This month’s Monocle magazine plays "Spot the Shopper" at one of China’s cavernous new luxury malls. Have a look — there’s barely a shopper in sight. We’ve been hearing similar reports about luxury malls and stores in Russia, and the (admittedly anecdotal) fashion grapevine says that luxury stores in India are struggling as well. Add this to the economic uncertainty sweeping through the global economy and it’s enough to step back and wonder: is this whole Asian luxury explosion overstated?
Not according to Radha Chadha, a leading expert on Asia’s luxury boom and co-author of the book The Cult of the Luxury Brand: Inside Asia’s Love Affair With Luxury. Turns out that some companies and luxury projects are just not well conceived to begin with, and these ones are likely to fail. However, other players are scoring major successes in Asia, especially those that have been present in the region for some time.
We reached Radha Chadha in her Hong Kong offices to better understand the impact of the global economic downturn on the luxury boom in China and India and to get Radha’s views on which brands are best positioned to dominate the market there.
BoF: With all the talk of recessions and the debate over economic decoupling, how do you think this will impact the so-called luxury explosion in Asia?
RC: The equation is simple: if the economies of Asia grow, the luxury market in Asia will grow too. I am not an economist, but from what I can see on the ground, things seem rosy for the luxury market here, at least for now.
Even with the USA going into recession, people expect China and India to continue growing… perhaps at lower rates, but growing significantly all the same.
BoF: In your research on luxury in Asia, what surprised you the most and why?
RC: Surprised me? Ordinary people spending extraordinary sums of money on luxury brands. But they seemed to be getting their money’s worth in terms of social kudos and enhanced self esteem.
BoF: Which luxury brand do you have the highest hopes for over the next 10 years, in terms of growth, profitability and brand awareness in Asia?
RC: Hard to say, 10 years is a long time in the fast paced Asian markets. Any brand with a kick-ass Asia strategy (and execution to match) could do wonders in that time period. Going by the current situation, I’d pick Louis Vuitton (it has formidable brand building capabilities) and Coach (based on what it accomplished in Japan).
A category I’d watch is Spirits & Wine…some of those brands are making a concerted effort to "go luxury".
BoF: What advice would you offer to brands looking to break into the Asian market but which do not have local contacts and experience to do so? Where is the first place they should turn?
RC: Chadha Strategy Consulting, of course! But seriously, my advice would be to spend time understanding the local consumer and the local market…these are complex, fast-evolving markets, and there are so many misconceptions about Asia.
China shopping mall photo courtesy of Monocle magazine.