Tuesday, June 08, 2010

Massification of luxury

Experts all over the world have been penning about luxury consumption among the Chinese customers. A Few have also discussed the issues of Chinese luxury brands aimed at worldwide customers including Shanghai Tang and LaVie. However, there is hardly any discussion on how slowly but steadily Chinese enterprises are acquiring or taking over Western luxury brands. This post is an attempt to highlight that.

In the later half of last century, a revolutionary style of luxury customers emerged. This involved successful business people, industrialists, artists and those who acquired brand-new riches in several marketplaces across the globe. This nouveau riche had little idea on how to use their new-found wealthiness and how to become stylish person. A innovative service industry emerged due to this: the fashion stylist who assisted this nouveau riche look and feel modern person.

One of the major impacts of this revolutionary luxury customer was that they made a second rung of overambitious leaders, directors and carrier go-getters at large. These materialistic customers also wanted to consume luxury however didnt have the means to purchase such goods.

To get out of this market luxury companies came up with a totally brand-new set of products which later on were defined as accessible luxury. It included bags, scarves, wallets and bags, belts and such other low-price goods. While the new marketplace was lucrative, most luxury organizations recognized that the production prices didn't provide enough margins when produced in the European factories.

To amend their financial bottom-line many luxury firms then looked for markets where these goods can be made for a cheaper cost. China was the most apparent options, still it was a unruly marketplace to establish relationships with local manufacturers. Many Hong Kong based dealers took advantage of the position and jumped opening up factories in China which developed luxury goods for many well recognized luxury houses.

As they gained knowledge and expertise in developing quality high-priced luxury goods some of his Hong Kong dealers and their Chinese counterparts realized that the greatest profit margin lies in the ownership of a luxury organization. In the early part of the brand-new millennium the Chinese encroachment in the luxury market jumped.

The most booming stories among these is the Chinese entrepreneur Silas Chou, the President and CEO of Novel Enterprises Limited, one of the worlds leading vertically-integrated textile and apparel manufacturer. In 1984, he actively helped his family in establishing Dragonair. He took over Tommy Hilfiger Corporation tacitly. Within 8 small years as a chairman he changed the luxury company from a US$25 million only America centric clothes company to a world-wide US$2 billion brand.

The above presents us a little thought of how the Chinese businessman are now stepping up in the luxury business which was predominantly European a few decades ago. As the market presence of Chinese consumers grow in the field of luxury, the other side of the movement also is going to grow only. Certainly some food for thought for the European luxury manufacturers and marketers.

Source: Massification of Luxury: the Chinese Invasion

Reblog this post [with Zemanta]