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.

The british fashion house Burberry and the French couture Louis Vuitton were dueling in a creative fight. It was already impressive to experience the new website fashionshow.louisvuitton.com, we again experienced a new storytelling writing of the Burberry fashion show in Beijing this April 13, created by its art-director Christopher Bailey.

Beijing and last Burberry 1,000 sqm boutique were chosen to represent the various technologies breakthrough. In a 2,000 sqm the audiences could see holographic models associated with real ones on the stage. Many other choregraphies and live shows, such as british rock-pop band Keane, DJ Tom Guiness and Chinese DJ ShanXi. An impressive broadcast made the show available in 200 other partners websites and many small cinemas prepared for the occasion at some Burberry boutiques.

Let’s see what Louis Vuitton is preparing back…

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.

Fashion designer Diane von Furstenberg has keen instincts and the savvy to reinvent herself as a designer, and over the years, she has become one of the most influential people in American fashion. Now, DVF has her sights set on China.

Her ambitious plan to get her name out and wow the Chinese includes an upcoming exhibit of her career retrospective, Journey of a Dress, in Beijing from April 2 to May 14, in a renovated factory in the 798 District. China’s leading artists will join and add their own portraits of her. Pulling out all the stops, she planning private parties, a dazzling evening gala, and of course, lots of celebrities.

She’s also having her 1998 autobiography, Diane: A Signature Life, translated into Chinese by good friend Hong Huang, known as “China’s Oprah.”

Meanwhile, Diane von Furstenberg opened the first of two new DVF boutiques in China in November 2010. The Beijing store, located in the Shin Kong Place Mall, is the thirty-seventh free-standing boutique for DVF, and offers a full range of products, including ready-to-wear, accessories, shoes, handbags, eyewear, books and small leather goods.

Last year, she told the New York Times, that soon China will be buying US products, instead of US buying theirs: “‘Oh, the Chinese buy everything.’ I mean, this China thing — I think it’s going to happen, like, tomorrow morning,” she said.

Source: The New York Times, via Red Luxury.

VIVE’s experiment in selling premium “made-in-China” cosmetics was risky. So how has Shanghai VIVE been received since its official relaunch after 6 months existence ? Founder Demos Chiang, grandson of Chiang Kai-Shek, explains the strategy of the brand:

With its 1080 yuan (US$163) “Yurong cream” and 220 yuan ($33) “Xiren” soap, Shanghai VIVE is clearly positioning itself as a true luxury brand. Shanghai VIVE’s appeareance on the scene means that China’s lack of a home-grown luxury cosmetics brand has come to an end.

In its comeback campaign, Shanghai VIVE decided to continue to use the “Qipao calendar girl” image originally used in the “Two Sisters” days. Meanwhile, parent company Shanghai Jahwa hired DEM Inc. to create the new logo, product packaging and store design. The grandson of Chiang Kai-shek, DEM Inc. founder Demos Chiang has become a key part of Shanghai VIVE’s brand’s resurrection. This is not only because he’s a popular media figure and writer, but also because of the international perspective of his design team.

When preparing Shanghai VIVE’s design, Demos Chiang said he did a lot of research about 1930s Shanghai, while also studying popular fashion magazines at the time. Finally, Chiang settled on a black and rose-red motif for the brand, feeling it best depicted the mysterious and sexy nature of Shanghai women.

Despite the success of Liushen and Herborist, Shanghai Jahwa doesn’t want to follow their model with Shanghai VIVE. In contrast to Herborist, Shanghai VIVE doesn’t use herbal ingredients as a selling point. Rather, it uses culture as its main selling point.

Currently, all of Shanghai VIVE’s packaging is imported from France, as “no domestic suppliers meet our requirements,” according to Lei Yuanzong of the brand’s design center. Added Lei, “It’ll probably take 10 years for China to develop its own luxury capabilities.”

Nonetheless, Shanghai VIVE has begun to attract attention from Europe and the US, though the brand isn’t yet available overseas.

Source: Jing Daily

Shanghai Tang’s chief executive shares his wisdom on the Financial Times, delivering some interesting messages to the young entrepreneurs or school students. We read that Richemont put him in charge of one of its smaller investment, the Hong Kong-based Shanghai Tang.

He progressively became the “mandarin de luxe” by transforming his key ideas into action, from the original concept of Shanghai tailoring to the concept of a more open lifestyle brand. His few advises to the coming graduates of business schools are to learn “the real experience of human relationships” or to “how to handle different issues”, things that are rarely taught in school, and to accept the “conflict between designers and salespeople, who sometimes accuse the designers of being too selfish and not commercial enough”.

Read more: “Le mandarin de luxe: Shanghai Tang’s chief executive shares his wisdom” at the Financial Times’ website.

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.”

LVMH, a bellwether for the luxury-goods industry, declined to give a full-year profit forecast even though all of its divisions performed better in the first half. Steep declines in LVMH’s champagne and watches businesses brought sales down to €4.14 billion ($6.17 billion), off from €4.16 billion last year. “I don’t think we can say the crisis is over, but we can start to see the light at the end of the tunnel, even though the light is far away,” said LVMH Chief Financial Officer Jean-Jacques Guiony.

Claudia D’Arpizio, a Bain retail consultant based in Milan, said she expects the industry’s heavyweights—a group that’s generally defined to include companies like LVMH, Cartier owner Compagnie Financiere Richemont, and Gucci Group, part of France’s PPR SA—to hold up better than smaller players. Mr. Guiony said LVMH aims to increase its market share this year, spread out over categories from cognac to perfume, bags and jewelry.

The U.S. and Japan have been the toughest markets for LVMH’s star fashion brand, Louis Vuitton. But strong growth in China, where it has 30 stores, buttressed the brand’s sales growth, which topped 10% including the positive impact from currency fluctuations. Vuitton contributes nearly half of LVMH’s operating profit, analysts estimate.

Indeed, a projected 12% increase in 2009 luxury-goods sales in mainland China could partly offset declines elsewhere, Bain projects. Luxury brands across the industry are targeting China with new store openings.

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