Sun Tiantian, a Beijing office worker, fell in love with Louis Vuitton's newly-released Monogram canvas wallet. She decided to get it for herself as a New Year gift and got ready to fork over a month's worth of her salary, about 5,000 yuan, to Louis Vuitton's flagship Beijing store. But to her surprise the bag was sold out, just a month after it was released.
Chinese luxury brand shoppers are apparently feeling the economic downturn's pinch less than their Western peers.
|A man stands beside a Harley Davidson motocycle at the Top Essence Luxury Show in Beijing in late November. Over a third of the items in the show were reportedly displayed for the first time in Asia. [China Daily]
A piece of jade jewelry priced at 30 million yuan was sold as soon as it was unveiled at the Top Essence Luxury Show in Beijing in late November.
"When the economy grows, wealthy people save money for investment; when it dips, they turn to luxury spending," said Leon Sheng, the show's managing director.
Originated in Monte Carlo and landed in Shanghai in 2005 for the first time, the show attracted 15 more luxury brands in 2008 than a year ago.
The fair-like show featured supercars, yachts, private jets, high-end jewelry and exclusive real estate opportunities. It attracted over 10,000 visitors, many from China's cash-rich but shop-starved places, such as coal-rich Shanxi province.
China's luxury market is holding strong, despite the worldwide economic slowdown. Luxury sales fell by 20 percent and 25 percent in Europe and the US respectively this year, but only dipped 5 percent in China according to statistics from the US-based World Luxury Association.
China, the world's most populous country, has an estimated 300,000 millionaires and a 250-million strong middle class, who combine to spend 40 billion yuan a year on luxuries, according to figures from accounting firm Ernst & Young. It is becoming a haven for the world's top-end retailers, especially as the global economy slows.
Michael Ouyang, CEO of the World Luxury Association China Office, said luxury brands have become an essential part in the life of many Chinese.
"In the mind of many Chinese, luxury goods are connected to your life, your career, your job and your title. If you don' use luxury goods you might feel disadvantaged in some ways," he said.
Luxury goods corporation Louis Vuitton Moet Hennessy (LVMH) said on Nov 12 that its activities in China remain "dynamic" and that its Louis Vuitton brand recently recorded 30 percent organic growth in China.
LVMH also said nothing signals its growth in China could change in the next few months.
Based on the confident forecast, Louis Vuitton cut the ribbon for a new outlet in Wuhan, capital of Hubei province, on Oct 30. It is the French fashion designer's 26th outlet since entering China in 1992.
The top-end retailers' confidence in the Chinese market may be well placed.
A traditional mentality of saving (instead of racking up consumer debts) may mean Chinese are better placed than Westerners to weather financial tough times without drastically altering consumption.
The most popular luxury goods in China are accessories, such as handbags, shoes or perfume, which are the luxury brands' cash cows.
The rising yuan may have Chinese consumers splashing out on luxury trips and products overseas.
The coming Chinese holiday shopping season lasts until Spring Festival in late January (or early February), a month longer than the Western holiday season and is a huge boon to luxury retailers.
Chinese people spend on their families and on building guanxi, (social connections, often crucial for business).
"The worse the economy is, the more important guanxi is," said an IT CEO, speaking anonymously. "Recipients appreciate luxury gifts, which make them feel well looked after."
But other luxury retailers are not sure they won't be hurt by the economic slump.
"Most of our clients are high-earning businessmen. If their businesses get hit by financial crisis, so do we," said Shirley Zou, an officer at Dream Italy, which offers Chinese people million-dollar-a-week luxury tours to Italy and other EU countries.
"It's very hard to tell what will come in 2009 through the current gloomy fog," Zhou said. "But to our joy, the travel packages during the Spring Festival have all been booked."
(China Daily January 5, 2009)