The New Silk Road is catering to millions of Chinese feeding a new Bling Dynasty. Within this substantial empire, many characters stand out.
Let me introduce you to five of them.
Spending time in China and meeting Chinese consumers abroad has shown that some stereotypical luxury consumers do actually exist. Rather than quote real people who may find it uncomfortable or rude, I have decided it was easier to present you with five avatars.These are representatives who embody the thoughts and feelings of luxury consumers coming from very distinct subsets of the Chinese culture. Here they are.
Calvin is 26 and is brand obsessed, loves logos and while he’s not that affluent, he wants people around him friends, family, business partners to know he’s succeeded.
He is what the managers of Coach would call a ‘status lover’, a somewhat disappearing breed of Chinese luxury consumers. He’s after brands as he’s eager to fit in to what he sees as modern China.
Calvin doesn’t speak English and I don’t speak Putonghua so every time we’ve hadto chat, I brought a friend along with me for translation purposes.
Calvin works as a manager in a textile manufacturer. He lives in Jinjiang, a third‐tier city, and an hour away from Xiamen, where Calvin goes some evenings for fun.
His favorite brand is Louis Vuitton, but that’s way too costly for him so midmarket imported brands like Calvin Klein work well. Three years ago, some Xiamen‐based friends made fun of him as he was wearing suit labels outside the cuffs these were the labels he was supposed to have cut off.
He is part of a few people in his entourage who bought brands that they thought were legit but ended up being interpretations of Western or Hong Kong–based brands: Qiaodan Sports (sued by Michael Jordan for using his Chinese name and a similar logo), Gio Amrami (instead of Giorgio Armani) suits and others.
Calvin’s older cousin he’s 30 now runs a property business in Xiamen, the city known to some as China’s Saint Tropez. He is very rich by local standards. He was smart to begin with and has great business acumen and connections.
His English is not great, and some mistakes he makes are opportunities for us to spend more time talking and laughing and less time understanding each other. But he’s a real entertainer and as long as he can get by, he’s happy with that.
He seems fearless and clearly is enjoying life to the fullest. He’s a loud man, likes a drink and a few more but he’s a great laugh. Lewis has no inhibitions and when I think of him, it reminds me of Dr Seuss’s words: ‘Be who you are and say what you feel, because those who mind don’t matter, and those who matter don’t mind’.
A bit like Calvin, Lewis has ‘nouveau riche’ habits, loves brands but can actually afford quite high‐end kit. Unlike Calvin, he’s got a passport like 4% of Chinese (or more than 50 million in total) and he can afford to buy a Louis Vuitton bag and has travelled in many Chinese cities. He went to Taipei late 2011, to Hong Kong for the first time last October, to Macau earlier this year and dreams of Milan and Los Angeles for his first ‘true overseas’ trip.
I write ‘true overseas’ as Calvin, like most Chinese, considers Taiwan, Hong Kong and Macau part of China.
He’s what the press calls Tuhao: tu is dirt; hao is splendor; so the meaning is along the lines of ‘parvenu peasant.’ Chinese popular culture despises Tuhao and at the same time secretly is envious and jealous of them. Lewis bought the gold iPhone 5s that came out in 2013, the one Apple put out specifically for the Chinese market, known in China as the Tuhao Gold and in the Apple HQ as the Kardashian iPhone.
Tiffany just started her first job in Guangzhou at age 22 in an advertising agency. She’s ambitious, graduated from a good school but has limited revenues in this first job. She’s never been abroad but would love to go to Seoul or Tokyo as they seem so refined.
Her English is conversational and fine. She recently started taking a few Korean lessons, just because it’s cool, and she’d like to figure out what on earth the K‐Pop bands she loves so dearly are singing about. She also follows many of the Korean soap operas that air on Chinese TV channels. She’s the Chinese equivalent of the Japanese Office Lady (or “OL”) and has relatively limited needs, so she has quite a bit of disposable income to purchase brands. She’s connected, quite active on Internet forums and blogs and a first‐time buyer of imported luxury brands. She won’t be spending often but she’ll be saving up to buy brands where she gets the sense that she’s rewarding herself.
Her wealthier boyfriend by that I mean he’s wealthier than she is; she only has one boyfriend bought her a Tiffany ring recently, and she was absolutely delighted. Yes, it cost more than a similar ring at a family jeweller but the blue box, the Tiffany guarantee and the discrete yet recognizable design thrilled her.
She is one of the 2 million Weibo followers of Angelica Cheung, the editor in chief of Vogue China and a veritable fashion guru. She likes brands with history and reads about them a lot.
Brittany is Tiffany’s aunt though she’s just ten years older. She’s a marketing director for a fast‐moving consumer goods company in Shanghai.
She’s Chinese in her style and has a slight, recognizable accent when she speaks in English but if I hadn’t met her in Shanghai, I would probably have never guessed she was a local as she could really be from anywhere, sounding as cosmopolitan as she does. Brittany goes to London for business and enjoys relaxing weekends in Taipei. She’s planning to go to New Zealand with her husband and daughter soon.
She has known foreign luxury brands for a while and is very knowledgeable. Louis Vuitton doesn’t do it for her. She likes more niche‐y concepts like Miu Miu and Céline but has seen many Italian and French fashion brands and thinks British Burberry or Mulberry or American Tory Burch and Marc Jacobs are great alternative options.
Tiffany and Brittany are at the heart of the Chinese luxury market growth.They are putting pressure on traditional, historical brands as they are very knowledgeable and won’t be moved by what most Chinese consumers have an interest in.
They know what they want, they are uncomfortable with brands that seem to cater too much for the Chinese, and they are much more subtle in displaying wealth than Calvin or Lewis.
When I asked him where he was from, Hermes said he was Canadian even though I now know he was born in Beijing. True, he spent more time growing up in Vancouver and studying in the United States and London than in China, where his parents have a place they are globetrotters too.
He speaks and writes English much better than I do; but hey, what do you expect, I’m French!
He’s 34. After working for a leading American consultancy firm, he’s now in asset management at a hedge fund, which has offices in Shanghai, Hong Kong and Singapore. For the past three years, he’s been based in Hong Kong and is hopeful he can become a partner at the firm.
He buys his girlfriend Saint Laurent bags and Van Cleef & Arpels jewellery and buys himself Hermès clothes though he will not go for the too‐obvious H‐buckle belt and he always wears a pair of Tod’s, at work or on weekends. He’s into Italian wine, Japanese whisky, complication watches and Maldives holidays. His consumption profile is that of a very affluent New Yorker, Londoner, Parisian or Tokyoite more than that of other Chinese.
Our five avatars are relevant for luxury demand today.
Tomorrow, they will dominate it.
Luxury demand is not just going to increase with consumers trading up. The bulk of the increase in sales should come mechanically from the fact that the number of Chinese nationals able to afford the products will increase dramatically.
Sales to Chinese should broadly triple over the next ten years.This may read like a bullish statement, but it is not if the basic metrics of income creation in China is considered.
In 2015, Chinese should represent about 20% of luxury consumers (or 75 million) and as much as 35% of sales, as their average spending is much higher than that of other nationalities. (See Table I-1.) The table below shows the evolution of luxury sales by nationality over the next ten years.