The most populated country in the world has been, until recently, perceived to be a hotbed of conspicuous consumption. Luxury brands rushed in to fill the void and make a bundle. Vuitton, Prada, Burberry — you name it, you could buy it in China. And consumers were happy to show off their ability to buy.
But suddenly things have changed. The tap has been turned off and many of the luxury brands of the West that flooded China are now sitting and waiting for consumers to get back into the spending mood again. With all the consternation over Burberry's lull in its China growth, it's easy for luxury to get rattled.
Prada, however, is trying to keep its investors, employees and calm about what's going on in the Mainland. "I think we must stay calm and be less hysterical. I don't see such a dramatic market," commented Patrizio Bertelli, Prada’s CEO, according to Reuters. "We think that considering all markets at the same level is wrong. We must accept markets' diversity and adapt to different needs and traditions." In effect, Keep Calm and Brand On.
At least one China-watcher feels it's an inevitable sign of a more sophisticated, discerning market — which would bode well for high-end luxury brands. “As the luxury industry matures, the Chinese are becoming much more sophisticated about the products that they buy,” said Fflur Roberts, global head of luxury goods research at Euromonitor in London, according to Bloomberg article pondering if logo fatigue is at play. “It’s not just about the bling aspect.”
Indeed, the highest end of the luxury market is still ringing up sales in China. “Same-store sales at niche luxury brands such as Bottega Veneta and Yves Saint Laurent, owned by Paris-based PPR SA, are set to increase almost three times this year’s industry average even as weakening economic growth takes its toll on demand, according to HSBC,” Bloomberg adds.
One challenge for luxury brands is the aspirational market is evaporating, as Reuters notes, on October 1st. That's when all civil servants in China must adhere to a “frugal working style” rule that will prohibit wearing or toting any luxury goods to the workplace. This clampdown (which also affects corporate gift-giving) resulted from “a string of high-profile incidents, including a high-speed Ferrari crash reportedly involving the son of a senior public official and a local government official photographed flaunting luxury watches beyond the reach of his salary,” Reuters notes.
All these brand names attached to government officials of leads folks to believe that corruption is at play. This has led Chinese police inspectors to do some extra studying “on how to recognize luxury brands to help them expose corruption,” Reuters notes. If only their hardworking comrades had the same luxury.
[Prada Wenzhou, China store image via]