High-end boutiques aren’t where most people would look for evidence of a shifting global balance of power. But “if you walk around Paris, or London, and you walk into one of these top-brand shops, 10 years ago you’d find one of the assistants would speak Japanese,” says Nick Debnam, a partner at KPMG, an accounting and advisory firm. “These days they have to speak Mandarin.”
Glitz-hungry Chinese consumers shelled out over $12 billion for luxury goods in 2010, setting their country on track to become the world’s third-largest market for the industry in the next five years, according to consulting firm Bain & Company. And with its own economic miracle, India is a tantalizing opportunity too. Already, the Asia-Pacific region, which excludes Japan, accounts for 17 per cent of the global $234-billion luxury goods market, according to Bain estimates. With market potential so gargantuan, Asia isn’t simply the next frontier for U.S. and European designers to conquer. It is a superpower mighty enough, it seems, to start imposing its own aesthetics on world-class bling.
Hints of Asia are already in the works of some high-end European designers. In November, Louis Vuitton re-edited 40 pieces from its 2010 Spring-Summer and Fall-Winter collections—this time using vintage sari fabric sourced in New Delhi, Bombay and Bangalore, among others. Chanel saluted the Shanghai EXPO 2010 with a “made for China” limited collection featuring traditional-looking items, such as bracelets with interlocking dragons, as well as benevolently ironic ones, such as the classic Chanel chain bag shaped as a Chinese restaurant take-away box. And Canali, the Italian luxury menswear designer, has re-invented suit jackets in the spirit of the maharajas in its India-focused Nawab collection.
But Western luxury makers must ensure these Asian touches don’t spoil the source of their cachet: their exquisitely Western identity. In China, market research studies warn, luxury buyers mostly understand chic as something foreign. Switzerland, goes the wisdom, is the homeland of superior watches, Italy of fine shoes, France of exquisite clothing and perfume, says KPMG’s Debnam. “Chinese consumers have got these associations with particular countries,” he adds, and their own People’s Republic simply doesn’t factor in, except for a few niche spaces, such as the antique furniture trade, and the high-end spirits market, where Maotai, the traditional rice wine, is king. The once-in-a-while Western homage to Asian styles, then, is little more than marketing flattery aimed at gratifying a fiercely nationalistic streak, experts say. Even in India, where formal occasions see the well-to-do proudly don traditional brocades and Nehru jackets, Western high fashion only makes sense if it stays Western, says Armando Branchini, secretary general of Italian luxury trade group Altagamma.
At least one major player, though, is willing to bet on a “go local” endeavour. Last year, Hermès, the Parisian maker of scarves, handbags and leather goods, launched its fully made-in-China branded subsidiary Shang Xia, which literally translates to “up down” in Mandarin. The lifestyle brand, marketed separately from Hermès, sells cashmere coats for over $5,000, colourful raw-silk jackets, and furniture inspired by ancient Chinese craftsmanship. Meant to appeal to consumer nostalgia, Shang Xia opened in a Shanghai mall boutique, but Chinese luxury trade magazines are musing about the possibility of a future store opening in Paris, supposedly aimed at Chinese tourists shopping abroad. So far, Hermès appears to be the only one to set up a China-only brand, but others “will watch what happens closely,” says Debnam.
Major brands are also eager to play godfather to Asia’s up-and-comers. LVMH Group, the world’s largest luxury goods conglomerate and owner of Louis Vuitton, said in March it will set up a $650-million private equity fund to help Indian designers target urban middle-income buyers. So far, local designers have focused almost exclusively on the traditional couture and wedding apparel businesses, which cater to the wealthiest families, missing out on the immense potential of the ready-to-wear market for a burgeoning middle class. In China, LVMH has reportedly set its eyes on 10 scalable brands worth between $200 million and $250 million.
Some quintessentially Chinese luxury brands have already gone international. One example is Shanghai Tang, which launched as a custom-tailoring business in Hong Kong, but morphed into a much more successful maker of fashionably Western-looking, ready-to-wear garb with just a touch of Chinese, such as Mandarin collars or embroidered silk linings. It now counts stores in London, Madrid, Frankfurt and Las Vegas.
And more designers based in China are trying to crack the Western market. The Polytechnic University of Milan, in Italy, is in its third year of offering an executive course in luxury brand marketing for established Chinese businessmen, a program run in association with Shanghai’s Jiao Tong University. The Italian part of the curriculum includes field trips to Armani, Bulgari, Bottega Veneta and Zegna boutiques, to allow students to breathe in the made-in-Italy customer experience, says professor Giuliano Noci, who oversees the program. He has no doubts about the pupils’ potential: “In the next five years,” he predicts, “we’ll see things we can’t even imagine.”