The China formula for new entrants in the luxury sector.

So we hear that China will contribute to 20% of worldwide sales for luxury brands. A lot of reports have been published on the evolution of the luxury customer but none of them really spell out the challenges ahead.

Here are a couple of observations based on the successes of Louis Vuitton, Ferragamo and most recently the one year old Chinese luxury brand Shang xia from the House of Hermes

1. The Chinese customer is getting sophisticated: New brands looking at the market are required to create a context for the brand. For example how does an Amrican sportwear brand fit into a country whose fashion aesthetic is “Dress up for the show” vs “fashion that is comfortable and effortless”. The key is education and therefore investing in a team that understands fashion and speaks the language of the brand. Also when increasingly brands are manufacturing in China it is important to focus on design and designer vs craftsmanship and knowhow.

2. Maintaining the luxury quotient: Brands survived the recession by introducing new lines at competitive (read lower) price points. The challenge is to ensure that the luxury quotient is retained even at affordable price points. In China “lower price points” can be considered “cheap”. It is imperative to build brand integrity on core values rather than talking price which could spell doom in the long run.

3. Think out of the box to get share of voice Below the line initiatives and reaching out to clients through superlative service will differentiate brands as the customer is  increasingly exposed to service standards in other parts of the world. Brands need to ask if they should organise trunk shows and pop-up stores in Tier 2 markets which will clearly define the future of the sector. A consistent digital strategy is required to be embraced to reach out to the 400 million consumers on line.

The Formula is to be committed to the DNA of the brand, have a non compromising long term approach and embrace the need to be granular as brands expand beyond the key cities.



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