24
Jan
2013

Will the snake enter the door the dragon is leaving?

As the tail of the dragon disappears over the horizon and the first signs of the snake begin to make its presence known, speculation rises as to whether the coming year, and in particular Chinese luxury consumption will again sustain sales and buoy the fortunes of luxury brands globally.

As we had already predicted in November and others are now saying, the Chinese New Year and the party congress that follows it will be positive in terms of consumer spending. This wasn’t a difficult suggestion, but perhaps what becomes more complicated in the coming year is a split in consumer habits and requirements that will challenge marketing strategies, and many of the staff and brands based here in China.

Reasonably sophisticated consumers in tier one cities will become more selective than they currently are, and more demanding as a result. They voted with their wallets in 2012, handing money to brands with lower patronage to bling and fewer logo’s, and not the traditional suspects. Those in tier two and three cities are still a little way off sophistication of this level, and for them, obvious and recognizable brands will continue to be the order of the day.

After a slow 2012, many luxury brands may have also decided to slow their expansion across China, to control costs and perhaps to consolidate and focus their efforts as the Chinese consumer demographic becomes less homogenous, and competition becomes tougher. It’s a difficult call to continue expansion and reinforce customer service and other core brand values simultaneously in such a fast moving market.

So the dragon is leaving the room it occupied during a slightly nervous 2012, and the big question is whether the snake takes up residence there, or chooses an alternative home. If it’s the latter, we may be in for yet another unpredictable year, although my feeling is that it will be far better than when the dragon was at home. When one door closes another often opens.

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