Chinese luxury brand consumers feel exploited because they are
This year is being described as a low point for the 250 billion euro luxury industry, with global growth at around one per cent, down from 13 per cent in 2011. Things are particularly bad in mainland China, where sales fell two per cent last year. At The Mystique of Luxury Brands conference, held in Shanghai this month, speakers suggested the industry was in dire need of some serious introspection if they’re to persuade people that luxury still stands for something other than high prices.
- The discrepancy between prices in China and Europe reached an astonishing 70 percent in 2015
Co-chaired by Curtin University and the Emlyon Business School, the conference included speakers from academia, brands and research agencies. Michel Ly, General Manager of Jewellery agency Qeelin, noted that well-travelled, web-savvy consumers were not being duped by higher prices in China. The discrepancy between prices in China and Europe reached an astonishing 70 percent in 2015 before falling to around 35 per cent — still a massive China tax. This price differential mainly benefits sales agents who buy luxury goods abroad and resell them in China, a grey market practice so rampant that it’s being cracked down on by the Chinese government.
Flamingo Shanghai co-CEO Julien Lapka pointed out that while the luxury industry began by offering something elusive, meticulously crafted and bespoke, it’s now perceived as mass produced. On Shanghai shopping streets such as Middle Huaihai Road and West Nanjing Road you see even more Gucci and Cartier stores than Starbucks, and the very term ‘luxury’ has lost its exclusivity, applied to almost everything, including toilet paper.
Javier Calvar, CEO of Albatross Asia agreed that some luxury brands in China have been seduced by the desire to sell to everyone when luxury should be a laser-sharp discipline. “If we have to spend money to market luxury products we have a problem," he said. "Luxury is about having personal conversations with customers.”
“For a lot of people I know, fake and real products co-exist in their wardrobes,” said Chuen Kok, the COO of Attos Group. When people really love something they’ll buy it but for things they merely want rich people can buy quality fakes and never risk getting caught because of their status. Why pay more if fakes are indistinguishable from the real thing?
Several ideas for revitalising the luxury industry were discussed at the conference.
Ly said brands should be quicker to realign their pricing in China with other parts of the world.
- “The luxury business must become more intimate”
Flamingo Shanghai co-CEO Julien Lapka
Lapka emphasised that all aspects of the luxury business must become more intimate, including design, production, distribution and service.
- Instead of creating limited edition offerings that make products seem disposable — there’s always something new coming down the pipe — work directly with consumers to create items that have more meaning for them.
- ‘Craft’ has become a facile term, overused, meaningless. But using better quality materials and more innovative processes, brands can create tactile experiences that build intimacy with items and help differentiate them from fakes.
- Instead of pursuing profit through a large retail footprint, create unique boutiques. And instead of hiring Chinese sales staff in stores around the world, suggesting a uniform, mass market approach, celebrate differences, for instance Tokyo’s unique sales culture: greeting customers at the door in Japanese, carefully wrapping purchases, and so on.
- While many luxury brands have been suspicious of the digital sphere, it’s another area where they can create much more personal relationships with customers.
Pivoting away from ultra-expensive watches, it's now trendy among the rich in Chengdu, Western China, to wear Tibetan prayer beads, simple bracelets made of wood. This kind of soul searching and reassessment must be matched by luxury brands if they're to remain relevant.
- Article by Sam Gaskin