Is Luxury Consumption A Window To China Or A Carnival Mirror?

Major Luxury Brands See China As Long-Term Growth Engine, But Some Chinese Academics Are Skeptical Of Perceptions

A retailer's dream, but a social nightmare?

A retailer's dream, but a social nightmare?

As the Chinese luxury market chugs ahead, expanding at a record pace and largely powering the global industry recovery, major brands — bullish on their prospects there — continue to open lavish flagship stores and new boutiques in smaller second- and third-tier cities. However, like most fast-growing areas in the Chinese economy, it helps to take wide-eyed projections with a grain of salt. Today, two Chinese-language articles give us two views of the Chinese luxury industry. One article, hinting that high-end consumption is a window into China’s economic development, says China is the global luxury market’s “savior of the East,” while another posits that consumption figures are something of a carnival mirror to China, giving a distorted picture of the country’s consumer market.

Bullish View: Top brands expanding at record pace (from Qianlong Online, “Luxury Consumption is a ‘Chinese-style’ Blowout”)

On April 28 of this year, LV opened two new flagship stores on the same day in Shanghai, one on Huaihai Road and another in Pudong, something that the company had never done before in its 100-year history.

Gucci plans to open 13-17 stores in [China], adding to the 16 or 17 stores in mainland China the company had opened by the end of 2008.

This May, Prada opened three new stores in Shanghai, and this month the company will open another Shanghai location. Over the course of the next two months, Prada will open new four new locations in Chengdu, Guangzhou and Hangzhou. Before opening all of these locations, Prada had 17 stores in mainland China.

The brand explosion in China has blown people away, in Beijing, in Shanghai, in Guangzhou, even in many of China’s second- and third-tier cities, these brands that many people had only seen in fashion magazines or on TV will soon be sitting at their doorsteps.

Chen Min, who works in the fashion media, said that starting last year, these top brands have recorded exponential growth. “In the [luxury] market, China’s share of growth has been explosive. In the past, we’d see those VIP sections allowing people to pre-order products in the U.S. or Europe, where they’d give targeted buyers first dibs on new products, but nowadays we even see this happening at second- and third-tier Chinese cities. The most distant place I’ve seen this was Hohhot [in Inner Mongolia].”

Following the global financial crisis, brands that were devastated by the downturn have seen Asia — particularly China — as the savior from the East. From 2009 onward, China has taken a seat in the global VIP section, accepting the collective tributes of the world’s top brands.

A More Sober View: Chinese luxury consumption is unhealthy, gives distorted view (from Xinhua, “Luxury Goods A Window To Corruption”)

[Recent figures that show huge growth in the Chinese luxury market] do not mean that the beginning stage of China’s luxury consumption is healthy. Actually there’s plenty of cause for concern. These cases indicate this market isn’t representative of the Chinese economy nor is it representative of the most suitable [development of] China’s consumer market. We can say that there’s been a tendency to distort reality. As Wang Ning, professor of Sociology at Sun Yat-Sen University, pointed out, “The surge in China’s luxury goods consumption is a window, reflecting many of the deformities in the reality of contemporary Chinese society.”

This could actually be a window we could use to observe the consumption of luxury goods, but in fact it’s imbued with the stench of corruption. Some experts have observed that the main consumers of luxury goods in contemporary China can be broken down to a few types: those who got rich first, which includes the “rich second generation” (富二代) or even the “rich third generation” (富三代); the social elite, including high-level white collar professionals; and let’s not forget a certain class of government officials. Attendant with this type of spending, we can even further divide spending styles up, from conspicuous consumption among the wealthy, to white collar professionals frittering away their cash, to officials buying [luxury goods] to away as gifts. (Previously on Jing Daily)

Luxury goods will always be unattainable for most people; otherwise, why would they be considered “luxury”? But as far as conspicuous consumption among the wealthy goes, it seems as if we’ve just got to grin and bear it. If they’ve got the high-end goods, we’ve got to fight the urge to be jealous. But as major global brands enter the China market…and butt up against the bureaucratic “gift-giving” tradition, whether or not we’re jealous we should recognize that it’s obviously a very dangerous tendency.

Although there’s really no way to say how many luxury items are purchased with the intent to give them as gifts, from previous investigations into major cases [of corruption], we can say that many corrupt officials have a natural love affair with luxury. A Beijing media analysis of 100 court cases from 2005-2007 showed that on the list of gifts received by corrupt officials around the time of Chinese New Year, cars and houses came second and third, with the top items received being “small luxury items.”

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