SINGAPORE — The Southeast Asian luxury goods market is charging forward to meet and soon eclipse its European and American counterparts, all thanks to the continued strength in demand from China, a conference here was told.
This phenomenal growth in Asia will be led primarily by China, experts said at the International New York Times luxury conference held here Thursday and Friday.
Euromonitor International expects luxury consumption in Asia-Pacific to grow some 170 percent over the next five years, eclipsing Western Europe, traditionally the leader in luxury goods consumption, by as early as 2018.
Jing Ulrich, managing director and vice chairman of Asia Pacific at JPMorgan Chase & Co., told attendees that a strong savings culture in China underpins luxury potential.
“Chinese people save about 50 percent of their income. China has savings of over 200 percent of GDP; that’s approximately $20 trillion,” she said.
China’s luxury goods market, poised to grow some 72 percent in constant value terms over the five years, is currently concentrated in Shanghai and Beijing, but for Ermenegildo Zegna, Harbin, Chongqing and Wuhan are getting increasingly important.
According to the Italian men’s wear giant, second- and third-tier cities make up one-third of Zegna’s Asia sales, on par with China’s first-tier cities. The rest of Asia make up the remaining third.
“Only those truly committed to investing in this region will remain leaders,” Zegna said, adding that he believed that investment in the region guarantees payback in the future, even though the company “is not there yet.” The brand currently has some 80 stores across 36 cities in China, and 12 in Hong Kong and Macau.
Tom Ford chairman Domenico De Sole said the company very early on understood the importance of China in Asia’s luxury goods market, and had at an early stage entered Hong Kong, Shanghai and Beijing with its ready-to-wear collection.
The company’s next step is to expand its presence to the rest of Southeast Asia, starting with a store in Singapore’s new shopping mall, Marina Bay Sands, next year. The brand also plans to open stores in Kuala Lumpur and Jakarta next year.
“You cannot be a successful brand if you’re not in Asia,” De Sole said. “The customer base here is young, sophisticated and characterized by a lot of travellers who are knowledgeable about both business and fashion.”
“In the beginning, logo was everything in China. Now we must be careful not to be too logo-driven; the Chinese customer today wants more style and sophistication,” said Zegna.
Instead, “shapes and materials are the new logos,” said Emanuele Carminati Molina, president of Valextra. The company, which opened its first store in Singapore last year, is looking to expand its accessories brand to the rest of Asia.
Speakers described Asian luxury shoppers as young, digital and social-media savvy.
Thomas Crampton, director of social media, Asia-Pacific, at Ogilvy & Mather, said Chinese customers are more active online than their U.S. counterparts in terms of reading online reviews of products, comparing prices and sharing photos or videos.
Hong Kong-based Lane Crawford understood this phenomenon when it launched its online store in 2011, which today “is seeing huge growth in online retail,” said Andrew Keith, president of Lane Crawford and Joyce Group.
Keith said the company’s current focus will be on China’s large luxury customer base, but is using e-commerce as a means to connect and reach out to its other customers in Southeast Asia. At the moment, Singapore represents 45 percent of its Southeast Asian online business.
“What we’re seeing happening is our customers are buying online and then collecting the products themselves,” Keith said.
Tom Ford’s online store is set to launch next year. “Online has changed the world, especially in Asia and Southeast Asia, where customers are young and sophisticated,” De Sole said.
Men’s wear is seen as a prime opportunity in Southeast Asia. According to the latest Wealth-X and UBS World Ultra Wealth Report 2013, Asia is home to 3,985 ultra rich males with a total combined wealth of $585 billion, out of a total 4,635 UHNW individuals in Southeast Asia, whose total combined wealth amounts to $620 million.
The growing number of Asian men indulging in luxury goods is notable compared to men in other parts of the world, various speakers at the conference agreed, and could be explained in part by societal rules and culture, as well as a growing sense of personal style combined with smart marketing.
This is certainly the case in the luxury watches sector, said Gregoire Blanche, regional director South East Asia and Australia at Cartier. According to Blanche, the Asian culture of gifting – or to show respect by bestowing a gift worthy of a business partner’s status – has helped boost the luxury timepiece sector in South East Asia to become the eighth-largest export market for Swiss watches in the world.
“Watches are the prime symbol of status amongst men in Singapore,” Blanche said. “With cars and property simply out of reach, these men turn to the next thing they can acquire to show off their wealth–a luxury timepiece.”
Even banks have cottoned on to this trend, with UOB bank now offering installment plans for watches, he said.
“[Watches] hold a typical quality and value in the eyes of the masculine Asian culture where traditions and accomplishments are essential concepts,” according to Blanche.
“Men in Asia are most concerned with genuineness,” said Zegna. “They want to know the history of a product or the brand. The important thing for us is to get the brand ambassadors in the store up to speed with our history in order to attract the male customer.”