Feature... Luxury essentials

Gucci Group CEO Robert Polet famously said he didn’t sell handbags, but dreams. Luxury goods producers sell an awful lot of those dreams in Asia, but not everyone buys the same one. For some, it’s about inspiring envy, for others, it’s fear of being the only one without a must-have accessory. For a few, it’s about being ‘in the know’, regardless of what anyone else thinks.

Asian consumers’ attitudes to - and ability to afford - the trappings of wealth may vary wildly, but their appetite for luxury brands is almost uniformly voracious.

The region’s fashionistas already account for about half of all luxury goods spending in the world, with Japan alone accounting for much of that, despite the finest shopping performances of China’s nouveau riche, Hong Kong’s moneyed tai tai wives and the expanding middle classes of Southeast Asia.
Sales of luxury goods in China rose 30 per cent last year, and while luxury car sales globally have been on the skids - BMW sales last year fell 27 per cent and Ferrari slipped 22 per cent, according to the Wall Street Journal - in India, the young affluent are buying them like never before, and luxury car growth is forecast to expand 100 per cent by 2010.

Radha Chadha, author of the book The Cult of the Luxury Brand, says luxury marques are a way of replacing traditional Asian indications of social standing, such as India’s caste system and the Japanese hierarchy from samurai down to merchant.

“You knew your place,” she says. “Now, with all this economic development and social change, suddenly there’s just one criterion for judging people and that’s how much money you have. There is a need to display new money, and luxury has very clear logos and symbols that help you do that. They do the talking for you.”

General thinking is that the more people get used to having money and the ability to afford luxury, the less they feel the need to show it off. With longer-term wealth, therefore - not only personal wealth but wealth of the country or city you’re in - tends to come sophistication and subtlety about the way brands are chosen and displayed.

In this respect, the scale tends to run from Japan, the most sophisticated market overall when it comes to luxury, through to Hong Kong, Singapore and Taiwan next, then Southeast Asia, China, and finally India.

Novice luxury buyers, no matter where they are, tend to start with something small, like a wallet or a bag, and work up through watches and shoes before they can afford to keep a full designer wardrobe ticking over.

What does all this mean for marketing luxury goods? Brand development company Added Value says that to be culturally relevant, brands and product ranges need to be tweaked for different markets.

In China, for instance, the recency of economic liberalism means there is no old money; 62 per cent of the top 10 per cent of earners are under the age of 35. Products mean more than services, and while Beijingers no longer leave the labels on the outside of their suit jackets, this is a market where luxury is still all about show.

“In China, respect is driven first from what you wear, and then who you are,” says Magdalena Wong, CEO of Oracle Added Value, China, and head of Added Value’s Hong Kong luxury practice.

Synovate’s China MD Darryl Andrew points out that the word ‘luxury’ in Chinese connotes excess and exhibitionism. Niche luxury brands are seen as a foolish waste of money because they won’t be recognised or will indicate that you’re being pretentious - a big no-no. Luxury helps you stand out, but not too far out.

Logos on products need to be as prominent as possible. Fendi, for instance, sells heavily logoed products in China that would be considered brash elsewhere. This year, Gucci has done a special collection of red products sold only in Hong Kong and China and named after the Chinese lucky number eight. Louis Vuitton also sells chess and mahjong sets, and Prada accessories in China include teddy bear key rings, while Hermès sells mobile phone trinkets.

In Japan, meanwhile, living standards are more broadly consistent and there is more wealth. “You don’t have people using luxury goods as a way of way of saying ‘I’m considerably wealthier than you’, which is very different from other Asian markets,” says James Parsons, Tokyo director of research firm Flamingo International. “It’s not the desire to stand out, but actually the desire to fit in.”

Quality and packaging count more in Japan than in most other markets thanks to kodawari, the respect for craftsmanship and perfection. And the retail experience, always important in luxury, has almost been raised to an art-form.

Choosing recognisable brands of course is vital, but a degree of connoisseurship and private pleasure is slowly arriving. In premium whisky, Parsons says, while the most expensive brand is still the one you must buy for your boss, people are starting to buy the ones they actually prefer to enjoy alone or with friends.

In contrast, Koreans struggle with conspicuous consumption: while some people are hungrily tucking in to luxury, there is a deep sense that such indulgence is shameful, and that great wealth was probably ill-gotten.

Korea’s super-rich, Chadha notes, are therefore discreet with their money. The opening of Giorgio Armani’s flagship store in Seoul was a necessarily low-key event, as shoppers want a degree of privacy that is the opposite to the look-where-I’m-shopping outlook in much of China.

However, middle-class wives, following the national obsession with youth and beauty, spend on cosmetics and fashion, while 20- and 30-something women have more in common with their Japanese and Chinese counterparts, saving madly for the ‘right’ bag or shoes, regardless of disapproving elders.

In Southeast Asia, it is Singapore that leads in the sophistication and subtlety stakes. Unlike the neighbouring countries of Malaysia and Indonesia, the city-state has a larger, more generally wealthy population rather than an elite super-rich.

Meanwhile, in Hong Kong, flashiness is no longer ‘in’ for affluent people, according to Jill Telford, Synovate CEO for North Asia. “Self-worth through connoisseurship is more desirable,” she says.

Having recognised, visible brands is still important, though, with Nielsen research showing the most frequently bought luxury brands are Gucci and Louis Vuitton; if money were no object, shoppers say they’d first buy LV, then Gucci, Burberry and Prada.

If there is one thing Hongkongers love as much as a brand name, it’s a bargain. Store loyalty cards are huge, and Hong Kong is rare in having a popular trade in second-hand luxury items, usually frequented by the lower-earning office ladies who can’t afford a new bag but don’t want to resort to fakes.

Nielsen’s Yvonne Lum says being canny makes them no less choosy, and last season will not do, which explains why ‘evergreens’ are hugely popular because they don’t date. Seasonal specials are bought only by those who can afford to move on in a few months.

Overall, Chadha says Asian markets and individuals within them are moving quickly from one stage of luxury consumption to the next.

“Earlier, it took generations to move from one group to another; now you can meet a young woman in China who’s just showing off her first luxury purchases, and you meet her five years later and she’s a very sophisticated woman,” she says.

A single brand clearly cannot be all things to all people in all markets - exclusive but well known, a must-have for everyone and a prized discovery recognised only by those in the know. A strong underlying brand story that can evolve and take on local characteristics is therefore essential to success in Asia. More than anything, though, luxury brands need to be consistent.

“What luxury brands must keep in mind is that information travels at the speed of light, so you need a fairly unified message,” explains Martin Roll, brand strategist at VentureRepublic. “You can’t vary it too much in terms of what makes a brand iconic.”