History of European Luxury Brands in China

Top European Luxury Brands in China

Following a series of special economic reforms in the 1980’s, it was the French luxury brands (with the exception of Italian Ermenegildo Zegna) of Louis Vuitton, Chanel, Dior and more recently Lancôme, who were the first European luxury fashion brands to invest heavily in China. Thereafter and through the early 1990s, industrially produced made-in-Italy fashion brands like Giorgio Armani, Gucci, Versace and Bulgari began to provide made in Italy, made-to-measure, high quality products to the Chinese public mainly in Hong Kong and Beijing.

With a much stronger edge in design capability and brand marketing, foreign brands have dominated in China’s high-end fashion scene. Today, leading luxury groups such as LVMH Group, Richemont, PPR Group and Prada have a major presence in the country. Also, thanks to the increase in Chinese travel abroad, Chinese luxury consumers favor brands that can easily be recognized. Other superbrands such as Cartier, Hermes and Gucci, as well as German automotive brands like Mercedes-Benz and BMW also have a stronghold.

Beijing and Shanghai's Wealthy Consumers of Luxury Brands

Beijing and Shanghai Luxury Store Windows, Fall/Winter 2011

Wealthy consumers worldwide seek to pursue brands that represent status and allow them to be recognized as belonging to a certain modern, elite community. They want to experience the high quality of products, to stand out from the crowd and reward themselves, whether they come from a “developed” market like Japan and the United States or a “developing market” like China. Opportunities clearly exist for luxury brands in the booming Chinese consumer market. According to Hurun Research, traditional, male, high net worth individuals (HNWI) primarily live in the coastal regions and top Tier 1 cities of Beijing, Guangdong and Shanghai, which are home to 40% of China’s millionaires. According to McKinsey these wealthy consumers living in the three largest cities, tend to have more conservative attitudes toward saving and are more focused on family than their peers in smaller cities. Less surprisingly, they are more trusting of foreign brands like Bulgari, Giorgio Armani, Hermes and Dior.

What Modern Luxury Consumers Want

Luxury product spending patterns are continually evolving due to the financial, structural and demographic changes affecting consumers around the world. Global luxury fashion brands (Giorgio Armani, Louis Vuitton, Prada) and specialty niche accessory players (Bottega Veneta, Miu Miu, Salvatore Ferragamo) react quickly to this environment with new product offerings, original advertising campagigns and glocal retail store formats. The 2008 international financial crisis and subsequent decrease in worldwide retail sales forced all brands to sharpen their strategies to better serve their customers. Consequently, luxury brands are now paying closer attention to their heritage and brand dna’s, while more efficiently directing investments that coherently streamline both online and offline retail sales experiences.

Many mass market brands (Adidas, Nokia) want to improve offerings with more innovative products targeting higher end consumers (especially since most have not decreased their post-crisis buying powers). But aside from expecting superior quality, design, craftsmanship and durability, modern luxury consumers are seeking more substance over style. These consumers seek something more meaningful than just an expensive item: he/she desires brands that live and breathe their values through the way they do business. A new set of more sophisticated and knowledgeable (or scrutinous) consumption patterns is emerging, permitting brands that truly represent more genuine or “special” values to substantiate higher price points. Modern, luxury consumers also have a stronger taste in product design and aesthetics, travel internationally and trust the opinion of flagship stores, official brand websites, their friends or magazines for pre-purchase information.

Generational shifts (for example, the new rich in developing markets like China and Brazil, or ageing consumers in developed markets like Europe and US) are rewriting the rules of how brands market to geographical areas. The Baby-boomer generation is retiring and ready to spend savings, while Generation Z (always connected) has specific shopping experience or retail-tainment needs to be met. This increased power of the modern consumer in selecting or cancelling this or that brand from their portfolio is forcing luxury players to be more nimble in their merchandise selection and enhance customer experiences offered to a diverse consumer base.

Online marketing or ecommerce business is an increasingly fundamental opportunity for brand web sites to exceed exclusivity experiences and features inside their flagship stores. Luxury brands are quickly realizing how all generations of consumers are spending more time (and money) while gathering information via the internet. Personalized online marketing campaigns and exclusive offerings are able to convey a high-end, luxury experience for the sophisticated, modern consumer.

PGDS on Luxury at China Cosmetic Summit in Beijing

This summer I was invited to be a keynote speaker on Luxury Brand Management at the 4th China Cosmetic Summit in Beijing. Organized by China's top industry publication Cosmetic Observer Magazine (part of the China Marketing Magazine Group), I presented how top European luxury, fashion and accessory brands strategically extend their brand into new areas of business including Beauty and Personal Care products (fragrances, cosmetics).

Thanks to their tradition, experience and tailor-made approach to the mainland China market, my benchmarks of success are Giorgio Armani (new Emporio Armani online store in China) and Ermenegildo Zegna (20 year anniversary in China commemorative watch). They continually excite their customers with new products, creative advertising and excellent in-store service, while allowing aspiring consumers the opportunity to "enter their dream world".

For more insights, see my video interview on how "true luxury" brands launch and market original, innovative products.

Asian Luxury and Wealth: A Golden Future

Luxury brands are a modern set of symbols that Asians are wearing to redefine their identity and social position. Traditional Chinese consumers are proud to discretely show off their wealth and international savvy while demonstrating an acquired taste for quality and craftsmanship. At the same time, and compared to western standards, an increasing number of younger, wealthy individuals are capable of evaluating information and acquiring well-positioned, authentic luxury brands coming from Europe and the USA. Famous Western brands like Louis Vuitton, Dior, Salvatore Ferragamo and Tom Ford are attracting many Asians because they have an international profile, giving the consumer an image of modernity and success.