China's Home-Grown Luxury Brands Struggle For Credibility, Customers

    One of the most commonly discussed topics within China's luxury industry is when the country will produce its own luxury brands that people are actually willing to buy.
    Jing Daily
      Published   in Hard Luxury

    Tianjin Watchmaker Seagull Only Sold 2 Of Its 1.7 Million Yuan Watches In 3 Years#

    One of the most commonly discussed topics within China's luxury industry (and here on Jing Daily) is when the country will produce its own luxury brands that people are actually willing to buy. This topic has only become more pressing over the past two years, following the release of the Chinese government’s 12th five-year plan, which prominently advocated the nurturing of domestic Chinese brands that could compete on a global level and move up the value chain.

    Yet while China does have a new generation of independent designers in Beijing and Shanghai, who steadily pump out avant-garde-leaning collections and increasingly hit the world stage, influential brands are scarce, and Chinese brands that do try to go upmarket (via new collections or sub-brands) often encounter resistance. With the notable exception of Chinese brands supported by major international partners, such as the Hermes-backed Shang Xia, Richemont-owned Shanghai Tang, and jewelry house Qeelin (recently acquired by PPR), few clear leaders have emerged in the running to become China’s first internationally successful premium marque.

    This isn't by lack of trying, however. In recent years, China's home-grown brands have invested heavily in upping their game, and many have been championed by influential figures like publisher Hong Huang. As Hong, whose Beijing boutique Brand New China (BNC) only stocks home-grown brands and designers, said back in 2011, "China will eventually be the world’s most important luxury market, but we ourselves don’t even have a luxury goods industry to speak of. The Chinese do produce [their own] luxury goods like tea, baijiu, and maybe some health products. But national brands haven’t been established."

    Other leading industry figures like Zhao Yunhu of Shenzhen CopaisZhang Zhifeng of NE-TIGER, and Jiang Qiong’er of Shang Xia are confident that Chinese brands will eventually peel wealthy Chinese consumers away from their beloved Chanel and Louis Vuitton by calling on China's history of craftsmanship. Back in 2010, Christian Blanckaert, former Executive Vice President of Hermes International, told the Chinese site BundPic that, in his view, "the perfect Chinese luxury brand would be like calligraphy — a kind of pure perfection, kind of Zen. The pursuit of quality should be of primary importance. Ancient Chinese lacquer-ware and ceramics were once very inspiring to [the Western world], but a more modern Chinese style needs to capture the hearts of the Chinese people themselves." To date, however, Chinese consumers themselves have proven to be more fixated on Western imports, with few aside from those interested in niche brands looking inward.

    Over the past year, Chinese domestic luxury brands have only seen their struggles intensify as more Chinese consumers have headed overseas to purchase high-end items in Europe, South Korea or the US. Growing interest in international travel, a strengthening of the yuan against the euro, and China's stiff import taxes continue to compel Chinese shoppers to do the majority of their luxury consumption outside of China, giving them little incentive to shop for home-grown brands, or even learn about them. Via Yahoo China (translation by Jing Daily team):

    The wardrobe of Jinan housekeeper Qu Yi (曲奕) is like a luxury shop, stocked with apparel, handbags and accessories. In terms of domestic Chinese luxury brands, the only one she's ever heard of is NE-TIGER, though she says "their style isn't suitable for everyday wear." Like Qu Yi, most Chinese women know little about local luxury brands, let alone purchase them.

    Not only are Chinese luxury brands rarely sought after, they're often hard to find in China's sprawling shopping centers. At Plaza 66 in Shanghai (恒隆购物广场), staff said, "Plaza 66 doesn't have any Chinese luxury brands. There are some higher-end Chinese brands on the second floor, but the first floor is packed with international brands like Versace."

    In a 2011 survey from Global Luxury magazine, 86 percent of Chinese respondents said they would not buy luxury brands that were "Made in China."

    Recent examples of the credibility gap faced by Chinese brands looking to go up the value chain can be found in China's watchmaking industry. Though the industry itself has improved dramatically over the past 50 years, leading manufacturers like

    Shanghai Watch#



    have found it difficult to shake their low-cost associations. For its part, Shanghai Watch has spent the last five years working to reposition itself as a luxury brand, encrusting high-end rose gold models with diamonds and using sophisticated tourbillion movements, and in 2008 teamed up with Wieden+Kennedy Shanghai and Jellymon to produce the well-received “Lao Leow” line.

    Founded in 1955, Sea-Gull has also looked to go up the value chain despite its large-scale production volume. Currently, Sea-Gull is the world's largest manufacturer of mechanical watch movements, accounting for one quarter of total global production. Despite sporting the same complicated features seen on Switzerland's best watches, Sea-Gull's luxury models have largely struggled to find a buyer base in its home country. Since its introduction in 2010, Sea-Gull has only sold two of its most expensive timepieces, priced at 1.68 million yuan (US$269,936), which some in the Chinese-language media attribute to a deficiency in the watchmaker's upmarket strategy.

    Yet as Tianjin Sea-Gull Watch Group Co. general manager Lu Jun (吕军) told the Voice of the Economy (经济之声), owing to the great deal of time needed to produce the timepiece -- which is up to one year, according to Chinese media -- Sea-Gull does not mass-produce this particular model, making them only on a per-order basis.

    As Lu put it, "We only have the ability to produce one or two of the [1.68 million yuan] watches per year. Customers can't just walk in and buy one. This is mostly because it takes a great deal of engineering and technical work, machining and assembly. It's not about how much money we make. We're focused on making an ultra-thin high-quality double tourbillion watch." Continuing, Lu said that he doesn't agree that there is no market for home-grown luxury goods in China (translation by Jing Daily team):

    We feel there is a market here, and we're confident in the quality of our products. It's not true that we've "only sold two watches in three years." Actually there are many watch enthusiasts really interested in this [watch] and many have already reserved them. We're in the process of manufacturing them, and these customers pay after the watch is finished, because every customer's specifications are different. We can customize them according to the customer's needs. We may be lagging behind in some regards, but if you're saying that this means Chinese watch lovers or the Chinese watch market aren't interested in Chinese products, I disagree with that completely.

    Lu went on to point out that Sea-Gull is more focused on the mid-range luxury watch market than the ultra-luxury market, with its premium timepieces ranging in price from around 30,000 yuan (US$4,820) to the hundreds of thousands. Yet it's not difficult to see why Sea-Gull is still associated more with low-end watches in the minds of consumers. As Chinese news site Economic Information notes, the price gap between Sea-Gull's premium and budget ranges continues to yawn, with lower-end timepieces typically priced at less than 5,000 yuan ($803) and the cheapest in the 1,600-1,800 range ($257-289). What Lu of Sea-Gull and many of China's luxury industry observers do realize is that rising up the value chain, and developing a "Made in China" luxury brand that consumers actually respect, and are willing to buy, will take time. As branding expert Yang Xi Lun put it:

    The Chinese perception of luxury is still that high-end brands are from Europe and the US. Their entire understanding of luxury is that Europe is its birthplace. All of this takes time to change. In the 30 years since the reform and opening-up process, people have started to develop some brand awareness, but the creation of luxury brands hasn't really happened yet. So far, [Chinese brands] haven't caught on and haven't asserted themselves strongly enough. So it'll likely take quite some time.
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