Chinese firms aim to tap luxury growth

10 April 2012

BEIJING: A diverse range of companies from China are reshaping the local luxury goods market, and also have increasingly international aspirations.

China Garments, a state-owned firm specialising in fabric and yarn, as well as military uniforms, has recently established a premium menswear line, Sheji/Sorgere, designed at home and manufactured in Europe.

"We want to create a truly Chinese brand, but have our clothes made in Italy," Zhan Yingjie, chief executive of China Garments, told the Financial Times.

"In the beginning, many Chinese consumers believed that only the most expensive was the best. But the Chinese consumer is becoming more rational, and we will give him something that is truly his own, and something that is the best."

Powerland, the handbag expert, Shanghai Tang and LaVie, two apparel groups, and Chow Tai Fook, in the jewellery sector, are among the country's leading indigenous challenger brands at present.

Bain & Company, the consultancy, has reported that luxury sales in mainland China hit €12.9bn in 2011, versus €7.1bn in 2009, reaching €23.5bn when taken to include Hong Kong, Macao and Taiwan.

Moreover, growing numbers of Chinese shoppers are buying high-end goods abroad due to lower tariffs, adding another €12bn-€15bn to this total. Their attractiveness as a demographic is thus obvious.

"It is quite probable that in the current year, Chinese companies will buy foreign brands and also try to create Chinese luxury brands," said Armando Branchini, executive director of Altagamma, the trade body.

In evidence of this, Shandong Heavy Industry, which manufactures items like bulldozers, has paid €178m for a 75% share in Ferretti Group, the world's biggest premium yacht firm, based in Italy.

"They know logistics very well, and we know how to sell yachts and a luxury lifestyle that people want," said Lamberto Tacoli, Ferretti's vice president of sales and marketing.

Franz, established seven years ago and making exclusive porcelain goods, has enjoyed regular annual sales growth of 40%, Chen Li Heng, its CEO, revealed, and is also pressing into outlets like Germany.

"The craft industry in Europe is weakening because few people are willing to do the job, so they are increasingly reliant on machinery," he said. "As Chinese, we are nimble by nature. Don't forget that we have strength and clever hands. Only with that will your products have the human touch."

Data sourced from Financial Times; additional content by Warc staff