Luxury in China
IPAG business school
MBA, Luxury Brand Management
JIA JIA WANG
1. The concept of luxury
1.1the definition of the luxury
1.2 the characteristics of the luxury
1.3 the types of the luxury
2. The analysis of Luxury in China’s marketing
2.1 the environment in China’s luxury
2.2 the situations of the China’s luxury marketing nowadays
3. The strategies of international luxury enterprise in China
3.4 customer relation
4. The development and recommendations of Chinese luxury business
4.1 the problems existing in Chinese luxury business
4.2 the strategies of Chinese luxury business Conclusion
Through the study over a period of time, I gradually began to understand the significance of the existence of luxury. The emergence of luxury goods, is a product of historical development. With the development of human progress and science and technology, people are no longer satisfied merely the demands of materials , there will be more on the spiritual pursuit and longing. And, in today's society, the definition of luxury has become more diversity, which is no longer a luxury product. It became a kind of spiritual replenishment, a symbol of social existence and status. In people's lives, it is playing an increasingly important role in the spiritual and psychological effect.
As the development of China's market and the improvement of people's living standards, the luxury have a good consumer base and market environment in the Chinese market；Chinese consumers have a growing demand for luxury goods.
According to statistics；in 2009；Chinese people's consumption of luxury goods had
reached $ 9.4 billion；becoming the second-largest consumer of luxury goods only to Japan’s. Expected in 2014, China will become the world's largest luxury goods in the market, accounting for about 23 percent of the global total. In the luxury market, almost occupied by the international foreign enterprises. Although made in China in the world economy has an important place, few Chinese luxury brand go out for abroad. Therefore, we must pay more attention for the development of the luxury.
1. The concept of luxury
1.1the definition of the luxury
On economics, the definition of luxury is often relative to the necessity. Adam Smith in "The Wealth of Nations" just gives the definition of necessities, and all the necessities are not classified as luxury items. However,Esthetician believes that
"luxury" is a symbol of life is art, is an outward symbol of the pursuit of life into aesthetics, "luxury" is the direct representative of an art aesthetics, it has been given more cultural, historical, artistic and philosophical implications. From merchandising perspective, the high price does not mean that is the "luxury", "luxury" is not only means high production and use of excessive accumulation and pile material costs, but behind it there a perfect system support and centuries of cultural heritage. In today’s words, luxury is not a sector. Itself is found in many sectors. Luxury is a
trans-sectorial domain. It has many different sectors. It is difficult to say what it is.
1.2 the characteristics of the luxury
Luxury is not an ordinary commodity, on the contrary, it follows a set of
specific rules, referred to as paradoxes.
Price is an important factor in luxury. Besides, high price becomes a
symbol of the luxury which is different from the normal product. No
matter how high the price is, there always existing a part of consumers
who can afford and pursuit to buy .The high price is in terms of the
price of similar products. For example, a crocodile leather jacket,
Hermes, is about 5800 euros; a car, Bugattti Veyron, is about 2.5
million euros. From that, we know the starting point is the price rather
than the product. The product is constructed around the price.
Therefore ,a high price can simulate demand.
In terms of goods sales channels； luxury have more stringent
requirements than other commodities. The luxury goods are mostly
sold only in the stores, while the number of stores is limited, unlike the
any other normal products that can be purchased at any time in
anywhere. They have a strict distribution system.
CRM is about the customer relation management, which is also
means the negotiation with the customers. In the relationships, the
luxury brand always dominates the clients；always playing a decisive
role. Customers often depends on the purchasing power of the brand,
that only focus on its brand.
As the saying goes,‘When a thing is scarce it is precious.’ The supply of luxury goods are always in short supply that do not meet the demands. It should be this way, highlighting its unique value.
In the luxury, there are two important functions, that is the social function and the psychological function. Luxury must create and maintain a social distance. It is a symbol of social status. Some body buy luxury products only to want to buy an entrance ticket into the social distance. From the psychological aspect, when consumers carry a luxury, will feel very special status and pride, bringing spiritual satisfaction. Thereforefunction of luxury is more important than any practical function.
Making by hand is the symbol in the luxury products. Only in that way can make sure the quality of the product and express the products unique personality. The products is often made by the skilled craftsperson which is also the privileged. High quality of the product can win the customers’ trusts.
Maybe, if we want to buy a BirkinBag, we should have to waiting three years; After about six months waiting, we may get a John Lobb; Getting a Astro Martin may cost two years. All above ,the luxury brand keep the client waiting. On the other hand, timelessness is an aspiration of many luxury brands. No matter how many years it pasts, the genetic code of the brand does not change. Some products become the classic, and always make feting ,not over fashion, eg Chanel
No.5.Besides,ages often adds value to luxury products. Only in luxury, as the time goes away, the value of the brand will increase. Many luxury brands have deep historical heritage, founded hundreds of years ago, after several generations hard work and management growing so far. The brand's culture, that is the accumulation of family culture, the culture of the times, and have not happen and construct only in the one
day or one night.
For some luxury brand ,sometimes, there is no competition among
them. Some of the brands do not need the advertisement and publicity.
They have a fixed consumer groups and the gradual increase of the
consumer. Brand itself is a propaganda.
1.3 the types of the luxury
The luxury is looks like a pyramid. On the top of the pyramid is the so-called inaccessible products. That means the price is perceived as excessively high in relation to the average price in a generic category. For example, yachts, haute couture .Below that is the intermediate products, the price is perceived very high in relation to the average price in a generic category, which is more rational than inaccessible products. There two is the common thinks so-called the luxury. At the end of the pyramid is the accessible products, which means the price is high in relation to the average price in a generic category, likes Chanel No.5,champagnes.It is my professor’s opinion, but not all of the people agree with the
classification .However,I agree with it. The inaccessible products gives the brand value to the other two products and its environments. And the accessible products gets its brand value from its environments. They are complementary, are complementary and indispensable.
2.The analysis of Luxury in China’s marketing
2.1 theenvironment in China’s luxury
Politically, in 2006；the introduction of the consumption tax scheme,
increasing the excise tax on luxury items, so that the original 10% -20% of
the price of luxury goods which is higher than in overseas markets have
increased in price, a direct result of increasing demands of Mainland
consumers buying luxury goods when travel overseas. This policy will help
domestic brand sales training and market development.
Meanwhile, the Ministry of Commerce has taken to establish their own
typically brands, provides policy support and other strategies, to vigorously
implement the brand, which play a positive sense on cultivating China’s
independent luxury brand.
In economic terms, the global economic crisis have not much impact on the Chinese economy. The economy continues to grow, per capita GDP continued to increase, the development trend of economic is good. Plus, the increasing economic purchasing power of Chinese consumers, the development of tourism, the improvement of professional women costs and other positive factors conducive to the exploration and development of the luxury market. Social aspects, as the impact of China's economic openness and market globalization, the concept of people's consumption of luxury goods produced a huge shift, more with normal eyes to look at. 2.2 the situations of the China’s luxury marketing nowadays
China's luxury market is growing rapidly, in 2010 the total consumption of luxury goods market in mainland China has reached 10.7 billion U.S. dollars, accounting for a quarter of the global share. Ranked the world's second largest luxury goods consumer country. World Luxury Association predicted that "China will overtake Japan in 2012 to become the world's largest consumer of luxury goods." China's current luxury consumer groups has reached about 160 million people, increasing consumer demand for luxury goods. Chinese luxury consumer market has great potential, the world's top luxury brands are starting to seize the Chinese market. But on the other hand, the Chinese luxury goods market, compared with western luxury market development time is shorter, still in its infancy is not very mature, there are still problems in many ways.
China is a big manufacturing country and is also a counterfeiting marketing. That is a big problem in luxury. The group, whose average age is 25-45 years old with highly educated, high-income are the main force of China's luxury consumption . A 2007 conducted for the Chinese urban youth survey, over 60% of young people agree that "life is carpe diem" concept, and expressed willingness to buy luxury goods. Chinese luxury consumption younger has become a trend. Chinese luxury consumers have a low awareness of luxury goods, they are unlikely to explore the history and culture behind the brand. Most Chinese consumers only see the social function, appearing psychological comparisons. Most of them are blind
consumption, advocating suit.
Currently, almost all of China's luxury market is taking foreign brands, China's luxury consumer is actually Westernization, which is beacause we do not rule the roost in the world's top brands relevant. Luxury brands mainly from Europe, America, Japan and other developed countries. Even the "Made in China" foreign brands also make it worth decline, no matter the luxury brand . This is mainly from the public on the idea of deep-rooted Chinese civilians, as well as the counterfeiting in China. In fact, China is not the lack of local luxury products, China has a good growth genes of luxury brand. High-end mahogany furniture, as well as those in Chinese history associated with the Royal Wing tribute ended, for example, Brocade, Maotai, White tea etc. However, due to the lack of "going out" strategy vision and branding tools, making our local f luxury goods are not even love for their nationals and familiar with the foreigners. China's luxury market is an unopened market, with a huge development potential, should be sufficient to arouse our attention, positive developing local luxury brands, to promote China's luxury into the world. The environment is large and positive.
3.The strategies of international luxury enterprise in China
In order to attract Chinese consumers, many luxury brands before entering the Chinese market the product have carried out the appropriate changes, mostly in the brand's classic VW models and main replacement slower. Many brands in pursuit of high profits and high sales, lost the original essence of the brand. And these are not Chinese consumers want, their
ly want is to buy authentic Western products. actual
Many luxury brands in order to seize the market, put the line of sight into the lower end of the market, developing new products, producting cheaper products to satisfy consumers. Because foreign luxury goods cheaper than domestic prices, savvy Chinese consumers more to buy luxury goods abroad directly or through a network, such as purchase, resulting in a luxury
store in the country has become expensive furnishings.
Due to China's vast market, in terms of traditional sales channels, takes a more cautious attitude, approach to more multi-faceted retails when choosing stores, focus on retail stores with a high market share. In addition, due to the development of the two and third-tier cities, brand promotion not longer confined to large cities, began to develop other Chinese market and expand consumer groups. In addition, due to the younger consumer groups, the Internet has become a new channel for luxury sales. International luxury goods companies more inclined to establish their own brand sites, or in cooperation with e-commerce platform for communication and product information publicity.
3.4 customer relation
International luxury goods company in China to carry out the theme of marketing activities and provide support for social welfare programs, nonprofit organizations, to enhance the brand image in the eyes of Chinese consumers. Meanwhile the international luxury goods company should carry out a global marketing campaign in China.
Most luxury goods in limited production, to maintain its noble gesture of the case more attractive to consumers, although consumers do not know how much you are in the end of production. However, the luxury brand for its slow-moving merchandise normal phenomenon also means discounted sale of their business. In other countries, the luxury brand's user nor are all high-income earners or nobility, in Milan, Paris and other fashion cities, top brand discount sale regularly held events, but did not affect its top brand image. Therefore, the same holds regular top brands in the Chinese market sale will probably be a good way to tap more potential customers. In short, the international luxury goods company in China's development has been certain constraints, can not meet the desires of Chinese consumers, and no real grasp and explore to consumer demand and psychology, there are efforts but the effect is not obvious, speculation consumption psychological is very important, and can not be lost to the inherent nature of
luxury goods, which for itself, people familiar with China's local brands of consumer psychology is undoubtedly not a good opportunity for development.
4.The development and recommendations of Chinese luxury business 4.1 the problems existing in Chinese luxury business
China's foreign trade magazine has pointed out that although China is becoming the world's largest luxury goods market, but it has a lack of a true local luxury brand of embarrassment. China's businessmen often only focus on the short-term interests, lacking of luxury brands foster cultural conservation. They want to get the maximum return in the shortest possible time, and do not want to spend the time and money required into brand building. Specifically, the development of local brands existing following questions:
4.1.1 Lack of brand culture construction
There are enough good quality products, but the lack of famous Chinese luxury brand industry, which is fatally flawed. In a sense, there is no separate brand connotation is not true sense of the brand. Chanel, Hermes, Givenchy, etc. These luxury brands in the beginning of the establishment has its brand to convey the spirit, that is the genetic code of the brand, which is also the opinion of the founder. For centuries, they have insisted on the original spirit, after hundreds of years of change, operators change；the
genetic code of the brand has never changed. This is why people continue to pursue , brand culture always, on behalf of the brand's heritage and noble qualities, just as wine in general, the longer the year, the more mellow. 4.1.2 Lack of value innovative products and services
Many Chinese enterprises are facing the problem of short brand life cycle is, aging fast. Many old Chinese luxury brands, almost everyone knows, but worse is that they do not arouse the desire of buyers, and with the times and be gradually forgotten. For the Chinese liquor industry, they did not begin to introduce new products in the true sense, but merely confined to the history and culture of its strong propaganda.
4.1.3 Lack of professionals
Designers can be described as a soul of the brand, a good designer can often