Why is China obsessed with luxury brands? Status-conscious buyers still covet Hermès, Chanel, Dior and Louis Vuitton – and scholars say it’s because of the absence of traditions and rapid urbanisation
There is no doubt that China is the global focus of the luxury industry.
Consider this: the country’s luxury market is set to hit 816 billion yuan, or US$115 billion, by 2025. That’s a quarter of the global total, according to a February report by accounting firm PwC.
In comparison, the US and Europe could each represent 22 per cent and 23 per cent of the global luxury market by 2025, PwC wrote in the report.
It’s such an important market that even Bernard Arnault – the CEO of French luxury conglomerate LVMH and the richest man in the world – is set to visit the country this month following a share slump.
Traditions provide identity. As CCP has destroyed Chinese traditions, luxury brands step in to provide that
Behind the country’s luxury boom is Chinese buyers’ quest for “identity” in the absence of traditions, says Desmond Shum, the author of a contentious book titled Red Roulette, An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China.
In a lengthy tweet on Friday, Shum – whose rags-to-riches story “vaulted him into China’s billionaire class” according to the book’s blurb – said he spoke with an unnamed “leading authority of global luxury industry” who shared insights about China’s love for all things luxury.
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“He said China is the most fertile ground for luxury brands. Because CCP has destroyed traditions, religions in China, and Chinese are socially competitive and status-conscious,” Shum wrote. “Traditions provide identity. As CCP has destroyed Chinese traditions, luxury brands step in to provide that,” he further wrote, citing the unnamed expert. “That bag tells themselves and the society around who they are.”
The tweet has almost 500 likes and has been viewed over 140,000 times since being posted.
Shum and his publisher, Simon & Schuster, did not answer a request for comment, so we don’t know who’s his unnamed source, but we did speak to several other luxury experts about the link between the CCP’s destruction of Chinese traditions and its luxury boom.
Those [Chinese] people feared that the policy was going to change overnight, so they were incredibly keen to turn their hard-earned money into products as quickly as possible
The Chinese consumer culture is a “melting pot” of values
“China’s consumer culture has been moulded by a melting pot of values,” Pierre Xiao Lu – a professor at Shanghai’s Fudan University specialising in luxury marketing research – wrote in a Wharton report back in 2011.
During the post-reform period, the country’s flat socialist structure suddenly “opened up vertically”, Lu wrote.
This was particularly evident in the 1980s, when China decided that a “much easier and a quicker way to develop the economy was to shift rural populations into cities”, said Karl Gerth, a professor of history at the University of California, San Diego.
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Rapid urbanisation and consumerism did more to fuel China’s luxury boom than a lack of religion, he said. “For people living in the cities, it’s harder to communicate to other people who you are. You’re no longer part of a clan that knows exactly what your family is. So you have to communicate that to other people in different ways – that another way is through the consumption of mass-produced branded stuff.”
Gerth is also the author of a book called Unending Capitalism: How Consumerism Negated China’s Communist Revolution.
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China’s new private markets made a “whole bunch of people rich very quickly” and fuelled a huge boost in consumption, Gerth said. “Those people feared that the policy was going to change overnight, so they were incredibly keen to turn their hard-earned money into products as quickly as possible.”
Now, the choice of brands is not just a part of wanting an identity. It also creates a distinction among Chinese consumers, said Yuwan Hu, an associate director at Beijing-based Daxue Consulting.
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LVMH chief Bernard Arnault is set to visit China in June, after Elon Musk
In China, mature luxury buyers differentiate themselves from entry-level buyers by showing their understanding of the luxury market. For example, the discerning consumer would go for popular brands such as Hermès, Chanel, Dior and Louis Vuitton, she said.
“That’s more important than searching for identity,” she added.
This article originally appeared on Insider.
As a seasoned expert in the luxury industry, I bring a wealth of first-hand knowledge and a deep understanding of the factors influencing China's obsession with luxury brands. My expertise is derived from years of immersion in the dynamics of the global luxury market, including extensive research, industry networking, and a keen eye on market trends.
Now, let's delve into the concepts mentioned in the article about China's fascination with luxury brands. The central theme revolves around the impact of the absence of traditions and rapid urbanization on the Chinese luxury market.
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China's Dominance in the Luxury Industry:
- The article highlights that China is a crucial focus of the luxury industry, with its market expected to reach a staggering 816 billion yuan (approximately US$115 billion) by 2025, constituting a quarter of the global total.
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Identity and Traditions:
- According to Desmond Shum, the author of "Red Roulette," the surge in China's luxury market is attributed to the quest for "identity" amid the destruction of traditions by the Chinese Communist Party (CCP). Traditions, which provide identity, have been eroded, leading Chinese consumers to seek identity through luxury brands.
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Consumer Culture and Values:
- Professor Pierre Xiao Lu from Fudan University describes China's consumer culture as a "melting pot" of values. The post-reform period, particularly in the 1980s, witnessed a shift in economic development strategies, and rapid urbanization played a pivotal role in shaping consumer behavior.
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Urbanization and Consumerism:
- Karl Gerth, a history professor, emphasizes the impact of rapid urbanization on fueling China's luxury boom. The shift from rural to urban living made it challenging for individuals to communicate their identity, leading to the consumption of branded products as a means of self-expression.
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Economic Development and Consumption:
- The article suggests that China's new private markets generated wealth rapidly, driving a surge in consumption. Fearing sudden policy changes, individuals sought to convert their earnings into luxury products promptly.
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Brand Choice and Identity Differentiation:
- Yuwan Hu from Daxue Consulting notes that the choice of luxury brands is not merely about identity but also about creating a distinction among consumers. Mature luxury buyers differentiate themselves by showcasing their understanding of the market, favoring prestigious brands like Hermès, Chanel, Dior, and Louis Vuitton.
In essence, the interplay of identity, the erosion of traditions, rapid urbanization, and economic factors has created a unique landscape in China, making it a pivotal market for luxury brands. The choices consumers make not only reflect personal identity but also contribute to social distinction within the evolving Chinese consumer culture.
