Luxury habits change in China

09 October 2012

BEIJING: Hermès, the high-end leisure and lifestyle goods group, is emphasising "quality" rather than "luxury" in China, reflecting a growing trend away from ostentation and displaying logos.

To boost sales in the Asian nation, Hermès created the Shang Xia brand specifically for the country, selling furniture, jewellery and apparel based on traditional designs for up to RMB620k ($99k).

Patrick Thomas, the CEO of Hermès, revealed Shang Xia will receive "tens of millions of Euros" in support during the next five years. It recently opened a boutique in Beijing, and plans to unveil another in Paris in 2013, targeting Chinese travellers.

"Forget the word 'luxury' entirely. Use only the word 'quality,'" Thomas told the Wall Street Journal. "This is what Chinese want, and it will be a justification of [the] price."

Trinity, a firm headquartered in Hong Kong and specialising in menswear, purchased Gieves & Hawkes, the 241-year-old British tailor, for £60m in 2011, and has quickly increased its number of stores in China.

"Rich, successful people want to own the best things and always will do," Mark Henderson, the chairman of Gieves & Hawkes, said. "The respect for history and clear quality that we have appears to be a very attractive asset to the Chinese market at the moment. The true value of the brand is its heritage."

Silvano Lattanzi, which custom-makes shoes for clients like Barack Obama, the US President, and Uma Thurman, the actress, also has three stores in China. "[We use] no logo at all. Only your name can be carved after you have ordered 20 pairs of shoes," said Roberto Jiang, manager of its branch in Beijing.

Claudia D'Arpizio, a partner at Bain & Company, the consultancy, reported Chinese habits have undertaken a transformation in two years that took ten years to achieve in Japan and the US.

"There's a clear shift from logo brands towards high-end and absolute-luxury brands in China," she said. "Some of the most powerful brands have seen a shift from entry-level items towards the top end of the range. This has been very rapid."

The pace of this process should not be underestimated. "A few years ago, it was common for Chinese men to leave the label sewn to the sleeve of their suits so that people knew what brands they were wearing," Erwan Rambourg, head of consumer brands at HSBC, said.

Thomas Mesmin, of brokerage CA Cheuvreux, added that firms like Balenciaga, the fashion house, and Celine, the leather goods expert, were now in vogue. "Consumers' tastes are changing and Louis Vuitton is viewed less and less as an exclusive brand," he said.

Shaun Rein, managing director of the China Market Research Group in Shanghai, also stated that very wealthy shoppers often saw Louis Vuitton as being "too common". "They are interested in Chanel, Hermès and Bottega Veneta," he said.

Data sourced from Wall Street Journal, The Australian, China Daily; additional content by Warc staff