Skip to main content

Published - Toning Down the Bling Factor

The Belgian fashion house Maison Martin Margiela is known for its understated approach — from its unmarked white label to the fact that its design team has remained anonymous since Mr. Margiela left the company in 2009. So when Margiela chose Beijing as the site for its newest and biggest boutique last year, it was an indication of significant change in the Chinese market for luxury goods, which until now has been known for its logo-happy consumers.
The new preference for less-conspicuous brands, like Margiela, reflects in part the Chinese government’s clampdown on a culture of gift-giving after the online community exposed politicians sporting expensive watches that did not match their party-paid salaries.
It is also, analysts say, a natural evolution of luxury consumption patterns seen in other markets — where new buyers will always want to line their closets with the biggest names, but older buyers are getting choosier.
“What we are seeing is a change in spending patterns, not a drop in the desire for luxury items,” Elan Shou, managing director and vice president of Ruder Finn Asia, a public relations and market research firm, wrote in an e-mail.
“We are seeing an evolution occurring among luxury consumers from outward needs, i.e., displaying signs of wealth, to inward needs, i.e. buying luxury items to reward oneself and enjoy the experience.”
Recent official data in China have shown a slowdown in consumer spending in the first half of last year, reflecting the slower economic environment. But many international luxury groups still had healthy sales in the region.
PPR, the French luxury conglomerate that owns Gucci and Bottega Veneta, posted sales in the first half from Asia-Pacific outside Japan of €1.17 billion, or $1.47 billion, a 16.2 percent increase from a year earlier. Sales in mainland China rose 24.4 percent. Sales for its Gucci brand in China, where it has 54 stores, were up 17.2 percent in the first half; sales at Bottega Veneta, which operates 24 stores in China, were up 62.4 percent.
Hermès International sales were up 22 percent in the first quarter, while LVMH Moët Hennessy Louis Vuitton posted a 26 percent increase in revenue in the first half.
At Richemont, which owns Cartier and other luxury brands, sales have been so strong in the four months through July that the company said its operating profit for the first half was likely to increase 20 percent to 40 percent from the period a year earlier. Though it did not provide geographic details, analysts say it appears that Chinese consumers were again the driving force.
“When we talk to Chinese consumers, they absolutely want to spend on luxury, but there is also a definite shift,” said Shaun Rein, managing director of China Market Research Group, a consulting firm.
“We recently interviewed three dozen Chinese worth $10 million each or more, and they told us they don’t want Louis Vuitton any more because it’s become too common,” he said by telephone from Shanghai. “They are trying to differentiate themselves and not have the same logos and the same brands that have been so popular for the last ten years.” The handbag buyer, he said, favors “Hermès, Chanel, a Bottega Veneta — brands that have high prestige but are a little bit more low-key.”
The luxury market is also fragmenting by demographic and spending power, Mr. Rein said.
“There are still tens of millions of girls that are aspiring to buy Louis Vuitton, but very often it’s the secretary who makes $1,000 a month who is buying that bag,” he said. “At the ultra-wealthy end, individuals are now looking at more higher-end niche brands.”
The Ruder Finn/Ipsos China Luxury Forecast 2012, released in July, revealed some major changes in spending patterns, as consumers are cautiously planning for the next year. They appear to be moving away from luxury-brand watches, handbags and jewelry for the coming year, while favoring luxury cosmetics, high-end shoes and top-brand wines, spirits and cigars.
Ms. Shou, of Ruder Finn, also said that Chinese luxury consumers were not a unified block. “They include very sophisticated consumers who are interested in new, niche brands; and consumers preferably going after the big names,” she said.
“Luxury was often considered ostentatious in the past and there is still a strong social recognition factor in play for mainland consumers when they buy luxury items,” she added. “But they are also often looking for items and brands that reflect their taste and personality.”
PPR concurs, saying in a statement that “there is not one typical luxury customer in China, as there are many types of customers with different cultures, different habits and different tastes.”
Mr. Rein added that at the ultrahigh end, consumers were no longer getting prestige from a handbag, “They are looking at Ferrari and Lamborghini cars, private jets and yachts and you are seeing those markets still grow significantly,” he said.
Yuval Atsmon, a principal at McKinsey & Co.’s Shanghai office and co-author of the recent report “Meet the 2020 Chinese Consumer,” said the firm’s research confirmed that many, though not all, luxury consumers had been veering from showy displays of consumption to logo-less products.
“They feel they had evolved and don’t need big logos to prove their status,” he wrote in an e-mail.
“There is a rising interest in smaller brands, especially from consumers who have been shopping for luxury goods for several years,” he added. “More are starting to shop for niche brands or even brands that are from independent designers.” For the ultra-wealthy, he added, there is an extraordinary willingness to pay a premium for “exclusive” design. The interest in exclusivity has not been lost on haute couture houses, whose clients can pay €20,000 to €100,000 for a one-of-a-kind item.

In April, Dior chose to present its entire couture collection in China, a first for the company. Recreating the décor of its famed Avenue Montaigne boutique in Paris, replete with Napoleon III chairs, gray walls with white moldings and 18th-century consoles, the show on the Bund in Shanghai was a repeat presentation of the couture collection the fashion house had shown three months earlier in Paris.
The following month, the edgier avant-garde French couturier Jean Paul Gaultier presented his couture collection in China, also a first, this time in Beijing. In May, another couture heavyweight, Giorgio Armani, presented “One Night Only in Beijing,” which included 15 Giorgio Armani Privé couture looks created specifically “as a tribute to China.”

During couture week, Atelier Versace had the Chinese movie star Fan Bing Bing in the front row, while the couturier Stéphane Rolland “enlisted” Ms. Fan to model his final bridal look, guaranteeing himself good coverage in the Chinese press.
But as brands set up new boutiques in China to capture the domestic consumer, they may be overlooking an important shift in luxury buying patterns: The Chinese are, by and large, not shopping at home.
“A lot of luxury brands look at pure economic data, see Beijing and Shanghai as the cities where the wealthiest are, and so decide to set up a flagship store there,” Mr. Rein said. “The reality is that people in Beijing and Shanghai do very little luxury shopping in China because they travel abroad more, and right now it’s much better value for them to buy in Europe as prices have not increased there, while the euro has fallen.” The real growth, he said, is going to come from smaller cities.     

This story first appeared in print on September 11, 2012, in The International Herald Tribune.