“Is The China Consumer Story Overblown?” (Forbes)
According to data published by the Boston Consulting Group, 80 percent of Chinese believe their children will live better lives than they do, compared with only 20 percent of Americans who believe the same. Couple this magnitude of positive consumer sentiment with fast rising income levels and that — not luxury sales — is the real China consumer story to follow, says the article’s author, who quotes Jamie Kramer of J.P. Morgan’s Private Bank in New York: “Everybody loves to talk about [China] luxury, but that’s only part of the story. It’s about diet; it’s still about eating more meat, drinking more alcohol, the stress of the city.” This is a reminder that while capital markets are notoriously fickle when faced with short-term volatility, brand builders should focus on the bigger picture: Chinese consumer confidence is up and is fueling a larger portion of global demand than ever. The luxury goods sector benefited early from this trend, but a few quarters of slowing retail sales do not negate the country’s overall upward trajectory.
“Hugo Boss Goes Global With China-Centered Campaign” (Jing Daily)
Hugo Boss’ upcoming Autumn/Winter 2013-14 runway show in Shanghai breaks the mould. In place of the usual encore presentation for a Chinese audience, the May 30 event will be a true global premiere, captured and broadcasted live online. Advance promotion for the event revolves around an online video campaign entitled “Shanghai Affairs,” consisting of two mini-webisodes following a nocturnal flirtation between Taiwanese actress Lin Chi-ling (recently named one of Forbes China’s most influential Chinese celebrities) and a Caucasian male admirer. Incorporating Chinese faces and settings into brand storytelling — and even debuting content in China are becoming increasingly common practices. The second instalment of Dior’s “Secret Garden” campaign, for example, debuted in Vogue China this month.
“E-Commerce Soars In China” (The New York Times)
A recent Price Waterhouse Cooper report sheds light on the behaviours of Chinese online shoppers. Of particular note, a third of those purchasing online are likely to complete the transaction via a mobile device (smartphone or tablet) rather than a personal computer, double the global average. The Chinese also click to shop more frequently, with 58 percent of respondents admitting to buying online at least once a week, compared to 42 percent in the US, 41 percent in Britain and only 13 percent in France. The country’s online retail opportunity is merely in its infancy, generating approximately 1.3 trillion RMB ($211 billion) annually. As the fastest growing direct-to-consumer channel, the upside of localising to Chinese browsing habits is relevant to all retail segments from household basics to luxury.
“Luxury Fashion Labels Measure Up To The Competition” (China Daily)
In the decades since market liberalisation, China’s couture whims have been largely answered by foreign couturiers at the expense of fostering a domestic high-end industry. A select number of designers, exceptions to the rule, have successfully cultivated the patronage of prominent members of Chinese society and built sizeable local ateliers. Couture labels such as Guo Pei and, in this case, NE Tiger, are finding themselves at the tipping point of achieving global exposure.
NE Tiger (“Dong Bei Hu”) is one of the most prominent domestic luxury names. But according to chairman and designer Zhang Zhifeng, the company, established twenty years ago, only recently began turning a profit. The business today focuses on made-to-measure women’s dresses, of which it turns over roughly 2,000 garments a year at average retail tags of 30,000 yuan ($4,760). Here, Zhang discloses an early reliance on subcontracting and export trade, in order to finance and ultimately shift the focus onto the high-end prospects of the brand. Domestic demand is picking up, but in need of higher volumes to offset narrow profit margins, NE Tiger is setting its sights abroad: a recent exhibition in Riyadh has led to couture commissions in the Gulf.
It’s a fallacy to attribute China’s luxury slowdown to the country’s anti-extravagance campaign, as many reports have done, cautions Anne Zhang, a reporter for Chinese business magazine CBNweekly, in a contribution to BoF. While the Xi Administration’s crackdown on conspicuous spending among official ranks has certainly chilled the mood, its impact is reflected, almost exclusively, in the capital city. Whereas Gucci stores in Beijing have seen several quarters of disappointing sales, secondary markets such as Wuhan are now top-performers.
Zhang identifies says the root causes of the market slowdown are broader changes in consumer behaviour and the diversification of retail channels. Today, affluent Chinese enjoy unprecedented flexibility in how and where they can purchase, resulting in robust outbound tourism spending — which is less costly and offers a more varied selection and lowered risk of scrutiny — and growing online sales. But the most sensible explanation of all often goes unsaid: that extended periods of double-digit growth are not feasible in any consumer sector and that the current rate of adjustment is positive for the long-term stability of the Chinese market.