance for luxury in China - Mrs Peng ­Li­yuan has not only opted for a very classic outfit but most importantly, for an all Chinese made one, by Guangzhou bazed premium fashion brand EXCEPTION – a classic black double-breasted jacket and  an elegant logo-less calf leather handbag. It is indeed, probably for the first time in China’s history that the country’s First Lady is set to become not only a role model but an inspiration.

The statement of not wearing any Western luxury branded product is only a continuation of the harsh measures to crack down on alrady rampant corruption and focus on the needs of the poor, announced in November last year when Xi Jinping was nominated to succeed as China’s President and re-iterated at the National People’s Congress which took place early this month. The measures include: no more luxury cars for officials (one of the most affected is Audi, a favourite brand of the Chinese elite in the past years), no more lavish events and caterings at luxury restaurants and events for officials and most importantly an indirect statement about ‘gifting’ which has been so vital to the success of Western luxury brands in China.

Many wealthy Chinese already make most of their luxury shopping abroad, mainly due to much higher prices in inland China (30 to 50% import taxation), however, the statement by the First Lady will certainly encourage Chinese to buy designer apparel and accessories signed by Chinese fashion designers. If this turns into a coherent long-term message, this will indefintely change how Chinese regard products made locally and the ‘Made in China’ which is often associated with cheap, low quality and copying Western designs.

This will certainly not be a menace to the China’s luxury market currently dominated by Western brands but about the much needed healthy balance between local and imported brands which people could start perceiving as similar in terms of quality. What these changes will trigger is a major change in the way Western luxury brands approach marketing and communications in China. Given the importance and sheer size of China’s luxury market, we may not only see further acquisitions of local premium / luxury brands by Western groups but also major international luxury brands producing capsule or limited edition collections in China.

The tremendous response by the Chinese on all local social networks is yet another indicator of the power of the internet which the Western luxury brands have yet to tap in. Within minutes from the photos of the First Lady which went viral, Chinese websites were already proposing the exact same total look on sale. The comments related to design should also be a major wake up call for the major international luxury brands as to what the Chinese could aspire to, and this may no longer be about bling, colourful, gold and most exotic leathers. Logo-less and more sophisticated designs (away from the recognizable shapes and colours) could be the next trend.

Oliver Petcu in Beijing

Exception fashion store in Beijing (Exception Fashion worn by Chinese First Lady)