"Luxury China: Market Opportunities And Potential" (John Wiley & Sons, $29.95, Hardback, 2010) By Michel Chevalier & Pierre Xiao Lu#
China, as the world's second-largest luxury market, is clearly the place to be for any luxury brand that wants to be taken seriously as a global player. But who are these Chinese luxury buyers we're hearing so much about lately? Where do they live? How old are they? What drives their purchases? And how do you convince them to purchase more?
Answering these questions and many, many more, Michel Chevalier and Pierre Lu's Luxury China: Market Opportunities and Potential is designed to be less of a broad overview of the Chinese luxury industry -- there are plenty of other books for that -- and more of a reference, or manual for anyone who wants to understand the many dimensions and constantly changing allegiances of the emerging Chinese luxury consumer.
Chevalier and Lu are well aware of the complexities of the massive, heterogeneous, balkanized Chinese market and the vastly different levels of development that we see now in China from the marquee cities of Beijing and Shanghai to the semi-rural cities now awakening in China's interior regions, and by lending their enviable experience to this book the authors save their reader the trouble of long introductions. In short, this book -- though substantial, at 251 pages -- cuts to the point, and unlike many China business books strikes the difficult balance between catering to China greenhorns and old professionals, spending just enough time on the culture of luxury buying in China to make their case, while backing up their findings with plenty of graphs and statistics. By walking the line between analytical and experiential, Chevalier and Lu succeed in supplying their reader with the practical knowledge necessary to enter, or expand in, the Chinese luxury market.
One of the major strengths of Luxury Chinais the comparative aspect of its case studies. Rather than focusing only on the China market as a self-contained bubble, Chevalier and Lu follow up each chapter with an exhaustively researched case study centering on global brands like Alfred Dunhill, Louis Vuitton and Rolex, and luxury brands from the Greater China region like Shanghai Tang, Shaitzy Chen and Liuli Gongfang. By illustrating the wide array of difficulties and triumphs these companies have experienced in China, and deconstructing the branding, public relations and marketing, and ultimately retailing strategies that ultimately led to success in this challenging market, Chevalier and Lu masterfully back up their observations and data.
Although Luxury China includes a great deal of valuable information about how smaller luxury brands can enter the market, successfully communicate their mission and advertise their products, and fight counterfeiting, one of the book's greatest strengths is the conceptual framework Chevalier and Lu are so adept at constructing to break down complex phenomena. By looking at Chinese luxury consumers not only in terms of their educational or income levels, geographic location or age, but also their place on a sort of luxury buyer "continuum," the authors help their reader understand that not only are all Chinese luxury buyers driven by their peers or the cash in their pocket, they're also driven by their innate personalities. According to Chevalier and Lu, there are four distinct personalities that can be observed among Chinese luxury consumers: "Luxury Lovers" (conspicuous consumers, rational rather than impulsive buyers); "Luxury Followers" (Influenced by trends rather than own feelings and understanding of products); "Luxury Intellectuals" (have own understanding of luxury, individualistic and rational); and "Luxury Laggards" (apathetic towards luxury brands, though they can afford them).
By understanding these four groups, and their place on the luxury continuum -- which does, in some ways, echo Pierre Bourdieu's field theory -- luxury brands can ensure their products are hitting the right notes to maximize appeal for as many potential consumers as possible. While the methodology behind Chevalier and Lu's four classes of Chinese consumer are relatively complex, the authors manage to explain it in down-to-earth, practical terms -- a consistent strength of Luxury China. Through all of Chevalier and Lu's observations, experiences and theories, the book maintains an easy-to-read, smooth flow and avoids the condescension or excessive jargon that often weigh down other "industry" books on China.
While Luxury China will obviously be of more benefit to luxury industry insiders, the book -- like other recent China business books like China Entrepreneur -- includes enough insights on Chinese consumer culture, effective branding and marketing to apply to a range of businesses that operate, or hope to operate, in China. For those who are in the luxury industry, however, this book is particularly valuable. As Chevalier and Lu note, no luxury brand that wants to be taken seriously can ignore China: "What is certain is that a luxury brand which is absent from, or has only a weak presence in, the Chinese market in 2015 or 2020 will simply no longer have claims to being a worldwide brand."
Luxury China: Market Opportunities and Potential is available on the Wiley & Sons website, or on Amazon.com
Excerpt#
Luxury China? Why do we believe there is a need for such a book? Let us explain what we mean by Luxury China.
A luxury product has to have a strong artistic content. It must be the result of craftsmanship; and it must be international. The raison d'etreof a luxury brand is to be selective and exclusive. But how exclusive and how selective? For us, Lacoste and Hugo Boss are luxury goods because they provide sophisticated fashion products in an environment which generally remains controlled by the brand owner for sales in self-standing stores, department stores and multi-brand stores.
Is luxury very different from top fashion? For some analysts, the two terms are quite different: a textile and accessories brand, for example, might start out as a fashion brand and would only be given the status of a "luxury" brand when it has achieved some stability and a quality of "timelessness." According to that view, a new fashion brand has to be creative and come up with new ideas, new concepts and new products for every season, in order to attract the interest of the consumers. However, as it develops "classical" models that sell year in and year out, becoming permanent best-sellers with a signature style, its status will move from fashion to luxury.
...
[W]hy address the topic of luxury in mainland China at all? The answer is simple enough: in the last decade China has become a very major economic power, with an annual growth rate in the region of 10% and, allowing for differences in Purchasing Power Parity, will soon surpass the United States in the volume of products it manufactures and services it delivers.
For luxury goods, China has certainly become a very important market, as we discuss at length in Chapter 1. As Bernard Arnault said in November 2005: "We knew [China] would someday be the biggest market in the world. Whether it would be in 20, 30, 40 years, it was irreversible."
So, in what sense is this a challenge? China is a very difficult market. It is the most populous nation in the world, with 57 cities of more than one million inhabitants. Where do you start and how do you deal with such a powerful and diversified country when you want to begin distribution operations here? As we will see in chapters 2 and 3, while Chinese consumers are very interested in luxury products and major luxury brands, it takes time and money to convince them that they should buy a given brand rather than another.
Is it easy to be profitable in China? If large brands have a relatively easy time of it, medium brands undoubtedly find it more difficult to build the necessary volume to offset the minimum costs of operation and of advertising and promotional investments. And smaller brands face the difficult challenge of investing in brand communication and awareness to be able to gain a foothold in this huge market. But profitability is only one part of the issue. Given the very impressive growth of the luxury market in China, a brand must invest heavily in new stores, new inventories and new accounts receivables to keep pace; and even for profitable brands, major cash injections are often required to increase their local investments.
But the challenge is not merely financial and economic. Developing Chinese activities requires a strong understanding of the way business is conducted and of the basic cultural values and reactions of 1.4 billion inhabitants.
Our regular contact with foreign brands operating in China and with Chinese brands planning to expand their operations worldwide has prompted us to describe in depth this very specific market and to give indications of the best ways to operate. the opportunities on offer in this rapidly expanding market are such that it deserves very special attention and very special investment.
We believe this book will be useful both for executives already operating in China or for those looking at opportunities to start activities here. But it is also addressed to all analysts, journalists and scholars who are interested in luxury brands in general and in the Chinese market in particular.