The Rise of Chinese Luxury Brands

The Rise of Chinese Luxury Brands
Apr 15, 2013 By Seve Findlater , eChinacities.com

When you think of China and luxury goods, your mind probably wanders one of two ways: “China, the land of cheap low quality goods” or “China, the land of modern excess”. In fact, both are true; China is a land of extreme contrasts. It is still in many ways the factory of the world, but with its growing international presence and subsequent newfound wealth, an appetite for all things luxurious has taken over China.


Source of the image:sassyhongkong.com

With huge taxes placed upon foreign luxury goods in China—a combination of import duties, VAT and consumption tax, which can be as high as 50 percent—it is not uncommon to hear of Chinese shoppers flocking to Western nations just to shop. Even with the huge taxes applied to luxury goods, people still buy them in their droves in China. Approximately $14.6 billion was spent on luxury goods in the country in 2012, acting as a huge source of revenue for the government. However, China wants a bigger piece of the luxury game. With an increasing appreciation of Chinese aesthetics and a government desire for a “Chinese renaissance”, homegrown luxury brands are starting to appear.

Lose the attitude

In fact, China’s luxury label game is more than just creating Chinese brands—it is about changing attitudes. Approximately 20 percent of Italian giant Prada’s collections are made in China, rightfully demonstrating that the country does have the know-how and the quality craftsmen to produce high-end products. China and luxury are not polar opposites (despite its reputation as the land of cheap low quality goods), but are cut from the same cloth. The country’s silk, jade and porcelain were the envy of the world for centuries, once a bastion of luxury. However, a high number of international luxury labels, despite their Chinese craftsmanship, still feel the need to claim their products are European made and by adding the final button or zip back in Europe, ultimately proclaiming it “Made in Italy” or “Made in France”. Herein lies the problem of China’s luxury label game: perception and attitude.

The foreign touch

It seems for a Chinese luxury label to stand any real chance of competing with the current players, it needs to have a foreign (in particular European) connection. Mary Ching known as “the Louboutin of Shanghai” provides just that. Due to her extensive time in the UK, her designs are a mixture of Chinese decadence at its best and British eccentricity. With limited edition lines, high-end materials and a foreign connection, the label’s growing allure and hefty price tag (i.e. status item) stand the Mary Ching label in good stead.

Increasingly, she is not alone. Beijing-based designer Guo Pei, who designed the Swarovski diamond studded dress worn by singer Song Zuying at the closing ceremony of the 2008 Beijing Olympics is another star on the ascent. Adored by Lady Gaga (foreign seal of approval), CCTV hosts and the movie crowd (Crouching Tiger Hidden Dragon star Zhang Ziyi has heaped praise upon her designs), Guo Pei’s international presence is certainly growing.

A marriage of worlds

Despite their success, both Mary Ching and Guo Pei are small-scale enterprises and as such will take longer to be recognized. At present, Shanghai Tang, founded by Hong Kong businessman David Tang in 1994 is counted as China’s first luxury brand. Choosing Shanghai as its namesake, the brand aims to cash in on the allure of Shanghai and its glamorous past. Fans of the innovative brand include Angelina Jolie, Prince Charles, Margaret Thatcher and Nicolas Cage. Its aim is to turn around the image of “Made in China” as the source of low quality cheap goods and instead show the best China can offer.  

However, celebrity endorsement of a luxury brand is not sufficient to parachute a luxury label onto people’s wish lists. China was once the luxury goods capital, but the game has since changed. China needs the outside world to be a serious competitor, just as much as the luxury industry needs China to buy its goods. China is predicted to represent 44 percent of global luxury goods sales by 2020, up from just 15 percent in 2010. This tremendous projected growth presents a unique business opportunity, which has not gone unnoticed. In 2001, the Swiss luxury goods group Richemont (owner of Cartier and Van Cleef & Arpels) purchased Shanghai Tang, placing Raphael Le Masne de Chermont as it CEO. This successful blend of Chinese design and philosophy with European management and experience has allowed Shanghai Tang to become a leader in China’s luxury label game, with stores across the globe.

Shang Xia rising

Shanghai Tang owes a lot of its success to its successful foreign partnership, something that has quickly been emulated. Shang Xia, another strong contender in China’s luxury label game is owned and nurtured by luxury French power player Hermès, copying the Shanghai Tang model of European and Chinese collaboration. Just like Shanghai Tang, Shang Xia’s founder Jiang Qiong’er, has made it her business to remove the stigma of Chinese made goods. Selling a range of luxury Chinese goods from fashion to furniture and jewelry, Shang Xia offers the full Imperial experience (with prices to match—“gold-woven porcelain teapots” will set you back $45,000).

Unlike Shanghai Tang, Shang Xia is the joint product of Ms Jiang and the chief executive of Hermès, Patrick Thomas. However, it is Shang Xia’s business model that is most interesting. Ms Jiang has been quoted as saying that the brand does not do marketing, it is not a financial project, but instead a project of cultural investment, with the life of the project not five or ten years, but 100 or 200. With Shang Xia’s commitment to building a quality Chinese luxury brand, with a pedigree and image consumers can truly buy into, the brand is well placed to have a healthy slice of the luxury market in China in years to come.

Watch this space

The likes of Shang Xia and Shanghai Tang might be in low numbers now, but China is just getting started. Luxury and China are historically linked. The country used to be a center of luxury, with European merchants flocking to acquire high quality silk and exquisite Ming vases, all of which were sold for a fortune back in the grand old cities of Europe. The two are just as linked today. The outside world needs China to buy its luxury goods, just as much as China wants to buy them. However, can China go back to its roots and create luxury labels to rival the European power players? It took 30 years for China to economically conquer the world, but the next 30 will be the most interesting. Watch this space; China has just begun to play.
 

Related links
Does China's Materialistic Image Really Represent Most Chinese?
Lavish Living: Tracking the Consumer Habits of Wealthy Chinese
Hainan: The “Hawaii of China” by 2020?

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Keywords: Chinese luxury brands Chinese brands China and luxury goods luxury goods in China

1 Comments

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13david

Makes me sick. What do the peasants ploughing the fields think?

Apr 15, 2013 18:58 Report Abuse