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China's Constant Flux

Fresh from a circuit of Beijing, Shanghai and Hong Kong, Imran Amed shares his first-hand observations on China’s fast-changing fashion market.
Traffic in Beijing, China | Source: Flickr
By
  • Imran Amed

BEIJING, China — The most discussed app in Beijing is not Sina Weibo, but rather the Air Quality Index app created by the American Embassy which helps local residents plan their day, in the same way that people elsewhere might plan their day around the weather. A normal reading of the "PM 2.5 Index" (so named for measuring the fine particles suspended in the air with a diameter of less than 2.5 microns, considered the most harmful to health) is around 25. But during my recent visit to Beijing, PM 2.5 readings reached more than 400, a level that poses "hazardous" risk to the health of the general population. At times, it was impossible to see more than 10 metres ahead of oneself due to the thick haze of particulate matter in the air: a toxic blend caused by heating from coal-fired plants, rising car ownership and nearby factories, amongst other factors.

This was the first topic of conversation almost everywhere I went. That, and the city’s incomprehensible and often unpredictable traffic jams. Both are symbolic of the breakneck speed of growth that has seen Beijing become one of the world’s most polluted and congested cities.

But being the capital city of a country that is rapidly emerging as the most powerful economy in the world does come with benefits, as well. Indeed, Beijing is the seat of power, not only of the Chinese government, but also of the major media companies, investment firms and industrial conglomerates which are driving the economic boom that, arguably, prevented the world economy from falling off a cliff in the months and years following the global financial crisis. Without sustained demand from China, who knows what would have happened.

This includes global fashion and luxury houses, who now depend enormously on consumers in China. In the five years since my last visit to China, I found that parts of Beijing had changed, almost unrecognisably and the growth in awareness of international luxury brands is evident everywhere you look. Unfortunately, it seems that things have evolved so quickly that many luxury brands did not take (or have) the time to think carefully about how the local presence they were rapidly building would have to evolve to stay in sync with the fast-maturing tastes of Chinese luxury consumers.

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So now, brands like Gucci, Burberry and Louis Vuitton each have scores of identical stores with identical products in undifferentiated shopping malls in cities dotted around the country. Even in first-tier cities, in every luxury shopping centre you enter — from Parkview, Seasons Place and Shin Kong Place  in Beijing to the sparkling new IAPM in Shanghai to the IFC in Hong Kong — you see not just the same brands, but the same visual merchandising, the same advertising, the same everything.

Sometimes, as with the Stella McCartney store in Beijing's Parkview Mall, the branding of the store's façade is much, much larger than the scale of the actual store itself.

Perhaps it's not entirely surprising, then, that some brands are reportedly suffering, not just from the slowing growth we've been reading about in news reports, but in some cases double-digit percentage declines in revenue, as experienced luxury consumers in China turn away from heavily logo-ed bags and other obvious brand signifiers.

Many seasoned luxury executives I spoke to said they had never seen a market evolve quite so quickly or dramatically. Indeed, it took decades for residents of Japan to arrive at the level of maturity (and fatigue) exhibited by mainland Chinese today.

So, what has changed?

The notion of individual self-expression is still a relatively new concept in China. For decades, the government advocated exactly the opposite: a kind of extreme conformity designed to make everyone look and think the same. But perhaps it’s precisely because of these policies — and the “bottling up” effect they created — that the rate of change has been so dramatic now that self-expression is gathering steam. This, and the rise of rapidly growing social networks, which have given the Chinese a first taste of what it is like to speak their minds publicly.

Whereas once consumers might have first looked at the label on a bag or article of clothing to ensure it came from a brand with respectable provenance that offered them social acceptance and status amongst their peers, they are now looking at the garment itself, asking: “What does this say about me? Is this who I am?”

This really is a fundamental change in the Chinese psyche.

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So, rather than toting the latest ‘it’ bag and sporting a blingy Swiss luxury watch, advanced Chinese consumers are now looking for products that really set them apart as individuals in the know. The last thing they want to do is to walk into identikit stores and buy the same ubiquitous products as everyone else. In this way, many wealthy Chinese in first-tier cities are now more like their counterparts in America, Europe and Japan than they are like their fellow citizens in still-emerging second-tier cities like Chengdu and Chongqing.

What’s more, the widely reported government crackdown on gift-giving is the real deal. At a fashion show in Beijing, one senior official at a government affiliated arts organisation explained to me that, following the transition of power to the government under new President Xi Jinping, he and his senior colleagues have been required to attend weekly classes on Marxism and Leninism in order to reconnect with the communist values that they grew up with. The final deliverable for the class is a 6,000 word personal statement repenting for past excesses and reaffirming the lessons they have learned.

While the official in question seemed to roll his eyes at the whole exercise and didn’t think that it would change thinking, the government crackdown does appear to have changed consumption habits. Amongst the political class, unbranded luxury clothing and accessories are the order of the day so as not to attract unwanted attention.

But where there is change, there is also new opportunity. These dramatic shifts in consumer behaviour have given rise to many high-end multi-brand boutiques, offering unique product assortments and high levels of personalisation.

From its ultra-luxurious outpost in the Beijing Yintai Centre, Lane Crawford serves uber wealthy "platinum" clients (many of whom are hotel guests at the Park Hyatt hotel housed in the same complex) by creating bespoke edits of top international labels like Lanvin and Givenchy and young designer brands including Jason Wu, Phillip Lim and Peter Pilotto. Large sections of the Lane Crawford Yintai store can even be completely closed off to give a single client total privacy and undivided attention.

One gets the sense that part of the motivation is to offer higher levels of service, but part of it is also about simply making clients feel important — and different — from those shoppers frequenting the identikit stores just outside in the mall.

Over at the newly opened Galeries Lafayette, not far from Tiananmen Square, there is another emerging trend under way. While big brand luxury shop-in-shops dominate the main floor, with the same programmatic approach to merchandising — the Saint Laurent store looked more like a still image from a catalogue — the upper floors were teeming with lively European contemporary brands such as Sandro, Maje and MGSM, many of which are exclusive to Galeries Lafayette in the Chinese market.

Ultimately, what’s clear is that the Chinese luxury market is evolving faster and faster, and it makes little sense to think about a monolithic Chinese luxury consumer. While those clients travelling to places like Beijing and Shanghai from third-tier cities may be seeking their first logo bag, there are also many shoppers who first entered the luxury market ten years ago and have quickly moved on to something else.

Make no mistake. The luxury market in China remains huge and is still growing, albeit more slowly. Those brands that take a long view and maintain an agile stance, continually adapting their go-to-market strategies to reflect the changing, multi-speed reality of today’s China will continue to take market share in this, the most important luxury market in the world.

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