China turns to domestic luxury brands

27 February 2012

BEIJING: Local brands are becoming increasingly competitive in China's luxury market, putting international players under growing pressure.

Bloomberg reports that domestic brands, including Shanghai Jahwa and Eve Group, are employing a variety of marketing techniques to appeal to luxury consumers. Many emphasise their Chinese roots to stoke national pride.

The trend reflects China's increasing economic power and the rise of an affluent urban-dwelling middle class over recent years. According to figures from Bain & Co, Chinese luxury sales reached 212bn yuan in 2011.

RBS analysis also suggests that annual sales growth hit 20% last year.

Shanghai Jahwa has recently revamped its product line and is now taking on foreign brands such as L'Oréal in developing cosmetics for high-end Chinese consumers. The firm also has a distribution deal with perfume specialists Sephora to sell its wares in Europe.

Speaking to the news source, Shanghai Jahwa chairman Ge Wenyao said: "Foreign products are still good but the aura surrounding their brands is no longer there."

Meanwhile, Eve Group, a menswear specialist, has opened 400 boutiques across China, selling clothes priced at up to 20,000 yuan ($3,175).

Ashok Sethi, head of consumer insights at TNS Research International, added that the popularity of domestic brands was due to the fact the "Chinese are extremely proud of their years of history and culture".

Nevertheless, certain western luxury brands retain a cachet in China.

Figures from the Hurun Research Institute released in January 2012 revealed that Louis Vuitton, Cartier and Hermes were the most popular luxury labels considered by wealthy Chinese consumers for gifts to friends and business contacts.

Firms including Hermes have also adapted their product ranges and even launched new brands to suit Chinese tastes.

Others are making acquisitions in the luxury space. Earlier this month L Capital Asia, the private equity group backed by luxury goods giant LVMH, announced that it would boost its Asian investments to $1bn in 2012, up from $650m in 2011.

Data sourced from Bloomberg/Warc; additional content by Warc staff