The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
SHANGHAI, China — In luxury industry circles, some describe him as their 'China Oracle.' As LVMH group president of Greater China, Wu certainly has an intimate understanding of Chinese luxury consumers and the forces that shape their purchasing decisions. The diverse and very dynamic nature of this vast consumer base was the focus of a conversation with Wu at the third annual BoF China Summit, supported by the Savannah College of Art and Design (SCAD).
To be able to connect with consumers in China you need to pay a lot of attention to the changes that are happening in China and the underlying behaviour and behavioural motivations
IA: For those of us that might not be as familiar with the Chinese market as you are, what was it like here back in 1993 when you returned from Canada?
AW: Well everybody has probably read about China's 40 years of economic reform, the open-door policy that started in late 1978 but it actually happened from the beginning of 1979 so we are now really in the 40th year of change. In the '80s, as people probably may recall, China was starting to change, but it was changing in terms of trying to become a manufacturing base... trying to learn from the 'Four Little Dragons' in Asia [South Korea, Singapore, Hong Kong and Taiwan]. So China became very much a place of cheap labour.
You really need to have a much more humble or open-minded approach to how you're going to understand the Chinese.
IA Everyone is talking about Chinese millennial consumers, who are driving the growth more than any other consumer segment. In what ways is their mindset different from their parents?
AW I think you'd need to divide it into even more different groups. Probably the first wave would be represented by people who were born in the 1980s, who are pushing 40, so this would be considered the first wave. And the first wave probably would be represented by — I remember reading about it — there's a famous Chinese writer by the name of Han Han and he was reflecting on something [a few years ago] in his blog. He mentioned that the word "fashion" did not exist to him in the Chinese vocabulary until 2000.
AW Yes, he really said that. It was probably barely noticed by most other people but I was taken [with it] because don't forget that I started working for LVMH in 1993 in China so it was very obvious to me the work that was being done in the 1990s was educational. It was preparing, but not necessarily translating into a force of influence, until the people who were born in the 1980s [reached] their 20s or late 20s; basically it happened probably after the year 2000. Now you have a younger generation coming in, the generation segment who was born in the 1990s, who are now in their 20s. So now after wave after wave of pushing, you see this situation whereby the first segment was probably so unmentored because their parents were from the Cultural Revolution. This generation literally had almost nobody else ahead of them, so whatever they were doing, they thought they were probably doing everything right. But don't forget they were unmentored.
IA I see.
The consumer is the ultimate judge and endorser, and in fact the force to make or break a concept or business.
AW But now you move to the next segment, the generation who were born in the 1990s and their parents probably are currently still working in their 50s or whatever and many of them are successful. So they have some mentoring, and then, of course, they're going to be pushed by people who were born in the turn of the new century which is actually now pushing 20. That's how you have this situation of accelerating change stimulated by the younger generations. Contrasted with other countries, no country has a shortage of different generations, but the context of China is that, because of the Cultural Revolution, because of the cold-door situation for 30 years, this explosion, this pent-up demand, this passion that exists with the young people, probably to me is unprecedented and unrivalled if you compare to other nations. If you look at Japan, obviously it's an ageing population, it has at least three, four generations of consumers who are already with [luxury], and if you look at Europe, America… we're talking about [an] emerged middle class, yes? But if you are talking about the absolute number, it's similar, maybe it's at minimum 120 million Chinese people [in the] middle-class, and therefore you say "well it's like the US or like Japan," but it's not, because the Chinese middle-class are all very young, probably in their 20s or 30s, while the average age of the Japanese middle-class [luxury consumer] is probably 65. And the American ones, yes, but they are not feeling they are doing better than their grandparents or their parents so, therefore, the positive feeling has everything to do with this Chinese middle-class, not just emerged, almost purely young people. So that I think is probably the fundamental difference: the accelerated speed.
IA So that explains why every time I come here it feels like everything's changing so quickly?
IA In a market where the consumer is advancing at such a rapid pace, where the market context is changing so quickly, what advice do you have for fashion entrepreneurs in our audience? How do you connect with the consumer in a context where the market is so fast?
People are acutely aware of the air pollution and the smog here — all of which are true, but technology has become the new air in China.
AW This is a country where the notion of B2C [business to consumer] is relatively new. If you look at the country of China's change for the last 40 years, you were [mostly] talking about exporting, so that's not B2C. That's B2B [business to business] and B2B business has dominated much of China's economic reform, mixed with also B2G [business to government], because you are selling to the government. Don't forget that GDP growth in China for a long time was driven by government investment infrastructure and all that. So this whole notion of B2C is so new that it's not automatically in the Chinese entrepreneur's mind. But things are changing: if you look at e-commerce, that's a B2C business, if you look at a lot of internet start-ups today, they're mostly B2C. I think there was at least a moment that you almost felt that some of the Chinese designers just wanted to win awards. But do they connect with the consumers? So, therefore, connecting with the consumers is a notion in China that should not be taken for granted. It's something that is happening: I see a younger generation of Chinese designers embracing it and that's the right way to go about it. The consumer is the ultimate judge and endorser and in fact the force to make or break a concept or business. So, I think that probably precedes the notion of 'how'.
IA OK, so now tell us how.
AW Actually it would not be right to pretend that I know how. I think the how is a game of engagement and there is no one right answer for everyone. There's nothing wrong if a Chinese designer wants to design and win a non-Chinese audience, nothing wrong – if you make it work. So that's one way, you could be a Chinese designer and become a very big force in America, or in Europe, or anywhere. If you look at China, are you looking at the Shanghai area, or are you looking at [Inner] Mongolia? Are you looking at the Beijing area? There's a lot of differences. I think that even within China you could connect with someone and not connect with the others.
We collectively, [and] internationally need to make a bigger effort to better understand the Chinese.
IA One of the things I want to touch upon is the role of technology. WeChat is a game-changer here, like a combination of Apple Pay, Facebook, Instagram, etc. Back in the west, Mark Zuckerberg says he's now consolidating the messaging of WhatsApp, Facebook and Instagram, effectively trying to catch up with the technology here. What is the role of technology here now with consumer connection and going after market opportunities?
AW I'm not really a technology person so I cannot comment much but I can say one thing. People are acutely aware of the air pollution and the smog here — all of which are true, but technology has become the new air in China. You're literally living in an environment where technology is the new air. Again it's all about connecting. And that's everything to do with the fact that China is driven by this movement of youths which adapts and adopts new things faster and probably more readily than other places.
Connecting with the consumers is a notion in China that should not be taken for granted.
IA You've mentioned earlier that there's not a single type of Chinese consumer. What is the single most misunderstood thing about reaching and connecting with the Chinese consumer? What advice would you give to people to overcome in their mindsets about the consumers here in China.
AW To be able to connect with consumers in China you need to pay a lot of attention to the changes that are happening in China and the underlying behaviour and behavioural motivations, so you cannot just look at the person. There are plenty of overseas Chinese that you look at and say, "okay since you are Chinese I assume by looking at you, I can understand the consumer," but that's not in the right context, right? Sometimes the overseas Chinese present one view or another view of [being] Chinese, all of which are true, but not necessarily sufficient for you to understand [all Chinese consumers].
IA No. Why?
AW Because it's not Chinese, it's Singaporean Chinese. Most [mainland] Chinese probably didn't feel a connection. And in the movie even when they attempted to speak Chinese, the mainland Chinese probably would laugh because obviously they can tell [the actors] are ABCs [American-Born Chinese] or whatever, so all these little things are very telling because if you're far away and you even do things with good intentions, sometimes it doesn't connect. So I think we collectively, [and] internationally need to make a bigger effort to better understand the Chinese. And, of course, it's also a very important period when China needs to also help the world understand China better. This is on all of our shoulders', especially Chinese who are maybe internationally minded or bilingual, so there's a lot of work to do. I think it's both ways, it's not just one way.
Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders' documentation guaranteeing BoF's complete editorial independence.
This interview has been edited and condensed for length and clarity.
The Savannah College of Art and Design (SCAD) is the Associate Partner of the BoF China Summit
HKRI Taikoo Hui is the Venue Partner of the BoF China Summit
Shanghai Fashion Week is the Strategic Partner of the BoF China Summit
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