The Emergence of Chinese Luxury Brands: From Hope to Reality?

    As young Chinese consumers look inward, the creation of more Chinese luxury brands and interest in them will continue to grow for these consumers.
    As young Chinese consumers look inward, the creation of more Chinese luxury brands and interest in them will continue to grow for these consumers. Photo: Gucci
    Erwan RambourgAuthor
      Published   in Hard Luxury

    Key Takeaways:#

    • The main reason Chinese consumers are buying Western luxury items is because they simply view themselves as cosmopolitan rather than specifically Chinese
    • As luxury demand is still in its infancy in China, first-time purchasers simply go to the most established international brands for elements of trust
    • Chinese brands will emerge but give it some time, at least until the end of the 2020s

    When I was based in Hong Kong, I used to travel to mainland China on a regular basis or meet with some mainland consumers back in the city. When I asked them why they thought Chinese luxury brands had not developed in a substantial manner, they looked at me with pity in their eyes. “What do you mean Chinese luxury brands? There is no such thing. Your question makes no sense!” Actually, there are Chinese luxury brands, but the reality is that most up-and-coming Chinese consumers either do not know of them or do not relate to them.

    Louis Vuitton generating more than half of its sales with Japanese consumers in 2003 never made it a Japanese brand. Omega generating the bulk of its sales with Chinese consumer today doesn’t make it a Chinese brand either. The reality is that for many aspiring Chinese consumers, luxury is there proxy. Their benchmark is not another Chinese consumer in another Tier-2 or Tier-3 cities. It’s the Parisian, the Tokyoite, the Londoner, the New Yorker. You are not a Chinese consumer. You are a citizen of the world, a seasoned, sophisticated, traveled (pre-COVID, of course), edgy consumer.

    Similarly, the best-in-class luxury brands do not design products and think about consumers with a particular nationality in mind. Of course, red will work better in China just like green will work well in the Middle East. Of course, round shapes for watches will be seen as more harmonious in China. But top global luxury brands stay true to their history, their “DNA,” as they like to put it and product creation should be devoid of a particular nod to one culture or one nationality. Or said differently, it should be holistic, all encompassing, and timeless, though there is a great focus on youth, which does make a lot of fashion tough to approach for those my age!

    More fundamentally, Chinese consumers are mostly first-time purchasers and the clear implication of that is the reality that you are not buying for yourself but for others. You are buying to fit in, to prove a point, to tell others you are worthy of building a connection with or possibly worthy of a promotion and so on. As a first-time purchase, you do not want to get it wrong and, more often than not, you will go to the established brands. A handbag? Louis Vuitton! A cool bracelet? Cartier! An engagement ring? Tiffany! A watch? Rolex. Nicolas Sarkozy, the former French president who was known by the press as the bling-bling president worked with publicist Jacques Séguéla, who once said (and regretted it since): “He who does not have his Rolex by the age of 50 is a failure.” Well, if you are looking to fit in, Rolex and other Western icons remain markers of success, and generally way ahead of your 50th birthday.

    True, many Chinese consumers are more than happy to “buy Chinese” for staples (beer, snacks, and such) but struggled on premium goods for issues of trust. Made in China is not really an issue, though. While luxury items are generally not made in China, Nike shoes and Samsonite suitcases have been for years. However, it’s more “made by Chinese corporates,” which has been the issue for some consumers who have questioned the consistency of quality.

    I believe, however, that it just might be a question of time. Luxury brands don’t appear overnight. And with the young Chinese generation, which is becoming more inward looking, keen to discover or rediscover 5,000 years of history and art and starting to boost domestic travel, not just because borders are shut, but also because they are curious, I am convinced that domestic luxury brands will emerge. Shang Xia, which is today 90 percent owned by the high-end French group Hermès, celebrates its tenth year of sales in 2020. And when Hermès took that stake and analysts like me asked them how we should think about the outlook of this beautifully crafted brand, the answer was both cheeky and logical: “give us a few decades.”

    Erwan Rambourg has been a top-ranked analyst covering the luxury and sporting goods sectors. After eight years as a Marketing Manager in the luxury industry, notably for LVMH and Richemont, he is now a Managing Director and Global Head of Consumer & Retail equity research. He is also the author of Future Luxe: What’s Ahead for the Business of Luxury (2020) and The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun (2014).

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