China's rich have insatiable appetite for haute couture

China's rich have insatiable appetite for haute couture
By Susan Fenton Reuters - Thursday, May 29 03:02 am

HONG KONG (Reuters) - European and American fashion designers feeling the pinch from the credit crisis can look to the growing ranks of China's nouveau riche to boost sales.

China's millionaires' club is expanding rapidly and many new members are women who don't even blink when asked to pay a cool $10,000 (5,000 pounds) for a cocktail dress from a top international designer.

"The Chinese are the newcomers to the global market," said Sebastian Suhl, Asia-Pacific chief executive of Italian fashion house Prada, which has nine stores in China.

"They're very hungry to learn about fashion. Fashion represents obviously status, but luxury is also a kind of bridge to the modern world for them."

As the Chinese economy surged more than 10 percent annually over the past five years, the country boasted 345,000 U.S. dollar millionaires by the end of 2006, a third of whom were women, according to a report by Merrill Lynch and consultancy Capgemini.

Some 5,000 mainland Chinese had assets exceeding $30 million, accounting for a third of Asia-Pacific's super-rich.

Even affluent Chinese women, without millions in the bank, are willing to spend their savings on designer fashions, seen as the ultimate status symbol in a communist country that is increasingly becoming preoccupied with the trappings of wealth.

Elegantly dressed Chinese manager Zhang Ning, 30, has never been to France but she likes to wear Hermes which she says is the epitome of style.

"I like its simplicity, it makes me feel elegant," said Zhang, who works as a manager at an electric power company in the southern Chinese city of Guangzhou.

"France for me is elegance: good fashion and wines."

While luxury goods makers such as Louis Vuitton have benefited from booming demand from Chinese keen to show off their newfound wealth by wearing clothes and accessories emblazoned with prestigious logos, Western couture houses such Hermes are now tapping into the more discreet tastes of the super-rich.

"The mainland Chinese market is still very accessories oriented but we believe that will change," said Alex Bolen, chief executive of New York-based couture house Oscar de la Renta, whose sleek cocktail dresses retail for up to $10,000, while its evening gowns approach double that.

"There's definitely a market for the cocktail dress. But what has surprised us, pleasantly, is how rapidly the customer has also adopted our daywear."

ASPIRATIONAL MARKET

Leading the charge is upmarket Hong Kong department store Lane Crawford which is bringing designers to China who are seen as being on the cutting edge in the West but are not well-known in China.

The opening of Lane Crawford's first store in Beijing last October has expanded the China presence of British designers such as Alexander McQueen and Stella McCartney and heralded the arrival of more niche designers including Dries Van Noten, Hussein Chalayan and Rick Owens.

Buyers from Lane Crawford now take prized front-row seats at fashion shows in Paris and Milan, alongside buyers from high-end U.S. retailers Saks and Nieman Marcus.

Meanwhile, Chinese fashion editors, headed by Vogue China, have become an influential presence on the European fashion scene.

China's ongoing transition to a more market-oriented economy after decades of strict communist rule is producing a constant stream of newly rich.

Their purchasing power and the growing sophistication of a more established wealthy clientele is creating a very diverse market for fashion, says Angelica Cheung, editor of Vogue China. The magazine was launched in 2005 and it has 320,000 readers.

"It's very different from the West, there are a lot of entrepreneurial opportunities and there are wealthy people emerging all the time," said Cheung.

"A young woman who might now be on a monthly salary of 5,000 yuan (362 pounds) could next year be running her own business. So it's a very aspirational market. Her first luxury product might be a Louis Vuitton bag but within a few years she might move on to something more niche such as Marni."

Chanel is the most preferred high-end fashion brand for affluent Chinese followed by Giorgio Armani, according to a report by MasterCard.

Oscar de la Renta says China is central to a strategy for Asia which it hopes will account for 20 percent of its sales within five years, up from 5 percent at present, helped by its burgeoning accessories' business.

Luxury brands can easily sell their perfume and cosmetics in local department stores. But when it comes to ready-to-wear fashion, they are all competing for space and customers in a handful of luxury malls such as Plaza 66 in Shanghai and Lane Crawford in Beijing where rents are sky high.

"They're overpaying (on rent) but they're looking at China as an investment," said Marcel Braun, Hong Kong-based executive vice-president of Swiss company DKSH, which advises luxury firms on market expansion.

"Fifteen years ago brands came and left. Now they can't do that anymore, China's too important."

Rampant copying of accessories brands remains a problem for luxury goods firms in China, but it is much less evident among high-end apparel.

Yet nevertheless high-quality copies of designer handbags can be purchased across Beijing and Shanghai for just a pittance of the retail price of the originals.

FINDING THE RIGHT MODEL

China's luxury market is still in its infancy and luxury retailers are experimenting to find the right model and get the sales strategy right, analysts say.

Lane Crawford has pieces of modern art on display in its spacious Beijing store, aiming to offer a new concept in shopping. It sells more than 600 high-end fashion brands, but visitors to the store say shoppers are often scarce.

Lane Crawford says its Beijing store is the first stage in a long-term plan for China and other stores will be rolled out in the future.

Retail analysts say that having a flagship store rather than being among dozens of brands carried in a high-class department store is the best way to achieve brand recognition and exclusivity in China.

However, it is difficult and expensive to find good sites for boutiques in China due to exorbitant rentals in high-end areas.

Reaching out beyond Beijing and Shanghai is the next step. The southern boom city of Shenzhen replaced Chengdu in 2007 as the city with the highest average spending on luxury goods, according to Credit Suisse, while the size of the luxury markets in Shenzhen and Wuhan doubled.

Braun says fast-growing northeastern cities such as Dalian offer better opportunities for expansion than southern cities.

Zhang Ning from Guangzhou heads to Hong Kong to shop at Hermes because there is no sales tax and luxury items are 30 percent cheaper than on the mainland.

A long-established market for luxury goods, Hong Kong also offers a much wider choice of designers.

Neighbouring Macau, a former Portuguese enclave, is also becoming a shopping hub for affluent mainland Chinese following the arrival of U.S. casino operators in the past few years.

Prada's edgier offshoot Miu Miu earlier this year staged its first fashion show in Asia in Macau, flying in the Crazy Horse cabaret revue from Paris to perform in front of local glitterati at the ritzy Wynn Macau casino resort, which houses Prada and Chanel boutiques in its ground-floor lobby.

"I believe Macau will be comparable to Hong Kong in terms of sales in the next few years," said Prada's Suhl.

Miu Miu, which sells at Lane Crawford in Beijing, plans to open its first independent mainland China store in Shenzhen this year. Meanwhile, Hermes is preparing for the opening of a 500-square-metre store in Beijing before the Olympic Games in August.

China sales will help offset a long-term decline in business in Japan, aggravated by its rapidly aging population, it says.

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Dior pulls Stone ads from China

By Geoff Dyer in Beijing

Published: May 28 2008 18:46 | Last updated: May 29 2008 17:15

Christian Dior on Thursday pulled advertisements featuring Sharon Stone from stores across China after the actress suggested the Sichuan earthquake might have been retribution for China’s policies in Tibet.

LVMH, the world’s largest luxury-goods maker, urged Ms Stone to clarify remarks suggesting the earthquake in Sichuan province two weeks ago, which has killed at least 68,109 people, had been ”karma”.

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French tour operators say Chinese boycott 'catastrophic'
AFP - 50 minutes ago

PARIS (AFP) - French tour operators fear a "catastrophic" plunge in business after an order was apparently given to Chinese travel agents to stop selling trips to the country.

France is the most popular European holiday destination for Chinese tourists and some 700,000 flocked to the country last year, with Paris, the Cote d'Azur and the Loire chateau region the most popular destinations.

But many cancelled their trips after demonstrators disrupted the Olympic flame's passage through Paris in April, and travel agents in Beijing said they had now been advised to remove France from their destinations from this week.

"It is a catastrophic year for Chinese tourism in France," Philippe Yao, director of the China Comfort Travel agency in France, told AFP on Thursday.

He said his agency had already had several cancellations following the pro-Tibet demonstrations in Paris, and warned of "serious economic consequences" for the sector.

Among those who cancelled was a group of 35 Chinese couples travelling to celebrate their weddings in a French chateau.

"The advice to discourage Chinese tourists from visiting France hasn't been officially confirmed, but it is being applied now by the travel agencies," said Pierre Shi, director of the China Travel Service agency.

Anti-French actions broke out across China after the chaotic Paris leg of the torch relay ahead of August's Olympic Games in Beijing.

Hundreds of people protested outside branches of the French supermarket chain Carrefour, prompting French President Nicolas Sarkozy to send envoys to Beijing in an effort to defuse tensions.

French authorities are trying to confirm that "the Beijing tourism administration apparently issued a recommendation" to travel agents to stop selling trips to France, a diplomatic source told AFP on Thursday.

"Chinese tourists who have already received their visas and paid for their trips won't cancel. The flow of visitors will likely drop in the months to come," said Paul Roll, director of the Paris Tourism Office.

Maison de la France, the French tourism promotion agency, said its office in Beijing was "trying, along with the French ambassador in China, to clarify the situation."