The China Edit | Prada’s Profits Grow, Chinese Tourists, Austerity’s Impact, Middle Class Remains Thrifty

The China Edit is a weekly curation of the most important fashion business news and analysis from and about the world’s largest luxury market.

Prada Men's Spring/Summer 2010 Campaign | Source: Prada

In China, The Devil Doesn’t Wear Prada” (Reuters)

Strong financial results from Prada may be further evidence that affluent Chinese consumers are shifting their attention to more understated consumption. The Hong Kong-traded company reported a nearly 8 percent increase in net profit for the past six months, with regional sales in Greater China nearing the 400 million euro (about $540 million) mark. While its luxury rivals Louis Vuitton and Gucci have been established longer in the market, their early dominance reflected consumers’ initial thirst for logo-driven branding. As political and social pressures mount from China’s ongoing austerity drive, discretion is the new premium and brands that can embody subtle luxury will continue to benefit.

Wooing, And Also Resenting, Chinese Tourists” (The New York Times)

Stories about the increasing flow of Chinese tourists traveling abroad continue to shock and entertain (much as similar stories about Americans and Japanese did in previous decades). As record numbers of Mainland Chinese travellers visit and shop their way through popular overseas destinations, retailers and service providers are increasingly conflicted over best practices. On one hand, tourism operators in the US, Europe, Greater Asia and Australia bend over backwards to woo the high spending Chinese. On the other hand, resentment has begun to brew among these same service providers and non-Chinese on the international tourist circuit who report a lack of common courtesy and etiquette amongst Chinese travellers. As influential blogger, publisher and Beijing retailer Hung Huang sums up, “They think, ‘The hell with etiquette. As long as I have money, foreigners will bow to my cash.’” In the end, it’s important to remember that travellers of any national origin come from a wide range of socio-economic and cultural backgrounds and that generalised assumptions and stereotypes about any one group can damage business.

Luxury: Measuring The China Austerity Effect” (Financial Times)

As the luxury goods industry continues to weather softening growth in Asian markets, perhaps too much blame is assigned to Beijing’s austerity drive. The range of root causes extends beyond political pressures: the inflationary domestic housing market which reduces disposable spending; currency fluctuations affecting where retail transactions are booked; overseas travel and tourism patterns; and a macro level economic slowdown, to name but a few. It is also beneficial to break down the luxury sector into narrow product classifications for further analysis. The anti-corruption watch tends to target readily “giftable” categories such as timepieces, premium liquor and automobiles; fragrances, beauty, and leather goods continue to gain traction.

China’s Anti-Bling Consumers” (Financial Times)

While typical market analysis by Western consultancies and brands tends to focus on Tier 1 to 3 cities, a consumer focus group conducted in a Chinese small city in the Gobi desert has produced some interesting insights. The city of Jiayuguan, where the focus group was conducted, falls short even of a Tier 5 classification. Nevertheless, residents are exposed to a Western-style department store and shopping centre, foreign fast food outlets and a base knowledge of the aspirational brands that preoccupy their more cosmopolitan countrymen. This is a snapshot of a less glamorous, but all the more real Chinese middle class, where thriftiness still prevails and ostentatious consumption is rationalised out of favour.