OMNIALUO - Shenzhen Oriental Luxury

‘Luxury brands need to seed their success through establishing a luxury culture in the Chinese market… Many Chinese customers have little sense of luxury culture with much of the nation still living in relative poverty, and while there is a growing cohort of rich Chinese most are yet to have a full understanding of and appreciation for the “luxury lifestyle.”’, reports KPMG in their China Luxury Consumers 2007 study.

It’s a long way down. Amongst profit-seeking luxury brands straddling the top of China’s vertiginous income divide, the dizzying potential has whetted the appetite of even the most timid CEO. The colossal potential for gains are, in theory, only matched by seemingly endless energy with which they are pursued.

The above quote claims that the best way for luxury brands in China to pursue their image is to develop the consumer perceptions of the ‘luxury lifestyle’ following the same patterns seen in ‘developed’ countries including the US and Japan. In these countries, luxury brands represent an aspirational standard which people are said to hope to achieve. However in a country which already has such polarized wealth, is this really necessary? Could this approach even cause damage to the luxury notion of the brand?

The same study above delineates two particularly unique reasons that Chinese consumers purchase luxury goods – Aspiration and Self-reward. They state that: ‘More than 70% [of respondents] saw luxury brands as a way to demonstrate their status and success’ and ‘Just over 60% of respondents bought luxury goods as a way to reward themselves for their hard work and success’.

Self-reward, the second of these factors, is particularly interesting. Why should consumers in China buy products to reward themselves more than elsewhere in the world? In reality this is unlikely to be the case. Chinese people aren’t really any more or less worthy of reward, they simply use a different justification for their purchase. Why, however is it necessary to use justification at all? If you want something and you can afford it, why not just buy it?

Louis Vuitton store construction advertisement Beijing, Plaza 66

It is likely in part to be because of a growing awareness of the difficult conditions of many other Chinese, both in and outside the large cities. The quantity of charitable donations in China is growing. This belies a growing realization that many others have not been so fortunate and have often been on the receiving end of corrupt or unfair treatment. In many ‘developed’ societies, consumers can comfort themselves with the knowledge that their taxes, supposedly, go towards supporting less fortunate citizens and that all people in the country, supposedly, have the same opportunities from birth.

In China, the awareness that people have been born unlucky is clearer. Spending money that has been hard earned allows the luxury consumer to avoid the guilt associated with being comparatively lucky in a collective environment (I say comparatively since those Chinese who have done well have often worked far harder and faced more challenges to their success than their counterparts in ‘developed’ countries).

However, this sense of rightful ownership does not extend to all the consumers of luxury goods in China. The four key segments of luxury consumers delineated in the study quoted above are the “traditional business elite”, the “new luxury shopper”, the “empowered women” and the “little emperors”. Of these, two are associated with the Chinese consumer underbelly – the brash and oft criticized “new luxury shopper” and the “little emperors”. The reasons for their unpopularity come down to the provenance of their money and the ostentatious way they show it off.

Many “new luxury shoppers” have earned their right to shop through hard business graft in cities such as Wuhan, Hangzhou and Shenzhen. However, this category also includes the Meilaoban, the mining bosses in Shaanxi and the North-East renowned for having made a fortune through often underhand business dealings. Whilst their own tastes tend to focus more on functional luxury – cars, property etc. – their children, the "Xiaohuangdi" (Little Emperors) are more interested in spending on clothes and entertainment. The questionable provenance of their finances causes discomfort amongst the legions of faithful consumers that have earned their money through more legitimate means.

Luxury by Shanghai Tang

If the fundamental motivation for aspiration is insecurity and the desire to be greater than one is, then this sort of branding is less likely to attract those who feel deserving of their purchase. So far, brands in China that have aimed for the top segment of society by positioning themselves as aspirational have specifically attracted the Meilaoban and their Xiaohuangdi children. This in turn has put other consumers off the brand as fewer Chinese, proud of their achievements and angry at unethical business practices, wish to be associated with these people.

Rather than constantly pushing up brand image, in a country full of cheap knock-offs and poor quality finishing, luxury brands should aim to improve perception and knowledge about the actual benefits of their products. Therefore, in order to maintain brand equity it is necessary for luxury brands to continue to factor in the importance of quality and artistry – the quality and artistry of their products, the quality and artistry of their manufacturing and, importantly, the quality and artistry of their consumers. They must maintain the notion, not simply of luxury for luxury’s sake, but of experience. Many young Chinese consumers can objectively see the negative effect of the hedonistic ‘luxury lifestyle’ on their foreign counterparts and are increasingly likely to eschew it in the future.

That is not to say that there is no opportunity to push the ‘luxury lifestyle’ in China. This concept and the ability to make money from it will still have impact for some years to come. However, the sentiments of many young, educated Chinese consumers are in stark contrast to these beliefs, and this suggests a potential paradigm shift in the future. If previous experience of China is to be relied on, this change will probably come about faster than anybody is expecting…