ARE CHINESE CONSUMERS READY FOR CHINESE LUXURY BRANDS?
- LanguageENG
- URLhttp://db.koreascholar.com/Article/Detail/271927
pp.1270-1272
Chinese nationals already make up one quarter of global luxury consumption and therefore represent the biggest group of luxury consumers worldwide (Bain & Co, 2012). It seems that there exists a considerable imbalance between the Chinese consumption and production of luxury. Many Western luxury consumers can hardly name a single Chinese luxury brand. However, although it is not on the radar of many experts and most consumers yet, the luxury business community in China is already emerging in big steps. China became an important manufacturing hub for semi-finished luxury products, which already helped building-up industry-specific know-how. The country is also best representing the entrepreneurial spirit in the luxury segment; there is a variety of Western and Chinese market players setting up China-specific luxury brands. New Chinese luxury brands include, for instance, Longio (watches), Mary Ching (shoes), NE Tiger (wedding dresses), Qeelin (jewelry) and Shang Xia (apparel, interior decoration; Heine and Phan, 2013). For the last decades, consumers and marketers strongly believed in the basic principle: Western stuff is hot – and Chinese stuff is not (O'Cass and Siahtiri, 2013). So are Chinese consumers actually ready for Chinese luxury brands? The objective of this paper is to analyze the challenges and strategies of Chinese luxury start-ups – with reference to the attitudes and preferences of Chinese luxury consumers. As Chinese luxury consumers and brands are still underexplored objects of investigation, which cannot be understood adequately by mere quantitative research, we employ an explorative approach with reference to the Grounded Theory. Based on a selection of (potential) Chinese luxury brands, we derive criteria that help answering the question: What are actually Chinese Luxury Brands? The “Chineseness” of a luxury brand depends, for instance, on the location of its headquarters (Mainland, Hongkong or even Taiwan) and the nationality of key people involved including the founders, designers, artisans and the CEO. Based on an analysis of potential Chinese luxury brands, we identified nine major types of players in the Chinese luxury market and their strategies to create Chinese luxury brands. Major Chinese luxury players include, for instance, Western luxury corporations, Chinese designers and Chinese (state-controlled) corporations. It already became quite common for Western luxury corporations to set-up their own more or less “Chinese” luxury brand. For instance, Hermès created Shang Xia and Estée Lauder Osiao (cosmetics). Other options for Western luxury brands include taking over Chinese luxury ventures (such as Shanghai Tang by Richemont) or acquiring Chinese premium brands or traditional Chinese handicraft brands in order to upgrade them into luxury brands. This is done, for instance, by LVMH group, who acquired a majority share in the time-honored winemaker Changyu. Many well-known Western luxury brands such Chanel or Dior were set up by designers. Accordingly, there exist already some successful Chinese fashion designer brands such as NE Tiger (since 1992 by Zhifeng Zhang), Maryma (by Mary Ma since 1999), Rose Studio (by Guo Pei since 1997), and Xander Zhou (since 2007), who may develop into (international) luxury brands. Similar to entrepreneurs, some big Chinese (state-controlled) corporations corporations aim expanding into the luxury segment because they expect attractive business opportunities, but may also aim to improve their corporate and/or brand image. Examples include Shanghai Vive by Jahwa group and SheJi-Sorgere by China Garments group. The combination of market players and their desire and strategies in creating country-specific luxury brands is truly unique to China. For instance, big luxury houses such LVMH never perceived another market such as Germany or the US as that specific and above all relevant enough to set up a specific luxury brand especially for that market. In the subsequent section, the paper shifts its focus to the Chinese luxury consumers. At the very core of this discussion lie the mobile and multi-faceted (and sometimes ambiguous) associations of China with luxury perception (Rovai 2014). These relate to both consumer behavior (the Chinese market for luxury) and production (the reputation of Chinese producers of luxury goods and services). Based on a content-analysis of current literature and press, we categorize and discuss the factors that may impact the attitudes of Chinese consumers towards Chinese luxury brands with reference to the major luxury consumer segments in China. These factors include, for instance, the increased sophistication of consumers, the international exposure of Chinese consumers, the rejection of “potlatch behaviour”, the empowerment of women in Chinese society, the emergence of a creative class in China, the slow fashion movement, the reversal of intergenerational influences, and the “sinofication” trend – the New Cultural Revolution led by the “young emperors” (or “Sugar Generation”), the generation born after 1978 (Wang and He, 2014). Subsequently, we are analyzing the attitudes and preferences of Chinese luxury consumers with a small-scale qualitative survey. We concentrate on the “young emperors” generation and especially on the segments of white collar workers and the second generation rich. We conducted several in-depth interviews about their luxury preferences and then, following an empathic research approach, we went shopping together with the respondents to develop a better and real-life understanding of these luxury consumer segments. The results are content-analyzed and presented with reference to case studies of Chinese luxury brands. On the one hand, the sophistication and sinofication trends of the Chinese creative class may threaten the big Western luxury brands, but on the other hand, they create a basis for the development of Chinese luxury start-ups and increases the chances of Western luxury SME’s and connoisseur brands in China. Based on our analysis of the Chinese luxury consumer behavior, the paper concludes with some recommendations for the development of luxury brands in China.