China Luxury Market Predictions For 2012

2

Ermenegildo Zegna 20th Anniversary in China Exhibition in 2011

Looking back, 2011 was really the year that announced China’s arrival as a major force in the world’s fashion and luxury market. While momentum has been building steadily since the 2008 Beijing Olympics, it was only last year that China became the hot topic for the industry at large.

Last year it seemed one only had to stand in a prestige hotel or shopping centre lobby in Beijing to see the world’s most influential fashion figures, CEOs, designers and editors walking past. I had the pleasure of speaking with many of these leaders and it was fascinating how gung ho they all are on China! Again, wherever I traveled in the world last year, I was beset with interest whenever I mentioned that I was developing business and strategies for brands in China. I doubt this would have happened if I had said I was working anywhere else.

Everyday it seemed there was news in international financial and fashion media, about the luxury phenomenon in China. On industry websites such as WWD, The Business of Fashion, Luxury Society and even Linkedin, China was a leading topic of conversation, with everyone wanting to know what’s going on, who’s doing what, opening where, and most importantly how to get into China?  Now, a week into 2012 Maosuit takes a look at the trends that shaped the China luxury market in 2011 and where the industry is headed in 2012.

Brands Will Continue to Open Big Stores

 

The overriding theme for luxury brands in China for 2011 was to expand and open new stores. Designer brands including Alexander McQueen, Burberry, Moncler, Marni, and Versace plus many others opened new flagships stores in Beijing, many of which are the biggest in the world or at least biggest in Asia.

This year brands will continue to open big flagship stores with the action focused in Shanghai. When opened mid year the Jing’an Kerry Centre Mall will reshape the retail landscape along Shanghai’s West Nanjing Road and become a new hub for designer brand flagship stores. Louis Vuitton will celebrate its 20th anniversary in China with the re-opening of their Shanghai Plaza 66 Flagship store. Under renovation for a year, when re-opened it will be Vuitton’s biggest store in China and knowing Vuitton, the store façade will be nothing short of spectacular blend of architecture and lighting. 2012 will also see LVMH open their own luxury mall project in Shanghai. A joint venture with Macao Casino magnate Stanley Ho, The L’Avenue project in West Shanghai will house the entire line up of LVMH brands as well as an A-grade office building.

The luxury brand land grab will continue for some time, but it will move to second tier cities and then for some brands third tier. Even if luxury sales do slow this year, brands will to continue to invest in new stores now in preparation for the future. Often falling under the radar of mainstream media, China’s massive second tier cities such as Chengdu, Shenyang, Hangzhou and Tianjin have booming luxury sales and each city will see multiple new luxury brand malls come on line this year.

The viability of multi-brand high-end stores in China continues to be a popular topic and we may see some more activity in this area. Last November Hong Kong retailer Joyce opened a large multi-brand boutique in Beijing which is quickly gaining traction. Although there may be some more multi-brand store openings in 2012, I predict this sector needs another year or two before it really heats up. But then again in China you never know, things can move awfully fast here.

World Class Brand Events Will Continue

2011 saw some phenomenal luxury brand events held in China. Burberry hosted a world first holographic fashion show and streamed it live into all their stores around the world. In February Prada invited retro rockers The Pet Shop Boys to Beijing for the replay of their Milan Spring Summer fashion show, and then took over four floors of the Shanghai Park Hyatt Hotel in July for the Miu Miu fashion show and after party extravaganza. More brands than I can count held big events based around their store openings. The event theme of the year though was brand heritage. With the aim to educate China’s emerging, yet largely ignorant luxury consumers, Bulgari, Chanel, DVF, Louis Vuitton and Zegna all put on retrospective exhibitions to showcase their heritage and brand history.

With many of the brands now having well-established retail platforms in China attention will shift towards brand building and how to attract the new waves of Chinese consumers entering the luxury brand hemisphere. I expect to see some big events held in Shanghai around the new mall and flagship store openings, plus a growing array of events in Beijing where China’s fashion media are all based.

E-Commerce and Social Media Gain Importance

 

Over the last few years millions of dollars of equity and investment funds have poured into E-Commerce sites such as Xiu.com, Shangpin.com and 5LUX.com etc.  2011 also saw Italian E-Commerce company Yoox.com launch its China operations and build solid strategic partnerships with brands, Chinese designers and the fashion media. However, large questions exist over which, if any of these sites are making any money and there is several indications of an E-Commerce bubble waiting to burst. Few of these newly founded companies have any direct relationships with the luxury brands themselves and most buy out of season stock wholesale and sell it online at a discount. To date this model hasn’t had any proven winners, and therefore 2012 may well see the demise of some of these companies. For those strong enough to survive a larger percent of the market share will be up for grabs.

As luxury brands continue to consolidate their store presence in the main cities they will be able to shift some attention to their own E-commerce and Social Media efforts, which for various reasons they haven’t done to date. Traditionally timid in the world of E-Commerce and digital media, and compounded by the uncharted territory of China’s online world, luxury brands are unlikely to set up full, in-season product online stores for China any time soon.

For Chinese social media 2011 will go down as the year of Sina Weibo. Known as simply Weibo, China’s hybrid version of Twitter and Facebook exploded and now has over 250 million users, up dramatically from a year ago. While many brands have already established a presence on Weibo and other Chinese social media sites like RenRen, and Tudou etc. there is still much room to improve and 2012 is the time to do it.

Overall Maosuit predicts 2012 will be a year of continued expansion for luxury brands in China, yet this will also be balanced with an emphasis on brand building and consolidation of existing operations. It’s shaping up to be another exciting year, with China certainly the place to be!

Biggest Store Opening in 2011: Burberry’s Beijing Flagship Store

Florentia Village Luxury Brand Outlet Mall Near Beijing, Opened in 2011

Best Fashion Event of 2011: Burberry’s Holographic Fashion Show in Beijing

Best Exhibition of 2011: Louis Vuitton’s Voyages Exhibition at The National Museum in Beijing

Jewelry Illustrations at the 2011 Bulgari Exhibition in Beijing

“100% Genuine Products”, Beijing Bus Advertisement for Luxury E-Tailer LUX.com

“Up to 50% Off Famous Brand name Bags”, Beijing Subway Advertisement for Chinese E-Tailer Tmall.com

 

Share.

About Author

2 Comments

  1. It would be interesting to see comparisons of Luxury brand spend in 1st tier and 2nd tier cities. Or maybe just seeing an analysis comparing number of luxury brand stores per city

Leave A Reply