February 8, 2013

Are Multinational-Acquired Chinese Brands Really “Chinese Luxury”?

Qeelin, Shanghai Tang, Gieves & Hawkes Among “Hybrid” Luxury Brands

Qeelin Xixi Collection

As more consumers in mainland China begin to pull away from a single-minded interest in the most visible high-end labels, home-grown luxury brands finally have an opportunity to gain the attention of the growing number of affluent domestic shoppers. But will recent acquisitions of “created in China” brands by international luxury powerhouses really give them the piece of the action in a domestic upscale market that undoubtedly will flourish over the next decade?

Jeweler Qeelin, recently acquired by PPR, is currently run by French luxury retail professional, Guillaume Brochard, and Hong Kong design consultant, Dennis Chan. Shanghai Tang, owned by Swiss luxury juggernaut Richemont, was started by a Hong Kong businessman who also has a foothold in the transportation, cigar and hospitality businesses.  While Jiang Qiong Er (Jing Daily interview), CEO and creative director of Shang Xia, is indeed a mainland Chinese who touts the brand’s use of local artisans, a significant proportion of the company’s publicity is still undeniably tied to its (remarkably hands-off) mother company, Hermès. Also sharing “Eurasian” brand DNA is Estée Lauder’s  new sub-brand Osiao, its first premium Asian skincare range.

While these brands are perhaps well-known domestically, can they really be considered “Chinese heritage brands” in the same way Chanel is considered intrinsically French or Gucci quintessentially Italian?  Will Chinese consumers really relate to the history of these brands, or will they view them as corporate foreign sell-outs?

As Chairman Mark Henderson of the Hong Kong-owned UK heritage men’s outfitters Gieves & Hawkes  has commented, “The respect for history and clear quality that we have appears to be a very attractive asset to the Chinese market at the moment. The true value of the brand is its heritage.” Leading Chinese industry figures, such as  Zhao Yunhu of Shenzhen Copais and Zhang Zhifeng of NE-TIGER agree, claiming that the consumer shift from foreign to domestic luxury will be rooted in a call on China’s history of craftsmanship. Yet currently, early adopters of Chinese luxury like Qeelin and Shanghai Tang occupy a difficult middle ground — where they can no longer capitalize on Chinese slavishness towards foreign luxury goods, but also cannot consider themselves fully home-grown luxury. Furthemore, there is no sense of discovery tied to purchasing these prestige brands, as the multinationals have gotten to them already.

Hermès chief executive Patrick Thomas thinks this is irrelevant, however, as he has previously advised observers of the China luxury market to “forget the word ‘luxury’ entirely. Use only the word ‘quality.’ This is what Chinese want, and it will be a justification of price.”

Ferrari 458 Italia Dragon

P.T. Black, creative director of the video series Thoughtful China, disagrees, saying, “Taste is not about knowing yourself, it’s about improving yourself.” Yet has Chinese consumer sophistication really evolved to the point that the quality of luxury goods justifies the price (thinking here of US$10,000 tea sets), when China has historically been a country in which people use luxury as a means to project social standing and affluence in a hierarchal society? Perhaps it still the exclusivity and prestige angle of luxury that draws a greater number of Chinese consumers. This could go some way in explaining the popularity of limited-edition models in China over the past half-decade in particular.

Luxury carmakers have performed well in taking advantage of the limited edition craze in China. Last April, BMW made 88 of its 7 Series Steinway & Sons models available to China, all of which sold out in less than four months, even at prices of upwards of 3.2 million yuan (US$513,693). Also last year, Rolls Royce commemorated 2012, the year of the dragon, with a deep red and gold accented Phantom, which sold out in two months, and Ferrari unveiled a similarly dragon-plastered 458 Italia. More recently, Mercedes-Benz followed suit, debuting a 2013 Year of the Snake limited edition Smart Car designed in collaboration with Chinese jeweler Wan Baobao.

A steadily increasing number of boutique brands are leveraging their small-scale production under the guise of “limited-edition.” For example, Shanghai independent designer MaryH only creates two or three of each model to give customers a unique product and unique buying experience, to ensure they don’t run into someone else on the street holding the same Louis Vuitton Speedy. Local design man-about-town Zhoujie Zhang of Ningbo, who has enjoyed enormous success with his made-to-order galactic furniture, has also gotten into the limited-edition game, creating a collection of 11 stools exclusively for Bundshop.

The market is evolving at such a rate that no one can really define what it is that Chinese consumers are now trying to discover — whether it’s tradition, exclusivity or quality. However, it is the companies that position themselves to facilitate this type of discovery that will succeed, regardless of the direction in which the market ultimately accelerates.

Stephany Zoo, cofounder and marketing director of Bundshop, seeks to bridge her bicultural heritage and achieve a greater understanding of international consumer behavior.

(Opinions expressed by Jing Daily contributors do not necessarily reflect the opinions of the Jing Daily editorial team.)

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Tag: china, china luxury, chinese, domestic luxury... , More

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