Global luxury brands like Louis Vuitton, Dior, are racing to grab a chunk of the Chinese market — and with good reason, considering the country is home to the third-largest population of millionaires and has become the second-largest consumer of luxury goods in the world. Meanwhile, however, hardly any of the luxury Chinese labels that showed have as strong a global brand recognition as their French counterparts. But that may change.

Angelica Cheung, editor-in-chief of China Vogue thinks it will happen, but not any time soon. “I feel that when everything else is ready — when people and the market are more mature, and people have more of an understanding of brands’ identity and individual style, and also the production side of the whole industry — basically, it takes maturity of the whole chain before that happens,” Cheung told website ARTINFO.

Only a decade ago, the term “Made in China” carried a negative connotation, often associated with cheap, poorly made goods. With more luxury goods being produced in the country, the meaning of that phrase is changing.

“A few years ago, people would hesitate before they used that expression,” said Cheung. “In Vogue China, we’ve had a column called ‘Made in China’ for the past five or six years. But it really means creativity out of China — what people were doing, what people created that was unique and interesting. These past few years, you just see a tremendous growth of young, homegrown talents. Every year the picture looks more promising and different.”

Many European high-end brands like Prada are replacing the “Made in Italy” label with “Made in China,” signaling a higher standard of quality (at a cheaper price) coming out of Chinese factories. “They understand more how these brands work, and they appreciate quality better than before,” said Chung.

But that doesn’t mean the Chinese luxury industry doesn’t face obstacles. “Where Chinese companies are lacking is quality control and product and image design,” said Eggers. “So far, China has not been able to produce a brand with a broad international appeal.”

Cheung cites many factors that affect the potential global success of a Chinese luxury label. “All these European brands, they succeeded for a big mixture of many reasons, so it’s not just about having a talented designer. It’s not just about having very skilled craftsmen,” said Cheung. “It’s many factors — generations of culture, skills, understanding of brands, understanding of quality, understanding of who you are, communication skills, business concepts, everything — understanding of markets. They’re all part and parcel of what makes a brand successful.”

Even though China’s luxury brands have yet to gain the global prestige that Prada, Gucci, Dior, and countless other designer labels have earned, perhaps it’s only a matter of few decades before they will be just as coveted.

Ermenegildo Zegna’s catwalk show during the Milan Fashion Week which debuted late this week is all about China and the inspiration of the Great Wall. The Zegna Group is also preparing for a major event which will take place in Shanghai marking the 20 years of presence of the brand in China.

Prada presented last year a collection entirely dedicated to the Chinese market and produced a movie inspired by Shanghai’s history which was presented online worldwide as well as at the Prada Foundation Exhibition in Milan. Prada, which has seen a 51 percent surge in revenue from the Asian region in the first nine months of 2010, is planning to restage its Spring 2011 fashion show in Beijing on Jan. 22. Both Prada CEO Patrizio Bertelli and Miuccia Prada are expected to attend, and Prada plans on creating a series of new items specifically for the event.

Chanel’s first fashion show in Shanghai included European models wore yellow face make up to play Chinese characters. Lagerfeld defended this as a reference to old films. “It is an homage to Europeans trying to look Chinese,” he explained. “Like in ‘The Good Earth’, the people in the movie liked the idea that they had to look like Chinese. Or like actors in ‘Madame Butterfly’. People around the world like to dress up as different nationalities.”

Dior created last year an advertising campaign dedicated to the Chinese market, which later proved controversial due to discrimination issues. Chinese top model Tang Wei who appeared on the Chinese Vogue cover is a regular model for the shows of Dior or Ferragamo in Paris and Milan, as well as for all luxury fashion shows that take place in China.

Marc Jacobs’s latest collection for Louis Vuitton is inspired by Shanghai, yet instead of the sophistication that usually comes from fashion’s wonder boy, the clothes were bogged down with Oriental stereotypes. And so is the entire 2011 advertising campaign of Louis Vuitton, entirely Chinese inspired. Fashion critic, Suzy Menkes wrote, “By the time the first models had sashayed out in slim dresses slit to reveal the leg, you didn’t need a master’s in Mandarin to get the message that China is hot retail property for Louis Vuitton.” As luxury brands expand to different parts of the world where so many people cannot read English or French, they can recognize and remember initials better and that is why, it is obvious that brands should not create special collections, but rely on the amazing power of the logos.

Oliver does not appreciate all efforts made by luxuty brands to adjust to the China market.

But just how far can this ’’Chinese’’ spell over collections and advertising go for the top luxury brands without producing a negative impact on sales in the U.S. or Europe. Even if the actual fashion show takes place in China, obviously targeting Chinese consumers, the news with images travels at light speed through the internet worldwide. For instance, I believe Louis Vuitton’s 2011 campaign no longer has a subtle or implicit Chinese inspiration but the entire ultra bling product line is also targeting Chinese. The traditional LV monogram is replaced by huge VUITTON letters the size of the entire bag. The atmosphere depicted is one of overt show off and bling. This type of branding is considered bad taste, not only in the mature markets but in the young markets such as Eastern Europe, where the financial crisis has made people think twice before wearing an overtly branded product.

The fact that China is becoming the number one market for many international luxury brands provides a financial motivation for brands to adopt such strategies. However, I wonder how, in long term, luxury consumers in mature markets such as the U.S. or Europe will react to this ‘’Chinese influence’‘. From the Chinese consumers in all major luxury stores in Paris or Milan, the Chinese sales assistants in stores from New York to Dubai, the Chinese inspired advertising, to the Chinese models and actresses on all major catwalks, China is everywhere! and you can’t miss that on fashion blogs, web sites (lifestyle or business) oriented, it all sums up to a phrase : ‘’Luxury is Chinese’’

We don’t believe that China influence are going too far. The whole Asia is embracing all aspects of luxury universes.

In 2010, the New York based agency Pao Principle has recruited a proprietary panel of China beauty buyers for the purpose of understanding their attitudes and usage about beauty products. The findings from this report are helping beauty companies better understand what is needed to succeed in this market. 1,014 panelists completed the survey incentivized by prizes donated by Oscar de la Renta, the study sponsor.

Here are some key findings:

• Prestige consumers are concentrated in Shanghai, are older and tend to either own their own business or work in middle management positions for an SOE or multi-national corporation.
• Mass consumers tend to live either in Beijing or Guangzhou and are primarily students
• Education and training are key to gaining market share as beauty is still relatively new in China
• While skincare usage is high and begins at a relatively early age, color cosmetics and fragrance usage begins in university
• Chinese beauty buyers rely on word of mouth from their friends and family as their primary source of information
• Brand loyalty is relatively low although skincare brands from Avon and Olay have successfully instilled loyalty among their respective consumers
• While mainland Chinese beauty consumers overall did not appear to exhibit price sensitivity, some brands such as Maybelline, pricing can potentially impact their consumption

Given the complexity of doing business in China, there have been many success stories and missteps along the way. This study explains some of the 2010 failures and brand missteps:

• MAC
  • They have had difficultly in communicating their message.
  • As a result, Chinese beauty consumers are confused as they don’t understand MAC’s message
• Clinique Happy
  • Chinese love the fragrance of this luxury brand. However, after mass advertising, has gradually has lost its image as a premium brand.
• Elizabeth Taylor White Diamonds
  • Indian rose ingredient is not very attractive to the Chinese.
  • Average packaging,
  • Insufficient advertising.
• Lancome Trésor
  • Lancome is not perceived as a professional in fragrances
  • Insufficient advertising (fixed since with a campaign started late 2010)

For further information you can get the whole study summary at the study dedicated website, made by Pao Principle.

Shang Xia will include ready-to-wear and decorative arts inspired by Chinese culture and traditions of craftsmanship. These are to be made using Chinese raw materials and artisanal know-how, Hermès said. Shang Xia’s creative director is Qiong-Er Jiang, daughter of a noted Chinese architect.

According to Patrick Thomas, President of Hermes International, the new brand will be tailored for the Chinese market where Hermes lags behind its competitors. The objective of this move is to offer cheaper products, as well as capitalising on the growth of the luxury market in the country in 2010. The brand will also be distributed in Paris in one of the large department store. This is the first time the fashion label will get in from the ground up, so it’ll be fascinating to see the results. Chinese luxury consumers don’t want to feel that China is the ”dumping ground” for cheaper or excess inventory.

The report shows a shift in Chinese consumers’ attitudes to luxury purchases, one that has seen them graduate from mindlessly chasing fashion to making far more informed choices – and even beginning to set international trends. In the long-run, says the report, the move to a more mature and knowledge-based consumption pattern in the luxury sector will add to its vitality and sustainability.

As a result, manufacturers in the luxury sector are now paying far more attention to the opinion and demands of Chinese consumers, swayed by their enthusiasm for such products and their more informed purchasing decisions.

Organized by the 21st Century Business Herald, a leading Chinese business daily paper, and supported by Ipsos, a global market research firm, and Fudan University-Bocconi’s fashion and luxuries management team, the report analyzed the behavior of China’s high-end business people – the newspaper’s primary readership group – with regard to luxury purchases. The report is aimed at promoting mature and informed decision-making throughout the luxury sector. During three months of extensive research, more than 150,000 individuals across the country responded to questionnaires about their purchasing patterns and the factors that influence them. In addition, the average number of daily visits to survey’s official website was more than 10,000, with nearly 1,000 online surveys filled in each day. The questionnaire, designed by Ipsos, analyzed a wide range of the target group’s defining characteristics, including industry preferences, purchase motivation, lifestyle choices and social standing. The raw data was subsequently analyzed by the Fudan-Bocconi team.

Professor Lu Xiao, head of the team and an expert in luxury brand management, interviewed scores of participants in randomly selected focus groups. The qualitative data sourced via these interviews, combined with a detailed analysis of the respondents’ opinions, allowed the professor to deliver in-depth insights into the sector. Alongside the report, the favorite brands of the business people surveyed have also been announced. The results show that the China Minsheng Banking Corp was the only Chinese mainland homegrown brand to make the list.

Commenting on the initiative, the event’s organizers said: “The essence of any luxury brand lies in the historical values it embodies. These values need to be continuously nurtured in order to retain their aspirational appeal across all cultural boundaries.”

Seventy-seven percent of Hong Kong consumers are spending the same on necessities while 54% continue to spend on luxury items despite the economic downturn, according to a global survey by leading market research firm Synovate. Interestingly, when asked whether they are worried about the economy, 58% of consumers say they are, but they just can’t stop spending.

Synovate surveyed more than 17,300 people across 26 markets and found that people are regaining their positive outlook on the economy, becoming more optimistic for themselves and their country’s economy.

Spending as usual

This latest survey shows that, while not many people are spending more in the downturn, the majority is maintaining their usual habits. Hong Kong consumers are spending the same on categories such as staple food items (86%), hot beverages like coffee and tea (68%), dairy products (66%), cosmetics (58%), and healthcare products (53%).

Brendan Shair, Managing Director of Synovate in Hong Kong comments: “The economic climate is surely not as good as last year. However, on any regular day when you go to the markets and some of the shops, it is still buzzing with people. This reflects in the high percentage of people saying they have maintained the same spending levels when it comes to necessities (77%) and luxuries (54%). This is good news for many companies.”

Hong Kong consumers’ overall monetary habits have not changed much either.

Shair continues: “After SARS and the previous Asian financial crisis, people in Hong Kong understand the importance of saving for a rainy day. It is not a surprise to see that across the 26 markets surveyed, people in Hong Kong are one of the highest groups (60%) to indicate their saving patterns did not change.

“And likely because of their habits of saving and still having money in their pockets, consumers also admit they are checking prices of food items less often. Over half of those surveyed said they are behaving in the same way as they were six months ago.”

It’s not as bad as we think

What is the impact of the economic downturn to Hong Kong consumers? Findings show it is not as bad as we think. Hong Kong fared better compared to its closer neighbours in the region.

Sixty-eight percent of people in Hong Kong say they are earning the same amount as six months ago, with 24% indicating they are earning less. Earning levels in Korea (54% earn the same, 30% earn less), Japan (44% earn the same, 44% earn less), and Taiwan (40% earn the same, 43% earn less) seem to be more affected by the downturn.

When asked about impulse buying, 55% of Hong Kong consumers say they are shopping as usual.

Furthermore, 61% say they have not changed a major life decision, such as getting married, having a child, or changing jobs, due to the current economic situation.

View on Hong Kong’s economy

Many projections have been made on whether Hong Kong’s economy is starting to improve or will continue to go down. We asked respondents their view on this, and 48% believe the economy is going downhill and will get worse before it gets better, with more females (49%) agreeing to this than males (45%). Thirty-three percent believe the economy is in a bad patch but will quickly get better.

In November 2008, 25% of people across the globe said that they find the economy boring and don’t pay much attention. In May 2009, it was up to 29%. The highest agreement came from Hong Kong.

“Fifty-four percent of people in Hong Kong find the economy boring and don’t pay much attention. This really shows that people in the city are bombarded with news on the economy, and negative ones, every day and they are getting tired of it. Over time, people would wonder whether the economy is really as bad as it is projected. From the low of the Hang Seng Index at 10,676 points, to its peak at 23,369, we currently stand at around 20,000 points. Are we still in a financial crisis which echoes in the news everyday?” says Shair.

Recommendations for companies in the downturn

This survey finds Hong Kong consumers are very brand loyal. In addition to spending money as usual, consumers have not switched brands to get more for the same amount of money in the current economic situation.

A high majority indicate they will continue to use the same brand for staple food items (85%), hot beverages (82%), laundry and cleaning products (82%), dairy products (81%), soft drinks (79%), canned goods (78%), bottled water (75%), cosmetics (73%), healthcare products (72%), and alcoholic beverages (68%).

Shair concludes: “These numbers reinforce the idea that companies should continue to invest in building and maintaining their brands despite the downturn. A brand is one of the most important aspects that connect to consumers. By continuing with customer experience improvement and understanding which brand attributes appeal most to consumers, sales will keep rolling in.”

Consumer confidence and purchasing power

Luxury consumption confidence on par: Despite the current economic situation, consumers in tier 2 cities show a strong capacity for luxury consumption, with 54.6% saying that prices have little impact on their optimistic view that their purchasing power will increase. This is only 4.3% lower than the proportion in tier 1 cities. When asked how confident they were about purchasing power over the next year, 36.6% of the respondents in tier 2 cities expressed confidence compared to 38.9% in tier 1 cities.

Smaller gap in purchasing power: In tier 2 cities, 74.9% of the respondents are likely to spend less than RMB 20,000 a year on luxury fashion and accessory items, which is slightly more than in tier 1 cities. Almost a quarter (23.5%) said they would spend between RMB 20,000 and RMB 100,000 a year on luxury fashion and accessory items, which is only 10% less than the number in tier 1 cities. The percentage of respondents spending between RMB 100,000 and RMB 200,000 a year is nearly the same in tier 1 and tier 2 cities.

When it comes to luxury watches and jewelry, 19.1% of respondents in tier 2 cities will spend between RMB 20,000 and RMB 100,000, only 3.7% less than those in tier 1 cities.

Purchasing triggers

Luxury goods as gifts for business: More than 80% of the respondents buy luxury goods for personal use. A small number or respondents purchase luxury goods as business gifts and this is three times more in tier 2 cities (7.6%) than in tier 1 cities (2.2%).

Brand comes first when considering a purchase: The level of luxury brand awareness is narrowing between tier 1 and tier 2 cities. Among all the measured factors, “Brand Reputation” was named as the most important factor by 75.3% of respondents in tier 2 cities, followed by “Brand Heritage”. In addition, some 46.6% of respondents in tier 2 cities said that they are loyal to certain brands, which is close to the percentage in tier 1 cities (47.2%), while Eastern tier 2 cities top the national list with 51.7%. As there are fewer luxury brands in tier 2 cities than in tier 1 cities and Hong Kong, the faster brands tap into the tier 2 markets, the easier it will be for them to build brand loyalty.

Point of Sales

Luxury department stores are the main channel for getting information: 64.5% of respondents in tier 2 cities said they sourced their information on luxury goods from leading department stores, 15% more than in tier 1 cities. The highest incidence of this is in East China where 70% are more likely to obtain information from salespersons in stores. In addition, 61% of the respondents said that a salesperson’s attitude would influence their purchasing decision while 54.6% said they would make a decision after carefully listening to the advice of sales staff.

Information Channels

Use of information channels similar: The results show that whether in tier 1 or tier 2 cities, the majority of the respondents get brand information from print media articles. Nearly 82% of tier 2 city respondents prefer to learn about new trends among the brands by reading about them in print publications, while some 20% say they get their information from television. Figures are similar for tier 1 city respondents.

Tokyo Kamon Girls

Tokyo Kamon Girls

Tokyo Kamon Girls

The cleansing oil line feature five different formulations…

The High Performance Cleansing Oil Classic is the original cleansing oil by Shu Uemura. The bottle is designed with leaves and vines and a Tokyo Kamon girl named Tsuruha.

The High Performance Balancing Cleansing Oil Enriched is for skin that is dry and dehydrated. The bottle is an eye catching orange check pattern and adorned with a Tokyo Kamon girl named Tamaki.

The High Performance Cleansing Oil Fresh is a light cleansing oil that will leave skin looking and feeling refreshed. The bottle is girly pink with chrysanthemums and a sweet Tokyo Kamon girl named Sakurako.

The Brightening Cleansing Oil will leave skin even-toned, translucent and smoother. The bottle is designed with purple and green colour with a coquettish Tokyo Kamon girl named Katsura.

The Limited Edition Cleansing Beauty Oil Premium A/O is a best seller. It’s has anti-aging and anti-oxidant properties to thoroughly cleans and purify the skin. The artwork on the bottle is of an elegant Tokyo Kamon girl named Matsuno on a green background with red pine trees.

Shu uemura Limited Edition Tokyo Kamon Girls Cleansing Oils are available from the Shu Uemura website while supplies last. / Shu Uemura

The majority of China’s rich now live outside of the mega-cities such as Beijing, Shanghai and Guangzhou, said a study published 16th April by the Hurun Report.

About 825,000 people in China have net personal wealth of more than 10 million yuan (1.47 million dollars), according to the magazine, which tracks China’s wealthiest. But about 52 percent live outside the three biggest traditional centres for wealth — Beijing, Shanghai and southern Guangdong province, which includes Guangzhou and Shenzhen. “People are always shocked when they go to the sticks — to the secondary, the third tier cities — and they realise ‘My goodness these places are booming like nobody’s business’,” Hurun’s publisher Rupert Hoogewerf said. “We’re seeing very clearly there’s a trend of the luxury brands moving into the secondary cities.”

Management consultants McKinsey also warned in a separate report published this month of the dangers companies face in focusing on Beijing and Shanghai while underestimating the importance of China’s smaller cities. “In Beijing, the biggest brand names often have several retail outlets, but many go unrepresented in Chengdu or Wenzhou, even though Chengdu has more wealthy households than Detroit, and Wenzhou as many as Atlanta,” McKinsey said.

The southwestern city of Chengdu, with a population of 10 million, and eastern Wenzhou, with 7.9 million residents, are only two examples of dozens of fast-developing cities with populations of more than five million. The number of households with annual incomes of more than 250,000 yuan (36,765 dollars) hit 1.6 million last year and is expected to rise to more than four million by 2015, McKinsey said. Three quarters of the growth in China’s wealthy consumer segment will come from people who currently live outside Beijing, Shanghai and Guangdong, McKinsey said.

Another recent wealth study by China Merchants Bank and consultants Bain and Company reported similar findings. More than 20,000 people who held more than 10 million yuan each in private equity were in the eastern provinces of Jiangsu and Zhejiang alone, it said. Bain’s banking study said 320,000 people across China would have more than 100,000 yuan in investable assets by the end of this year, representing a pool of nine trillion yuan in assets.

Meanwhile, consumer confidence remains unusually high among the country’s rich, with 80 percent of Chinese millionaires saying the economic crisis had not hurt their lifestyle, Hurun said, citing 67 interviews done in February.

Copyright © 2009 AFP.

China’s Rich and Super-Rich Broken down by Region

* Excludes Hong Kong, Taiwan and Macao
** Source: 2007 National Bureau of Statistics