Posted by Abe Sauer on April 6, 2011 04:30 PM
On the surface, Beijing's recent municipal rule banning all use of the term "luxury" in advertising seems to throw a spanner in the works for upmarketers promoting their wares in China.
But in fact, the new regulations provide a superb environment for branding to do its job — especially for brands that don't need to bother with the term.
Fortune reports that a new Beijing law imposes a $4,500 fine for any public advertisement that employs the term "luxury" (or variants thereof). The increasing chasm between the rich and poor and the cultural disease of "hedonism" are cited as reasons for the ban.
China, of course, has become a luxury good consuming juggernaut. Last year, The China Daily, a state-controlled newspaper, gladly reported that China had "surpassed the US to become the second-largest luxury market in 2009, spending of $9.4 billion and accounting for 27.5% of total global sales."
It seems the nation's appetitive for luxury brands was increasing a little too fast.
Still, the new rule doesn't restrict the sale of any luxury brands, just the language used in advertising and marketing copy, so it likely won't hurt luxury brand sales in China.
And consider the likes of Gucci, Rolex, Louis Vuitton, Burberry... These are not brands that use the term "luxury" in their marketing. They don't need to.
The term "luxury" (or similar) is often evoked by those names that are striving to become (or in worse cases, pass themselves off as) true luxury brands.
For example, look at Audi's latest campaign in America: "Escape the confines of old luxury" and "Luxury has progressed." The campaign directly targets Mercedes-Benz, a brand that wouldn't use the term "luxury" in its messaging because it doesn't need to — but that doesn't stop Audi from calling it a luxury.
As Fortune points out though, a much more important "luxury" question in China is one of taxes, noting that "major department stores in London and Paris now have Mandarin-speaking staff" and that "75% of Hong Kong's watch market is driven by Mainlanders."
If half of all luxury brand purchases by Chinese are being made outside China, these rules matter even less.