Luxury brands are taking a ride at the Asian Dragons to overfly recession. In recent years, European designers have expanded their market by opening stores in Asia and have really seen a substantial growth in profit. London-based Euromonitor estimated early this year that spending on luxury goods in Asia will grow 3.5 percent to 54 billion dollars in 2010, compared to just 2.2 percent globally. And they are proving to be right.
Good sample of such a success is French house Louis Vuitton, which has seen great hype in Japan. According to the leading Japanese journal, Asahi, “Louis Vuitton products are owned by one in four women…in Japan.” The CEO of Louis Vuitton, Yves Carcelle, stated that the Japanese are still their number one customer globally in a recent interview for the Nippon publication. For two decades, Carcelle has been leading innovations and maintaining traditions at the 156-year-old French leather goods maker Louis Vuitton Malletier. And he's done it in no small part by taking a leaf out of Japan's cultural notebook, as himself unveils to Asahi.
“Apart from Japan, the Asia-Pac countries have seen positive growth and many luxury brands are now looking to the region as a means of gaining revenue and keeping afloat during these difficult times,” said Fleur Roberts, a global luxury goods manager with marketing research firm Euromonitor International. Richemont, whose brands include Cartier and watchmaker Vacheron-Constantin, reported in January that December quarter sales rose 2.0 percent to 1.6 billion euros (2.3 billion dollars), thanks largely to Asia. In the same vein, Richemont’s revenue from Asia grew 25 percent while key markets in the Americas, Japan and Europe contracted during the October-December period.
Analysts from research firm Boston Consulting Group are especially bullish on China and tip it to become the biggest consumer luxury goods in the next five to seven years. In South Korea, government statistics showed luxury goods sales at major department stores — Hyundai, Shinsegae and Lotte — increased 15.7 percent year-on-year in 2009. In an ever-changing market, luxury brands have survived by appealing to their clientele through strategic marketing. They do take great measures in researching a culture and market before investing in an area and that might be the secret to their survival. While the U.S., European, and Japanese economies have been slowing down, the Chinese economy is growing steady rate.
The Chinese economy has then become more robust within the last decade. China is considered the second largest market for luxury goods after Japan. According to a 2004 Goldman Sachs report China is the world’s third largest consumer of luxury goods, accounting for 12% of global sales. Roughly 345,000 Chinese are identified at Capgemini as millionaires who are enthusiastic consumers of luxury goods. These numbers show how the emerging Chinese market has impacted the growth of classic European brands. Companies such as Chanel, Prada, Louis Vuitton, Gucci, and Burberry are all opening more stores in the area based on the expanding market. Luxury brands are realizing how profitable it is to sell their goods in the Chinese market. Bernard Fornas, the President and CEO of Cartier, knew the growing importance of expanding in Asia 10 years ago. Now Cartier is the number one luxury brand in China.
Consumers are highly brand conscious and the fact that one can afford these products is seen as a status symbol. Luxury brands like LV, Christian Dior, are therefore often sought after when purchasing apparel and cosmetics. For many segments, particularly younger consumers, foreign brands that are well known are still regarded as superior and are seen as a status symbol. Brands that are made in US and Europe are more highly valued than those from Australia, or other Asian countries like Singapore, Taiwan. Due to the high prices, there are also a lot of high end counterfeit clothing and shoe brands in China. Data collected by ChinatownConnection.com show that although Chinese consumers are price sensitive, a recent survey shows that consumers are increasingly concerned about product quality and customer service, particularly with respect to apparel.