Chinese do love luxury, but expect obstacles

Youth expert P.T. Black

By Published on .

China is in love with luxury. Well, not all of China, but significant and growing parts of the vast nation. There are so many places to see the obsession-–in the lines of mainland Chinese clogging Hong Kong’s luxury-laden Pedder Street during the October holiday, or in the parade of trendy purses, watches and shoes ornamenting attendees at Shanghai’s recent Formula One Grand Prix.

China’s luxury growth has been well documented in the press, and European luxury owners are making China a centerpiece of their global strategies. On a clear day the sound of anticipatory Gallic lip smacking can be heard all the way from Paris. But China’s luxury market can be confusing and strange at times, so it makes sense to look at a few defining characteristics of the industry.

First off, the world of luxury is expanding quickly. The second tier of European luxury brands is well advanced in the market, representing everything from storied jewel houses to yachts and boutique watchmakers. Mega brands like Louis Vuitton are facing competition from most of the smaller, idiosyncratic brands that are available in London or New York.

This increase in the range of luxury goods available is matched by their spread across the nation. The growing appetites of second tier cities like Shenyang and Chengdu have not gone unnoticed, and they are quickly becoming luxury shopping centers for their surroundings.

Even the terra-cotta warriors of Xi’an and the various hill tribes outside of Kunming can now visit an LV shop on payday. That poses a special challenge of course for the brand owners, who have to accommodate the disparities in the sophistication of their audience, prompting brands to play significantly with their merchandise mix.

The internet is the wild card here--being in far-flung Yunnan doesn’t mean that a wealthy businesswoman can’t look at an online catalog and expect her local LV to have the full range. Getting the right mix here is extremely difficult, and the cause of much anxiety. One brand manager described the difficulty to me, saying “It’s so difficult because China is simultaneously a developing market and a developed one – and I never know which of these worlds the customer is walking in from.”

Another evolution in the luxury good market is in the age of buyers. The stereotypical Chinese luxury shopper is a middle-aged official from the countryside who saunters into a high-end shop with a sack of cash and proceeds to buy dozens of watches and bags without glancing at a price tag. This character does of course exist (comically, in some cases, just spend a few hours at a Prada shop if you don’t believe me) but he is far from the only type. In fact a lot of luxury shoppers are young white-collar workers who manage their personal expenses closely and save to splurge on select pieces.

These young shoppers are an increasingly visible component of the luxury market. They are generally making good salaries, and stretch it farther by living at home and avoiding extraneous expenditures. All it takes is riding the bus to work, packing a lunch, eating dinner with parents and pretty soon a 7,000 RMB salary has room for a 5,000 RMB purse. They are keen to buy the right things for the right occasion, Dolce & Gabbana for clubbing, Marc Jacobs for blue jeans, Zegna and Zegna sport for meeting with clients.

These key purchases--the right bag, a fierce pair of shoes, the latest mobile phone--do more than just bring pleasure to the owner. They also signal that the owner is a person who understands trends, knows what going on, and is investing in his or her own self. Young people mix and match extensively with their luxury purchases, blending an expensive European bag with shoes from a local shop and a fancy watch, maybe even a fake.

But luxury goods are for more than just the up-and-coming bourgeois office worker. Taking their cues from Japan, hip Chinese kids are incorporating luxury brands into casual gear as well. An editor from the street culture magazine Yoho explained it to me, “Chinese street culture will never be like America’s, because Americans see a conflict between being youthfully casual and enjoying luxury. We are more like the Japanese, who mix luxury brands in with our other styles. There’s no reason why Converse can’t match with Dior, or Gucci with Bathing Ape. It’s all up for grabs, and the Japanese understand that. So we look to them.”

Hipsters have their own high-end brands, of course, and these are coming as well. Japan’s Bathing Ape has a devoted following in China’s big cities, as does the uber-cool Billionaire Boy’s Club, which just opened a shop in Hong Kong. Juicy Couture is making a splash Beijing entry in the next few weeks, and shops like Lane Crawford and i.t. will continue carrying a spread of high-end street brands to the waiting hipsters.

Piracy has already introduced these brands to the masses, and it will be a challenge to persuade people to buy the real thing. But smart managers will find a way, and the result will be even more options and choice for China’s voracious youth.

At this point, then, it looks like China’s luxury market is going to keep growing in all directions. More niche specialized brands for sophisticated urbanites. More up-to-date offerings for people in second tier cities. More interest from all kinds of young people, yuppies to hipsters. It’s no wonder those flights from Paris and Tokyo are so crowded.

P.T. Black is a partner at Jigsaw International, a boutique lifestyle research agency based in Shanghai that looks at the direction of change in China, particularly among young adults. He can be reached at
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