Retailers, investors and industry insiders believe China’s luxury goods industry, despite losses for the second year in a row in 2015, is still well on its way to a brighter future, coasting on the momentum of double-digit growth in recent years, said consulting firm Bain & Co.
The Fortune Character Institute’s research findings appear to confirm the optimistic outlook. In 2015, Chinese consumers bought 46 percent of the luxury goods consumed worldwide. But 78 percent of it was bought outside China.
Chinese consumers of high fashion and luxury goods are becoming increasingly discerning too. Not for them any brand that is easily available or visible. By buying and encouraging the best among the existing luxury brands, Chinese consumers are emerging to be trendsetters.
To ride the rising wave of fashion consciousness among Chinese consumers, Shandong RuyiGroup, one of China’s leading textile producers, reportedly joined the bidders for French fashion group SMCP on Jan 20, according to a Bloomberg report.
SMCP is estimated to be worth more than $1 billion. The group owns affordable luxury brands such as Maje and Sandro, which have been enjoying surging popularity among China’s rising middle class in recent years.
Shandong RuyiGroup is ranked among the top four of China’s 500 leading textile enterprises. Its consolidated annual revenue hit a record 30 billion yuan ($4.7 billion) in 2013.
The group declined to comment on its reported interest in acquiring SMCP.
Any such acquisition would be “just a drop in the bucket as the Chinese are fast climbing on to the upper chain of the luxury industry”, said Zhou Ting, director of the Fortune Character Institute. “The (luxury) market remains one of the most lucrative for now and (shall remain so over) the next decade. This means, if Chinese companies and investors want a share, they should be more actively involved in every link of the supply chain, from designing and manufacturing to marketing and retailing.”
Things have been moving in that direction of late.
For instance, China’s homegrown online fashion retailer VipshopHoldings, known for its discounts, invested several millions of pounds in November for a minority stake in British fashion-maker BrandAlley, to introduce more British brands in China.
A month earlier, its competitor, Secoo.com, created quite a splash by opening the first cross-border experience store at Piazza Del Duomo, one of Milan’s most-visited shopping areas.
Li Rixue, founder and CEO of Secoo.com, established the website seven years ago in Beijing. He called the Milan store “part of the company’s ten-year globalization plan”.
Industry insiders said that Secoo.com’s aggressive expansion reflects a strategy to target high-spending Chinese tourists in Europe.
Zhou said what, where and how the Chinese buy will likely determine where Chinese, and probably global, investors’ money would be pumped in.
Michele Alberti, CEO of Luxemporium Investments SA, a Switzerland-based fashion trading company that is co-invested by Shanghai Spring Bamboo Group, the city’s leading wool and cashmere manufacturer, said Chinese consumers are becoming more sophisticated and mature.
But there is no need to draw a circle where the Chinese are inside and people from other countries are outside. There is no need to study them differently, he said.
“Chinese consumers should no longer be alienated. I am always asked what’s the most distinguishing feature of Chinese consumers. I think it’s (the fact that) they are growing more similar to consumers from other countries, if not leading the industry,” said Alberti, who was part of the management of leading luxury goods companies such as Bally and Salvatore Ferragamo.
In 2014, he joined Luxemporium, and played a key role in the opening of the company’s first multi-brand store in Tianjin’s Friendship Department Store in January.
The 3,000-square-meter store on the second floor of the Friendship Department Store offers a wide range of footwear, bags and accessories from over 80 brands, including some of the most-sought-after designer brands such as 3.1 Phillip Lim, Charlotte Olympia and Sophie Hulme.
Alberti said one-third of them are designer brands that are rising in popularity in China as well as globally. “It’s happening everywhere, especially China ... even the richest people are pairing H&M or Zara clothes with much pricier and chic bags and shoes. People are looking for style, instead of statement.”
Over the next decade, the company plans to open at least one store every year in China, a country whose luxury industry is “not shrinking, but evolving”, Alberti said. The company’s team of experienced fashion buyers in Milan will help select the brands to be sold at its outlets in China.
“(Despite slowdown), people are still buying, and buying lots (in China). They are just not buying what they used to buy.”
He believes the expansion of Luxempourium, mainly to second- and third-tiered cities, could fill the gap in the luxury retail landscape of China created by the closure of stores of other luxury brands.
Zhang Jie, CEO of Luxemporium International Trading (Shanghai) Co, the local arm of the Swiss firm, said an ambitious plan is taking shape. “Luxemporium caters not just to Chinese customers. It starts in China but we want to bring it to other countries in Asia, Europe and America.”