A Louis Vuitton store hoarding in Nanjing. The French brand plans to limit the number of store openings in China. Provided to China Daily

Luxury brands from the land of de luxe continue to cast their spell in china

Luxury goods are perhaps the best calling card that French businesses can boast of when it comes to China. The Chinese market is undoubtedly the beacon that most luxury goods makers have their eyes fixed on, even as demand in more developed markets wanes.

French luxury brands such as Louis Vuitton, Chanel and Dior are still the most popular brands for gifts among wealthy Chinese customers, says the Hurun Chinese Luxury Consumer Survey 2013. The survey covered 551 individuals on the Chinese mainland with a personal wealth of 10 million yuan ($1.6 million; 1.2 million euros).

Six French brands, such as Hermes and Cartier, are among the top 15 best brands for gifts among men, while the top three brands on the list for gifts for women are all from France: Chanel, Louis Vuitton and Cartier.

"The promise of glamor, sophistication and elite status that brands like Louis Vuitton and Chanel offer is appealing to many Chinese consumers who either have become wealthy or aspire to become wealthy," says James Roy, senior analyst with China Market Research Group, a strategic market intelligence firm based in Shanghai.

Even though China's luxury market grew just 7 percent last year, compared with 30 percent in 2011, Chinese consumers were still the world's largest luxury consumer group, says the US consulting firm Bain & Co.

Though there is intense competition in the Chinese luxury brand market, the French brands have developed their own niche in China due to the premium-tag association and their rich heritage in making quality products.

"Most of the major French brands have high global awareness and recognition among Chinese consumers, who have in general shown a preference for brands that are widely known and respected," says Ben Cavender, principal associate at China Market Research Group.

Although newer entrants can do well in China, it is difficult to develop the kind of recognition that the French brands have developed over the years, experts say. Part of that reason is that Chinese luxury buyers are not only sophisticated but take a long time to warm up to newer brands.

"Consumers are wary of being tricked by brands trying to pose as luxury products in China, and will do their homework before buying. They don't want to make the wrong choice and look foolish," Roy says.

For Louis Vuitton, the relative contribution of Asia (excluding Japan) to group revenue rose 1 percentage points to 28 percent, while sales in France fell 1 percentage point to 11 percent and in the rest of Europe dropped 1 percentage point to 20 percent.

Hermes group reported revenue of 3.48 billion euros, a rise of 22.6 percent at current exchange rates, last year. Sales were stimulated by non-Japan Asia, which grew 25 percent. The network added two new branches in the Chinese mainland and Taiwan, and six other stores were renovated or expanded, it said in its financial report.

But, with an overall slowing of luxury goods sales, demand for most of the brands in China has tapered off.

"The crackdown on official corruption and luxury goods is having an impact, particularly on brands on the more premium side like Chanel. Louis Vuitton, which is primarily popular as a mass luxury brand, has been more resilient in the face of these campaigns as it has a broader base of customers than most luxury brands," Roy says.

Louis Vuitton has more than 40 stores in China. But with China becoming a battlefield for luxury brands, there is a risk of Louis Vuitton becoming too mainstream.

"The company is now starting to limit the number of stores it is opening and focusing more on higher-value products to retain their brand image," Roy says.

Bernard Arnault, the CEO of LVMH, which owns Louis Vuitton, says the company intends to pull back from some smaller cities, and focus more on quality, instead of opening stores in China.

Besides revising the overall sales strategy, the market decline has not stopped the French brands from investing heavily in expanding their retail presence, and planning more aggressive marketing campaigns in China.

After debuting in China last year, the fashion house Christian Dior is continuing to keep the luxury market in a tizzy. This month, the company released its first collection for Chinese customers designed by its art director Raf Simons in Shanghai.

Another French couturier, Chanel, is also making similar moves to cater to the Chinese market. In 2009, Karl Lagerfeld, designer and creative director for the fashion house, brought Chanel's first "demi-couture" pre-fall collection to Shanghai and has since frequently visited China to meet private clients, according to the Business of Fashion website.

Though there is a lull in the Chinese luxury market, it does not mean that interest in luxury products is tapering off, experts say.

"Many Chinese consumers are buying big luxury brand products while traveling overseas. More than half of the customers in a French luxury flagship store nowadays are from China," says Zhao Qian, a fashion consultant and CEO of the Beijing-based Inlife International Group.

Cavender says: "The reason behind this is not only the cost advantage associated with purchasing in Europe versus China, but also because customers are shifting spending toward leisure and are making many more trips than they have in the past."

The report issued by Hurun shows that Europe is slowly emerging as the most sought-after luxury destination and accounts for more than half of the top 10 destinations. France undoubtedly is the leader of the pack.

"The peak time for the Chinese luxury products market is still far away. French luxury brands that have managed to get a toehold in China will not give up that easily. Instead, they will adjust their strategy to shift some of their focus to the market outside China," Zhao says.

"Most of these brands may contemplate adding Chinese-speaking sales personnel in their global outlets to offer Chinese customers a unique buying experience," she says.

Roy says: "There is an increasing emphasis among the wealthy individuals on lifestyle activities and unique experiences, and you are seeing people focus more on high-end leisure tourism rather than traveling to shop, or for just collecting high-end products."

Further, Chinese customers are making progress in finding the right and suitable products and not just going after brands.

"They have diversified demands, and looking for different products to mix and match their tastes," Zhao says.

Wang Wen and Xu Junqian contributed to this story.

yaojing@chinadaily.com.cn

(China Daily 04/19/2013 page6)