“The Bling Dynasty” still reigns.
Even though Erwan Rambourg, global co-head of consumer and retail research at HSBC, published his book on the Chinese luxury market in 2014 — and four years is a century in the Chinese digital world — “The Bling Dynasty’s” themes hold up.
The book came out amid worries that Beijing’s crackdown on graft would do lasting damage to luxury brands, which provided a kind of unofficial currency for those looking to curry favor with officials.
But Rambourg wrote that “no other nationality will influence luxury consumption as much as the Chinese” and that despite any near near-term challenges, the market there faced a future that was “unquestionably bright.”
That rings true with the Chinese yearning for luxe transcending both the sudden bureaucratic allergy to gifting and the also sudden revaluation of the yuan in 2015.
The market took a hit, but is back.
Rambourg said that’s because the fundamentals of Chinese luxury growth — middle class expansion, more women high-end shoppers, greater access to travel and few local options — remain the same.
Things are also changing, for instance with three online platforms now vying for the high-end market online.
In an interview with WWD, Rambourg underscored how the key themes of “The Bling Dynasty” are still shaping the market and how the Chinese high-end customer is still evolving.
Here, he weighs in on the key topics at crossroads of the Middle Kingdom and luxury shopping.
On how luxury revamped during the spending slowdown from mid 2015 to mid 2016:
“This one-year lull gave the brands a lot to think about in terms of creativity, in terms of product, in terms of experience in stores and I think the brands actually became better….They got to develop a much keener knowledge of who the actual end consumer is and I think they improved in terms of product, in terms of merchandising, in terms of in-store experience, in terms of digital clarity.”
On the pressure of a crowded market:
“If you were [Louis] Vuitton or Gucci, these are the only two brands, maybe with Prada, that Chinese knew eight or 10 years ago. But now you’re in a field of 40 brands so you have to make that extra effort to capture that consumer and realize that you’re selling to a really young consumer.
“You’re selling to a digital native who was brought up on mobile, who is all over blogs and forums. She’s basically approaching the brands very differently. And you have to understand that your Asian consumer, who’s the key driver for your growth, is probably 10 or 12 years younger than your European consumer and 15 to 20 years younger than your American consumer.
“The recent success of Vuitton, Gucci and Cartier has been in selling to a much younger consumer who was maybe not involved two, three years ago. She’s involved now because you’ve developed a way to address her, products and experiences that she’s interested in.”
On the brand loyalty of Chinese shoppers:
“There’s this myth that young Chinese consumers are not loyal to brands. It’s not a question of a lack of loyalty, it’s more a question of brands lacking innovation. If you consistently come out with product that’s relevant, there’s no reason for consumers to move away to other brands.
“Gucci came back strong two and a half years ago and the initial reaction from a lot of people in the market was, ‘They got a good collection, they got lucky, consumers will move away.’ They haven’t moved away because for the past two and a half years Gucci has been incredibly relevant with young consumers.
“If you are dull or complacent or you don’t renew your assortment or message quick enough, it’s an open market. There are lots of competitors out there who might be doing a better job.”
On the product evolution:
“Luxury products have to evolve because everyone wealthy can have access to a Vuitton handbag or a Cartier watch. That’s why the Vuitton handbag, if you look at Jeff Koons, that was a very interesting association because the handbags were around art and known artists. It wasn’t about, I’m able to purchase a Vuitton handbag, it was about, I actually know who [Vincent] van Gogh is and I’ve been to a museum.
“You’re moving from a basis of, I can tick the box off, I can afford a high-end handbag to, actually, it says a lot more about me and my cultural openness, that I know who the impressionists are.”
On the importance of the digital luxury platforms:
“[Tmall’s Luxury Pavilion, JD.com’s TopLife and VIPlux] are already quite relevant even though they’ve only been around for 8 to 10 months for some of them.
“This is a question of convenience. Most of the .cn’s in China don’t have a lot of traffic and so, if you actually want to capture sale with that younger generation, you have to accept as a brand that you will have to go on multibrand platforms. The higher-end brands won’t want to go.
“The end game [for digital relevance] will probably happen between those three [platforms]. The brands will want to arbitrage between the three. I think the logic is that Luxury Pavilion will generate the most traffic, so theoretically, in terms of bang for your buck, you could think that that’s the best option. At the same time, you might have a willingness not to be just with Tmall.”
On the gender shift:
“Six, seven years ago, Chinese luxury consumption was essentially male driven and now it’s essentially female driven. Women in China became more financially independent. And so, for example, in jewelry, you’ve moved from a market that was essentially driven by gifts for the big stages of life — weddings, births, et cetera — to a market that’s really driven by self purchasing and impulse purchasing.
On why the crackdown on graft was good for luxury:
“Obviously, it wasn’t good for the sales figures in some years, but I think it’s good overall for the business in the sense that you are only driven by end consumers now, you’re not driven by people who are buying for others and artificially boosted by either the economy or government-related issues.
“If you’re not buying luxury, oftentimes it’s just that you’re not at the level of income that would enable you to, but if you could, you would. The sentiment of paranoia or of being monitored or being under pressure, that’s evaporated. Chinese consumer confidence is at a 25-year high, equity markets are doing OK and basically Chinese consumers are very enthusiastic and are willing to spend and there’s nothing holding them back.”