China: The Next Luxury Frontier
The country's homegrown luxury market is booming. Leave it to Hermès to lead the way.
This can’t be happening. It is just a teacup, and it is messing with my feelings. Made of eggshell porcelain, it’s pristine white and paper thin, the bottom half lovingly encased in finely woven bamboo. It is exquisite—vulnerable and brave—and as I hold it in my hand, I am helplessly moved.
Go ahead and think I’m nuts, but in my defense I will say that I’m your average material girl who doesn’t normally have near-spiritual experiences in retail stores. But Shang Xia—the Chinese brand launched last year by Hermès—is different. Its Shanghai store is a futuristic zen-like setting filled with unusually beautiful products. The clothes, jewelry, furniture and other homewares are obviously Chinese-inspired, but if you are thinking of dragons and red-and-gold brocades, think again: Everything here is muted, the lines are spare, the designs are utterly contemporary. As I leave the store, teacups in my bag, I wonder if Shang Xia is a one-off experiment or the beginning of a new era of Chinese luxury brands.
There is, indeed, a Chinese cultural revolution taking place. It’s so close to the ground that I am not sure it has registered on the radar screen of Big Luxury. It is at the let-a-hundred-flowers-blossom stage—chaotic, diverse, fledgling—but there’s a palpable energy, both from emerging designers hungry to express themselves and from a small but growing breed of consumers just as hungry to experiment. But I am jumping ahead. Let me give you the big picture first.
Along with the rest of Asia, China has carried on a torrid love affair with Western luxury brands without giving a moment’s thought to its own heritage. Venture inside Shanghai’s luxury mall Plaza 66 on a weekend and chances are you will have to line up behind velvet ropes outside Louis Vuitton, Chanel, Cartier, Hermès and other high-end brands. Burberry, meanwhile, reported a 60 percent sales jump last quarter in the Asia-Pacific region, boosted by its China expansion. The Chinese, shopping at home and abroad, are already the biggest consumers for heavy hitters like LV. According to a recent McKinsey report, the Chinese luxury market will be worth $27 billion by 2015 (up from $12 billion in 2010). Add on Chinese purchases abroad—let’s be conservative and peg it at half the home market—and you are looking at a $40 billion luxury consumption four years from now. The result: Every luxury brand of any consequence is expanding rapidly in China, and also in global destinations that Chinese tourists flock to.
The country is squarely at the show-off stage of luxury development, where the sole purpose of wearing designer labels is to say “I have money.” This isn’t going to change soon: As long as China’s economy keeps marching ahead, it will keep churning out armies of newly minted moneyed folk who will adorn themselves in luxury logo uniforms. Good for them, and even better for Big Luxury.
At the same time, there is a generation of Chinese consumers who have been accustomed to luxury brands for years—Big Luxury entered China around 1990—and by now their eye is well trained, their fashion sense evolved, their brand knowledge substantial and, importantly, their confidence high. This group has been steadily graduating to subtle luxury—a catchall of still recognizable products from Big Luxury but with scaled-down or no logos: a bag from Louis Vuitton’s Epi collection rather than the Monogram, a Birkin from Hermès, a dress from Chloé.