When western
people talk about the luxury goods in Chinese market, they may firstly suspect
the genuineness of the products. I have heard people teasing on me about that because
of my nationality. I took it as a joke. I am from this so called “Copycat”
nation, and I seriously can’t find any reason to personally feel ashamed about
it or defend about it (it is a fact as we all know). The way that this market
has been formed and developed must have its own reason. See, knowing about the phenomenon
of fake and inferior goods in the Chinese market, all the luxury brands still
consider China as a “yaoqianshu” (a legendary tree that sheds coins when shaken).
The remarkable purchasing power
I was talking
with my dad the other day; he told me that millionaire is very commonly found
in China. In recent years, many luxury brand open their store in my city,
people LINE UP to buy them. Somehow I find it funny when I see the photos of
people “rob” Louis Vuitton bags on the first open day. You have to admit that the
purchasing power of Chinese people on luxury products is remarkable. Let’s just
look at my own experience. I received a phone call from my friend who currently
lives in America; she was shopping in a luxury store where the sales started
telling her how crazy Chinese customers are. “All of our new bags and shoes are
sold out even before it is actually put on the shelf, those Chinese customers showed
us the picture of the wanted product, paid deposit and pre-ordered all of them!”
At the time I visited a Miu Miu’s shop in Hong Kong, there was this lady from
Shanghai who pointed at around 15 of the Miu Miu bags and bought them by paying
cash within less than 5 minutes. I am not exaggerating! From my own travel
experience, 80% of the customers I see in front of the luxury brands’ counters
located at David Johns in Sydney or Melbourne are Chinese. All of my Chinese friends
in Australia own more than one product (authentic) from a luxury brand. I see
my old school mates in China travel to Europe every year to shop those luxury
brands. After all, I am not trying to show off how rich they are nor proud of
it.
The price discrepancy
Most of the
luxury brands have their own price strategies differently in Europe, America
and Asia.This is what
I read from an article:
“A study into
luxury product prices by the University of International Business and Economics
in Beijing reveals that the price discrepancy between the Chinese and overseas
markets for luxury watches is between 100% and 350%, while for jewellery it is
20%-80%, for handbags and leather goods around 30% and for cosmetics 40%-120%
and as high as 188.5%. Another study found overall prices for luxury items in
China were on average 45% higher than Hong Kong, 51% higher than the US and 72%
higher than France.
Louis
Vuitton's Speedy 30 handbag, for example, retails in China for 5,750 Yuan
(US$907) but costs US$763 in Hong Kong and US$632 in France. A 30ml bottle of
Estee Lauder's Advanced Night Repair Synchronized Recovery Complex sells for
1,050 Yuan (US$165) in China but for just US$52 on the company's official
American website.”
It sounds
unbelievable if this is the first time I heard about it. But no, most of the
Chinese customers know about this. Thus can explain the report from World
Luxury Association- 72% of Chinese consumers believed prices for luxury items
overseas were more reasonable than those back home. The general purchasing power
of luxury products is high, but not inside China. Now, I feel a bit sad for my
country.
Why are they
so expensive in China? Look in depth of the reason, the taxes play vital roles.
But most importantly, is the mentality factor of Chinese consumers. The
perception of value from consumers is an important component when the company set
up its pricing strategy. To majority of buyers in China, such Louis Vuitton,
Gucci, Chanel and Prada, those luxury brands are consider as a social approval
tool, that represent prestige. Rather than the story behind the brand and concept
of its designers, the recognition and popularity matters much more to them.
Some of the rich ones only care wether the price is high enough to show his
wealth. Then, the price of luxury brands is naturally higher in China and might
be continuously high since they tend to protect their brands’ stature and
value.
You can’t
simply abuse that the consumers in China are too superficial. Culture
differences are the main reason behind their perceptions towards luxury brands.
The traditional “characteristics” from the history, stresses hierarchy,
collectivism, and the “face” issue all count as reasons. These reasons I
mentioned had been stated by many studies already.
What will happen in the future?
As the
background of those western luxury brands (their story behind brands, concept
of designers, early experiencers eta.) is all based on their own countries of
origin. Despite the culture differences between European countries are possibly
minimised, the Chinese and western culture differences are too big to minimise.
The consumers in China could never understand the meaning of their brand, or it
has been falsely planted into their mind from the beginning. How do you expect
them to value your brand? It was never considered anything with Chinese
characteristics, never really a member of the Chinese society and is always
considered as foreign, external GOODS. It was never been understand nor willing
to understand.
I also wonder
that if only the price and social status matters to the consumers. In the
future, how do those luxury brands see themselves in the market of China?
Maintain its high profit but always an outsider? In the long term, how do they
maintain its brand identity and loyalty in China? What can they do about their
brand knowledge perceived by consumers in China? Do you think that your brand
associates with royal elegancy, your original character and your inner quality?
From what I see through the eyes of Chinese media, those luxury brands associate
with the social problems in China! Some of the key phrases are “concubines
of those unscrupulous rich businessmen or corrupted powerful officials” “rich
2 G-affluent second generation flaunts their families’ wealth” “vanity－oriented” “stupid and ignorant”.
I sincerely hope that such big “culture
difference” will not ruin their original concepts of brands in the future. China
will continuously be one of the largest markets for those luxury brands; it is
no doubt that the perceptions of luxury brands’ value of Chinese customers will
have an influence on their future.
“It is
consumers that determine what quality is, what and how heritage matters and
wether brands are sincere”. Consumers are surely important, but the band could
also do something about it?!
