Are China’s Rich Already Bored of Bling?Wednesday, September 26, 2012 6:50
A couple of interesting articles came out in the last week that were focused on the drop off in luxury sales. It is a topic that I have had several conversations on recently with luxury brand managers and BD directors in China, and while I am not a luxury expert by any means I thought it would be interesting to write a quick post about what I have been hearing vs. what I read in the articles.
Why China’s luxury consumer is moving away from bling and logos provides a few reasons for why luxury may be coming off:
1) There are a lot of people who are not necessarily looking for the obvious symbols of wealth or fashion. They are looking more to buy things that they know are interesting or special
2) As Chinese luxury consumers become more knowledgeable (and more numerous, thus eroding the cachet of being part of an elite) some are beginning to develop a taste for the inconspicuous, too.
3) This is also a natural evolution in luxury consumption that has been seen in other markets before China, analysts suggest. Newly affluent buyers tend to gravitate first to the biggest, showiest names. But with time and experience, they get choosier.
Which is in a nutshell three points that reinforce a single point. That “luxury” in china is moving away from brands that can be recognized towards brands that unique. Perhaps unknown. A point made to me by someone specializing in art.
Another take on the same issue is the angle that it is a fall in government (focused) sales that are behind the drop off. Or at least a good chunk of it.
As suggested in the article China’s corruption crackdown takes shine off luxury boom
China is sensitive to anything that raises suspicions of corruption, especially after the scandal involving Bo Xilai and his emerald-wearing wife Gu Kailai marred this year’s once-a-decade leadership transition.
The government imposed a “frugal working style” rule on its civil servants, which goes into effect on Oct. 1, barring them from spending public money on lavish banquets or fancy cars, and from accepting expensive gifts.
Gifts are often offered in return for favors in China, where bribery is widespread. The culture of gift giving has been a source of demand for the world’s top luxury brands.
Which is far more interesting intellectually given all the recent press surrounding the trials and recent press, but I wonder if there aren’t other things going on..
First, unlike when LV opened its stores in Beijing and Shanghai to attract window shoppers who were on their way to HK, LV (and many others in the luxury category) are now spread out across China. A reality that certainly increases brand awareness (good for any retailer), but in conversations I have had with brands recently there is a recognition that perhaps this spread has reduced perceived brand image. Particularly in core markets. For certain categories/ product ranges
Second, unlike when LV opened its stores in Beijing and Shanghai, the Chinese are traveling far more now. To Paris. To Milan. To places where the
Made in China “original” products are sold. For some, simply the fact that it is imported (or purchased) from “the” flagship is enough. For others it is the access to different designs and/or different categories. In essence, buying abroad versus locally is seen as being better. Particularly if some “new resident” to Shanghai can afford the local items, but unable to access those abroad. Have to maintain that separation.
Third, a few recent conversations I have had suggest that the Chinese are changing habits altogether and beginning to look away from product based consumption and more towards service based consumption. Travel, food, yoga retreats, etc. Where it is about an experience. Perhaps this is how they are refining their tastes, in hopes of enjoying their wealth at a different level. One more personal in nature. Perhaps they are bored. But, if this is a trend (And I am not sure it qualifies as a trend yet) then that could mean that luxury product makers are going to have to focus more of their effort on the experience, or begin looking at how to build experience around buying trips in a different way.