18
Jun
2013

Luxury in China is alive and kicking; it’s just not the same as before

The last six months have seen the luxury market in China quoted as both an opportunity and a disaster for brands almost daily. One-day China is no longer going to save the industry, and the next it will. I have to say that often people with little or no real experience of either the Chinese luxury market, or Chinese culture write the stories, so the result doesn’t surprise me. I also know from conversations with senior staff working for brands here in China, that the perennial problem of headquarter based colleagues who likewise lack experience and knowledge of China, just don’t get why ‘things can’t be done according to their rules and policies?’

Prior to the appointment of the new leadership, it was predictable that the market would slow, that’s the cautious nature of Chinese culture. Post the appointments, it was likely that new policies would be implemented particularly directed at curbing government overspending and misuse of public money; the people were demanding it and gaining their support and trust was a necessity for the new leadership. So, for anyone heading up a brand here, they are likely to have read the signs, or at least I’d hope they did, and would have been prepared for a change in market conditions.

One of the most predictable things in China is its unpredictability, and to quote Monty Python, ‘always expect the unexpected’. In 2012, luxury consumers fragmented and their requirements and the way luxury brands needed to talk to them changed. Away from the developed interior cities and those on the coast, there was, and still is a huge opportunity to sell to the aspirational masses who still want the ‘bling’, so brands can use their past experience to address this group. The more experience consumers now want a deeper relationship with luxury brands, better service, and to be shown why they ought to invest their money with one manufacturer over another.

One other fact that appears to be ignored, is that the money hasn’t gone away, in fact there is probably more money in the system now than in the past, it just being spent more carefully. Chinese consumers have one eye on the past and one on the future, they know that history indicates that tough times could be round the corner, but the future looks bright for the country and its people. So the theme for 2013 is value for money. There is no problem spending, but unlike 2010 and 2011, when money was plentiful and the rainbow stretched far into the distance, today they want the assurance that cash is allocated on items and services that genuinely enhance their lifestyle.

So from inside China, luxury is still a strong growing market, albeit slower than the ridiculous levels of a few years ago. There will be many sceptical observers sitting on the outside looking in who are not directly in touch with the reality of life and consumption here who interpret the basic data in a rather skewed manner. But take it from me, luxury is well established in China and will remain at the heart of the peoples consciousness for many years to come.

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