foreign products make inroads
(November 15, 2004)
Beijing, November is a time when a hundred brands are blossoming
a hundred bright-coloured luxury brands.
downtown Oriental Plaza, a place visited by 200,000 customers
daily during weekends, opened its new shopping arcade to showcase
the world's high-end consumer items.
a week after that, an international jewelry show is being staged,
where foreign merchants are for the first time allowed to directly
cut wholesale and retail deals with their Chinese counterparts.
The show only changed its name to "international" in
just Beijing, in Shanghai, as the official Xinhua News Agency
reported, the world's third largest Christian Dior centre opened
around the same time. Third only in time sequence after similar
outlets were opened in Paris and then Tokyo.
to its upgrading, the Shanghai Dior centre was already generating
11 million yuan (US$1.3 million) in annual sales. And the management
reportedly hopes to raise the figure to over 15 million yuan (US$1.8
very far and not long ago, LV, Giorgio Armani, E. Zegna all opened
their trendy flagship stores in China.
just Beijing and Shanghai, but the entire Chinese mainland is
being targeted. Chinese cities are being bombarded by the world's
most expensive brands, from fashion to jewelry to cars.
world's most rapidly growing advertising industry China's is bringing
more and more international brands into the urban young people's
this only begins the sowing season for the brand owners and their
local marketing managers. Will they get a large harvest not just
in one or two cities for all the money and enthusiasm they have
poured into China? When will China, in its luxury spending, overtake
one consumer power after another in the world, just as it did
in general trade?
harvest of revenues will surely require more efforts than having
the PR managers get the shop-opening news covered by the Chinese
media, from the official newspapers all the way to Beijing Tatler,
Chinese Elle, and up to 40 other fashion and lifestyle magazines
to cater to a readership thirsty for whatever consumer concepts
from the West.
how big is the readership? And how many of the readers of such
glossy pictorials can really afford the items they fancy? And
how many more people are there who can be persuaded into reforming
their old way of life?
China was a planned economy some 20 years ago, when even food
items were rationed, it has not accumulated very comprehensive
and consistent consumer surveys. There have been some surveys
in recent years, mainly by the urban survey department of the
National Statistics Bureau (NSB). But these surveys are tailored
for macro-economic decision-making and are usually too broad to
reflect much of sectoral significance.
recent NSB survey shows that urban households making 200,000 yuan
(US$24,096) to over 1 million yuan (US$120,000) per year make
up 22 per cent of the nation's entire urban population.
to complicate the issue, many Chinese, especially those who make
more than others, have multiple sources of income.
to a recent Merrill Lynch and Capgemini World Wealth Report, widely
quoted by the Chinese press, there is already a layer of "high-net-worth
individuals" (HNWI) in Chinese society, and their number
has been growing faster than many other places in the world.
particular," according to James Gorman, president of Merrill
Lynch's global private client group, "wealthy investors in
the United States, China and India were able to capitalize on
these trends despite a great deal of geopolitical uncertainty."
total global wealth of HNWIs climbed 7.7 per cent to US$28.8 trillion
in the survey, while India's growth was 22 per cent growth, and
China's 12 per cent, as compared with more modest increases in
the Middle East and Latin America.
Chinese Internet services recently also quoted a Morgan Stanley
analyst as saying that the actual number of individuals who can
afford some luxury spending is around 1 per cent of the mainland
population, or around 13 million although the figure could quickly
rise to 100 million.
are just the broad figures. As for the rich people who really
want to buy luxury items all the time, the number is understandably
much smaller. According to Yue Zheng, a Shanghai-based consumer
analysis, their size is about 100,000 people in Shanghai, and
China's total luxury spending is about US$2 billion despite its
admittedly fantastic growth.
like everything in China, too much of a progress can look unsteady,
if not truly dangerous. Too much enthusiasm, once seen as a single-minded
chase of the rich and powerful, may at times appear arrogant and
distasteful, and cause misgivings.
fact, like consumer societies everywhere in the world, there are
plenty of people who don't like big companies and big brands.
Not every Chinese has an equal amount of sense of vanity.
marketing methods (including PR) that make sense to the local
culture are always more valuable than the sales a company can
generate for a short period.
promotion is a typical case in the point. Just last week, as many
mainland media reported, some people from a presumably semi-official
China Association of Branding Strategy claimed that the nation's
number of luxury consumers has swelled to a spectacular 160 million.
size of this group is going to grow further to 250 million in
2010, they added.
what did they mean by luxury consumers? Those who have some money
to buy one or two pieces of luxury goods in their life? Or those
who are addicted to a lavish lifestyle? Those who can afford any
little thing carrying an international brand? Or those who can
afford a BMW? The officials didn't seem to give a definition.
just said the 250 million big spenders in 2010 would be making
20,000 yuan (US$2,410) to 50,000 yuan (US$6,024) per month. Nor
did they bother to clarify whether these figures are for per capita
income or per household income.
whether in per capita income or household income, these figures
don't have support from any other sources, whether official data
or any respected overseas researchers.
wonder that the official People's Daily found the CABS figures
annoying. One of its commentators called it a foreign luxury merchants'
downright conspiracy, alleging that such propaganda was used by
those merchants to make Chinese consumers spend more on their
goods, while many people in this country actually cannot make
even 2,000 yuan (US$240.96) to 5,000 yuan (US$602.41) per month,
and some not even 200 yuan (US$24.10) to 500 yuan (US$60.24).
disputed the reliability of the figures, the commentator went
on by arguing that buying luxury goods is an indication of a "mistaken
view of life," urging his readers to stick to China's time-honoured
virtue of frugality.
is easy to see that too many of this sort of things may lead to
the politicizing of business, and ruin the whole game. But as
to how to prevent them from happening from time to time, and how
to avoid the unhealthy impact it may cause, it would call for
a lot of careful studies of what marketing methods can really
be withstood within this particular society.
despite the call by the People's Daily commentator for going back
to the traditional frugality, there is no question that increasing
RMB is indeed being spent on brands and goods that Chinese citizens
had hardly seen and heard of merely a decade ago.
of the early sowers are already seeing their seeds budding, not
just in Beijing and Shanghai, but in many other cities.
as of January 2005, China will lower its tariffs on diamond imports.
And that is expected to give another boost to the awakening consumer
interests in luxury items in the Chinese mainland.