Tuesday, June 12, 2012
ASIA BRIEFING: THE LUXURY China fair seemed to cover the whole gamut of expensive tastes in China, encompassing Steinway pianos, handmade Morgan sports cars, bespoke travel adventures in Rome, castles for sale . . . even special techniques for breast enlargement.
China is the world’s third biggest market for personal luxury goods, worth at least 160 billion yuan (€20 billion). In the next three years it is expected to leapfrog Japan and the US to take pole position, when the luxury segment is set to expand to 180 billion yuan (€22.6 billion).
Jim James, manager of Morgan in China, is showing the Plus 8 and the Aero Coupe (right) for the first time in the country since their launch at the Geneva Motor Show earlier this year. He has just sold two of the new Morgans and has commitments to buy two more.
“The reaction has been great. I had a customer from Hunan province come in and buy a car on the spot,” he said.
“No one who came up to me on the stand has said times were tight. People are still talking about starting luxury businesses. There is still disposable income at the top end,” said James.
He said the history of the brand – the cars have been made since 1910 – has a lot of appeal in China, and the fact there are so few of them about is attractive to the buyers, along with the modern roadworthiness.
An interesting aspect is that a lot of luxury car sales are driven by the internet in China, rather than showrooms. James has heavily leveraged Weibo, the Chinese version of the banned Twitter, and that’s been key to their early success – one of the buyers at the luxury fair had found out about the car that way.
“It’s not location, location, location, it’s internet, internet, internet,” he said.
More than 50 Chinese journalists turned up for the launch of the car, which was given a blessing by the British ambassador Sebastian Wood. “Chinese consumption is growing at a strong rate. There is demand for the kind of things that British companies can provide,” said Wood.
British companies have been busy in promoting their luxury brands in China, a market that Irish companies are slowly waking up to.
Last year, as Ireland wrestled with bailout terms, mainland Chinese shoppers spent an estimated 111 billion yuan (€13.9 billion) on luxury goods, according to consultants Bain & Co.
By 2020 the mainstream Chinese consumer – some 400 million people or 51 per cent of the urban population – will have an annual disposable income of between €13,000 and €27,000, according to a McKinsey study. In 2010 this bracket accounted for only 6 per cent.
Zhang Bohang (32), an art furniture designer, believes that Chinese consumers have not reached the sufficient cultural level to really appreciate luxury goods.
“It’s not about art design or tradition, they only see expensive labels. If a car is worth three million yuan, they might buy it – but if it’s for sale at one million yuan they won’t,” he said.
Walking through the show the stands seem to be promoting an odd mixture of goods. Many people at the show seemed happy to browse rather than part with their money.
However, one display which was attracting a lot of attention was the Bella Donna International Professionals in Natural Breast Care stand, which offers a natural form of breast enhancement and is familiar from an ad campaign in Beijing taxis.
At the Paloma Sanchez jewellery stand a tall, topless male model caused a stir, as did his equally tall female, fully clothed companion. Across the hall the Glory Property company was advertising a castle called Eyemouth, in Ayton, Berwickshire, Scotland, for €3.15 million.
“China definitely has many rich people who can afford to spend a lot of money on buying luxury brands. I think many of them are so called ‘new money’ – they buy luxury because they feel they need them as rich people to show their social status,” said Su Xitong (26), who works in construction management. She was only at the fair to accompany a friend, and only buys luxury items as gifts.
Tian Tian (26) cannot afford to buy luxury items. “But I know rich people who can buy luxury just like I buy yogurt,” she says.
“I used to work as a part-time realtor, and I saw rich people buying dozens of apartments, they feel the need to have expensive things. I do like this stuff, however, and if my salary is increased 100-fold I’ll buy too.”
One woman, Ge Li (34), who described herself as “freelance”, was wearing designer clothes and carrying a Miu Miu bag. “This exhibition is too disorderly,” she sniffed.
So how much does she spend on luxury items? “Oh, I never count,” she said.
Zhang Yihan, a brand relation manager, said she expected the luxury market to slow down a bit this year, just like the economy.
“Best-case scenario it will be the same as last year, also because the middle class in China has become more rational on consuming luxury items, although Chinese consumers are very polarised, either very rich or a relatively low income,” she said.
China was a market leader for many of the luxury products of ancient times, such as rice wine, tea, porcelain and jewellery, and it is a source of considerable irritation that the country is finding it difficult to come up with its own brands.
A recent survey carried out by the Beijing-based University of International Business and Economics showed that 68 per cent of the 2,000-plus consumers surveyed believe that China does not have the capability to create its own luxury brands.
Jessica Tu, chairwoman of the Luxury Market Council, bemoaned the lack of global influence of Chinese brands.
“They need to attach more importance to the exploration of overseas markets,” she told the China Daily newspaper.