Sunday, May 26, 2013


Why Asia?

Learning from Asian businesses
WHILE Asian business leaders still flock to swanky business schools in the US and Europe, one leadership guru from a top-tier management school feels that Western companies can learn from the practices of Asian businesses and their leaders.
The business leader of the new age will therefore need to adopt a new model of management, which is influenced by Asian characteristics. Value creation and the growing importance of cultural intelligence are the new trends.
"For starters, leaders of companies in the West could learn from their Asian counterparts to be less reliant on ego and to place more emphasis on practice," said Nigel Nicholson, professor of organisational behaviour at the London Business School in the UK.
"Western companies seem too preoccupied with the identity of the leader to determine the capacity of the business. I do not think that is right as a core capability such as excellence in execution is important," he told The Business Times.

The luxury industry has taken note that there are distinct characteristics of China’s millionaires which affect the ways in which companies choose to market to them. According to the report, the main driver for China’s wealth accumulation in 2012 was economic growth rather than a rebound in equity markets that helped developed nations, meaning China’s rich tend to tilt toward hard assets when it comes to investment. 

Chinese millionaires are also younger on average than those from other countries. A 2012 Hurun report found that Chinese millionaires’ main areas of consumption include travel, education, and real estate.


Pivate-equity firms are sitting on $120 billion in funds to be invested in Asia, the most cash they have ever had on hand. But the region's small markets, tough governments and fierce competition for deals could make it hard for firms to invest all that money profitably, industry watchers say.

Drawn by the promise of strong economic growth, investors have been pouring money into Asia for years, even though returns have lagged behind those in North America. Private-equity firms operating in Asia returned 6.5% in the year ended in March, compared with 12.7% in North America, according to data provider Preqin. In the five years ended in March, Asia funds had internal rates of return—a private-equity benchmark for the profitability of a deal—of just 3.9%, compared with 6.8% in North America.

"You do hear concerns that with all the money being raised and deal levels not at the levels you'd like to see, where is this money going to go?" said Michael Buxton, Ernst & Young Asia-Pacific private-equity leader.

The large economies where big deals are available—Japan and South Korea—aren't particularly friendly toward private equity, and when there are deals, competition is rife. Targets in high-growth markets like China or Southeast Asia tend to be small. Many of the region's initial-public-offering markets remain quiet or, in China's case, completely shut, making exits on past investments tough.

The $120 billion of unspent capital that Asia-focused private-equity firms hold is 54% more than they were sitting on five years ago, when the financial crisis started, Preqin data show. And private-equity deal activity has slowed since before the crisis: This year, just $17.3 billion in private-equity deals have been done in the Asian-Pacific region, compared with $42.5 billion in all of 2007, according to data provider Dealogic. Private-equity funds focused on Europe and the U.S., meanwhile, are sitting on less unspent money than they were five years ago.

Money has piled up thanks to successful fundraising by firms like KKR KKR -1.00% & Co., which raised a $6 billion Asia-focused fund this year, the largest private-equity fund ever for the region. CVC Capital Partners, a European private-equity firm with a global footprint, also started raising money for a new Asia fund in recent months, targeting $3 billion, and TPG Capital has brought in at least $2.5 billion for its sixth Asia fund, with the aim of raising another $1 billion by the end of the year, people familiar with the matter have said.

KKR co-founder Henry Kravis recently expressed confidence that the firm can deploy its capital in Asia, given the region's growth potential. TPG and CVC declined to comment.

Even more money may be coming. Preqin estimates 259 firms are actively raising a collective $77 billion more to invest in the region. Combine that with the existing dry powder, and private-equity firms could theoretically end up with enough capital—at around $197 billion—to buy nearly the entire Philippine stock market.

It is hard to see the pool of private-equity money in Asia shrinking anytime soon.

The hope among private-equity firms is that big markets such as Japan and South Korea, which haven't been friendly to these investors, will become more open and make it easier to invest the cash haul. There have been recent moves in that direction, but it is unclear how sustainable they are.

Last year, KKR lost out to a government fund when it bid for Japanese electronics maker Renesas Electronics Corp. RNECY -1.18% The U.S. firm also hit a roadblock in Taiwan in 2011 when a $1.6 billion offer for electronics components maker Yageo Corp. 2327.TW 0.00% was rejected by regulators.

Asia's biggest economy, China, has limited foreigners from investing in sensitive industries like defense-related companies or education and the Internet. 

Private-equity firms have long managed to buy only minority stakes in companies because many first-generation entrepreneurs haven't wanted to sell. 

Now private-equity firms are facing a potentially slowing economy and one where exits are few, after China put a moratorium on domestic initial public offerings last year following a succession of poorly performing IPOs.

"The IPO markets [in China], even if they are open and functioning well, they can maybe handle 300 plus-or-minus PE-backed IPOs a year," said David Brown, Greater China private-equity leader at PricewaterhouseCoopers. "There are thousands of companies being held by private equity."

Southeast Asia, meanwhile, is home to many small companies, and even when the firms are big, stakes available can be small. KKR said it closed its first deal out of the new Asia jumbo fund this week, investing $200 million for a minority stake in a Malaysian oil and gas transportation-services firm.

To be sure, there are some signs Asia's landscape may be changing as governments move to restructure domestic industries and push for more openness to foreign investors. Asia's biggest private-equity transaction this year, for instance, was done in South Korea, where Seoul-based private-equity firm MBK Partners bought ING Groep ING +0.16% NV's Korean life-insurance operations in a $1.6 billion deal. There could be more to come as regulators have said they will introduce a new plan to ease rules for private equity in October.

And after years of being perceived as having an inflexible corporate culture, Japan, too, is trying to improve its image. Prime Minister Shinzo Abe has been pushing policies to help companies boost profitability since he took office. KKR just landed its biggest deal in Japan when it agreed to buy Panasonic Corp.'s6752.TO +2.80% health-care unit for $1.7 billion.

It has taken awhile: Mr. Kravis, the American firm's co-founder, has been traveling to the country since 1978, but had only made one investment in Japan prior to the Panasonic deal.

Ropes & Gray partner Scott Jalowayski said, "The mindset in Japan is changing." 

 - 2013 October 13   Wall St. Journal

Friday, May 24, 2013

Richard Li - Global Deal Maker

Richard was awarded the Queens Diamond Jubilee Medal

Patron of the National Arts Centre of Canada

Conductor and Soloist Pinchas Zuckerman and the National Arts Centre Orchestra in China:
Hong Kong - Hong Kong Cultural Centre, October 6
Guangzhou - Xinghai Concert Hall, October 8
Fuling - Fuling Grand Theatre, October 10
Chongqing - Chongqing Grand Theatre, October 11
Tianjin - Tianjin Grand Theatre, October 13
Beijing - Tsinghua University, October 16
Beijing - National Centre for the Perfomring Arts, October 17
Shanghai - Shanghai Concert Hall, October 19
Richard has a long past of supporting musicians including bringing Sarah Chang to Hong Kong to perform with the Asia Youth Orchestra.

My Boss*

Consumer worries over Li family's telecoms grip in Hong Kong after CSL deal

Li Ka-shing's family will tighten its grip on the city's HK$63 billion telecommunications market with a takeover in mobile phone services announced by Richard Li Tzar-kai that has raised consumer concerns about fair competition, even though industry players have insisted the deal could help cap costs for users.
23 Dec 2013 - 7:26am

PCCW-Telstra unit in data deal with US govt
Phone, Internet data kept for FBI, Justice Dept under '01 pact

[SYDNEY] PCCW Ltd and Telstra Corp, partners in an undersea cabling venture, stored phone and Internet data for the FBI and US Justice Department under terms of a 2001 agreement with the agencies, Telstra said.
The pact, signed by Richard Li's PCCW after it formed its joint venture Reach with Telstra, requires the Australian company to store billing records for two years, according to a copy of the agreement posted online by news website Crikey, which first reported the deal on Saturday. The venture also guaranteed it would be able to provide US authorities with copies of stored data, call logs, subscriber information, and billing data, according to the document.
The revelation comes amid increased scrutiny of government data gathering as prosecutors in the US seek fugitive security contractor Edward Snowden, who exposed classified programmes and said the US had been hacking into computers in Hong Kong and mainland China since 2009.
PCCW transferred its 50 per cent interest in Reach to its listed subsidiary HKT Trust and HKT Ltd in 2011, according to HKT's 2012 annual report.


Thursday, May 23, 2013

The New Asian Rich - Young & Global


Asia's millionaires set to overtake North America's

They will outpace the Americans in number and wealth

THIS year, the number of millionaires in Asia is expected to surpass that in North America. By next year, the wealth that these Asian millionaires hold will also overtake that of their North American counterparts, predicted a report by Capgemini Financial Services and RBC Wealth Management.
The two regions are already about neck and neck in the number of such high net worth individuals (HNWIs): Asia-Pacific has 4.32 million of them and North America 4.33 million. Together, they account for almost two thirds of the 13.7 million HNWIs in the world.

In terms of investable wealth, Asians hold US$14.2 trillion, and North Americans US$14.9 trillion. Together, they make up just over half of the world's US$52.6 trillion of HNWI wealth.

But Asia is growing at a faster pace. That is one of the key takeaways from the 2014 World Wealth Report, said account executive for Capgemini Asia Pacific

Different motivations: Businesses must develop a customer strategy that is tailored to the needs of the Asian customer based on a detailed understanding of Asian consumer behaviour and local market conditions. 


Rise of the affluent Asian shopper
Brands must cater to him or her via creative strategies

PwC's recent study on the global retail apparel industry makes it clear that there are three main areas where Asian customers differ significantly from shoppers in the US and Europe.

WITH the continued growth of Asia's developing economies, an unprecedented proportion of the region's population is moving up the socio-economic ladder. Newly affluent consumers are not only spending more, they are also spending in different ways than their counterparts in more developed economies.
Findings from a recent study on the global retail apparel industry, titled PwC's Experience Radar 2013, show how local culture and practices in developing Asia drive different types of purchase decisions for regional consumers, and reveal features in the retail shopping experience that would inspire those consumers to pay a premium.
Beyond retail, cultural insights and learnings gleaned from the Experience Radar can also inform other industries seeking to push their brands into new markets.
From the study, there are three main areas where Asian customers differ significantly from shoppers in the US and Europe:
1. Outsized importance of brand, among the most loyal brand shoppers in the world.
Two-thirds of shoppers in developing Asia agree that access to leading branded goods is the heart and soul of their ideal apparel shopping experience.
These newly affluent consumers place so much value on it that they are four times more willing to pay for access to branded apparel than shoppers in developed nations.
Status, style and quality are the leading determinants of purchase decisions. Shoppers in developing Asia are more willing than shoppers in more developed nations to splurge on mainstream and luxury apparel brands. Brands telegraph the shopper's status, which influences how he or she is perceived on the social ladder. And, among the upwardly mobile, branded apparel is seen as a way of tapping into the latest global styles.
In developing Asia, quality trumps price as a reason to buy. Apparel quality is not a given in Asia. In 2012 alone, developing Asia produced US$24 billion worth of knock-off apparel.
In developed countries with generally higher merchandise quality and stiffer competition, shoppers are far more concerned with price. One-third of shoppers in developing Asia cite quality as a reason to buy versus less than 1-in-5 who shop based on price. Among developed country shoppers, more than one-third emphasise price while just one-quarter base their purchase decisions on quality.
What this means for businesses
  • Align price with brand equity: For luxury brands, premium pricing reflects exclusivity and quality, which attracts affluent developing Asia shoppers looking to showcase their status.
  • Guarantee authenticity: Help assure consumers of the authenticity of your products by providing product information and demonstrations both in-store and online, and by posting online authentication guides to help consumers identify counterfeits.
2. Other people's opinions matter - a lot more.
Family and friends are the foundation of society in developing Asia. Relationships influence all aspects of culture, including shopping. To inform their decision-making, people create their own trust structures that combine their network of friends and family with influencers such as celebrities and blogs. People value the opinion of those they trust to drive their position on the social ladder.
In developing Asia, peer feedback and celebrity associations with brands are exceptionally influential in driving purchasing decisions. Consumers are much more likely to tap into the opinions of those they trust to figure out what brands to wear, which fashion bloggers to follow, and where to shop. Shoppers in developing Asia are twice as likely as shoppers in developed nations to weigh peer feedback before making a purchase (47 per cent versus 24 per cent respectively).
Shopping with (and for) partners and family is a much more common, everyday occurrence. Nearly two-thirds shop with their partner or family, versus 41 per cent in developed countries. And twice as many (60 per cent) shop for immediate family, versus 33 per cent in developed countries.
Social media plays a significant role in influencing purchasing decisions with shoppers in developing Asia who are also very likely to share their own experiences. Nine in ten shoppers report they are influenced to make purchase decisions by information found on social media (versus approximately 6 in 10 shoppers in developed countries).
Some 87 per cent report sharing their retail experiences via social media channels (double the percentage in developed countries).
Shoppers in developing Asia are willing to pay for more access to peer and/or celebrity opinions about apparel brands. They are willing to pay up to a 47 per cent premium to access platforms that provide peer or celebrity opinions about apparel. By comparison, shoppers in developed countries would pay a 17 per cent premium. In India, where Bollywood produces nearly double the number of films than Hollywood, 42 per cent say they are influenced by the styles and brands of celebrity cultures. Overall, developing Asian shoppers are twice as likely as developed country shoppers to say they are influenced by celebrity cultures.
What this means for businesses
  • Activate your brand advocates: Using customer analytics and store knowledge, identify your key brand advocates and cultivate relationships with them through incentives such as discounts and invitations to exclusive events.
  • Tap into celebrity culture: In countries like India and China, celebrity culture is a huge driver of lifestyle. Leveraging film stars, sports icons and other celebrities can be a powerful tool in building brand awareness.
  • Educate employees: Shoppers in developing Asia are more likely to share a bad experience with friends and family. Educate and empower employees on how to turn issues into opportunities to deepen the customer relationship.
  • Create engaging social media platforms: Give customers a platform on which to share and amplify good experiences and raise issues that may need to be resolved.
3. Digital channels are a much more integrated part of the shopping experience.
Seeking better access to branded merchandise and better shopping experiences, most developing Asia shoppers are shopping online - surpassing even their developed country counterparts. Nine out of ten shoppers in developing Asia browse or buy online (versus fewer than 8 in 10 for developed countries). Online experiences can provide the richer, more robust and more personalised shopping experiences that customers in developing Asia crave.
Shoppers are using their smartphones to check prices and reviews in-store, spending an average of 15 minutes online per store visit. One in three customers want to access enhanced product information via in-store tablets.
What this means for businesses
  • Harness mobile: Today's shoppers are digitally savvy and crave additive features that use technology. Apps that provide regular style and merchandise tips or augment the in-store experience can attract savvy high-spenders and convince shoppers to stay longer.
  • Invest in omni-channel: Many shoppers in developing Asia browse online but buy in-store. Providing customers a seamless experience that allows them to access product information, pricing and their own account information across channels is critical to building a strong retail brand.
So, newly affluent consumers are not only spending more, they are also spending in different ways than their counterparts in more developed economies. This requires businesses to develop a customer strategy that is tailored to the needs of the Asian customer based on a detailed understanding of Asian consumer behaviour and local market conditions.
The writer is director, customer & growth practice, PwC Southeast Asia Consulting

  Source:  UBS Wealth X Report
There were 2.7 million high net worth individuals (HNWI) in China, and the burgeoning group is forecasted to grow to 2.8 million, equivalent to a 140% increase, by 2015

GroupM Knowledge - Hurun Wealth Report 2012
Rich and Super-Rich Broken Down by Region

No. of Millionaires*
Increase of Indiv.

No. of Super Rich**
Increase of Indiv.
 Beijing 179,000 1 9,000
10,500 1 500
 Guangdong 167,000 2 10,000
9,500 2 500
    Guangzhou    55,000   1,500
4,100   100
    Shenzhen 52,000   2,700
3,400   100
    Dongguan 18,000   3,400
900   60
 Shanghai 140,000 3 8,000
8,200 3 400
 Zhejiang 133,000 4 7,000
7,800 4 350
    Hangzhou 53,000   1,500
2,900   50
    Wenzhou 22,500   500
2,400   70
    Ningbo 20,000   5,300
1,200   250
 Jiangsu 73,000 5 5,000
4,800 5 200
    Nanjing 24,200   200
1,900   100
    Suzhou 20,000   3,100
1,100   110
 Fujian 38,600 6 2,600
2,400 6 200
    Xiamen 12,500   300
700   40
Fuzhou 13,000   2,000
650   90
Shandong 35,000 7 2,000
2,000 8 100
  Qingdao 12,500   500
680   60
  Yantai 2,500   800
150   40
Liaoning 30,800 8 1,800
2,050 7 130
  Dalian 12,500   600
850   100
  Shenyang 8,800   460
650   90
 Sichuan 25,500 9 1,500
1,800 9 100
 Chengdu 15,000   500
850   50
Henan 17,300 10 800
1,200 13 50
Tianjin 17,100 11 1,100
1,250 12 70
Hebei 16,400 12 900
1,300 11 100
Shanxi 15,000 13 1,000
1,350 10 100
Hunan 14,600 14 1,100
830 17 70
Hubei 14,400 15 900
1,080 14 80
  Wuhan 7,500   2,790
450   100
Shaanxi 14,000 16 1,000
830 17 70
    Xi’an 7,000   2,810
300   40
Inner Mongolia 13,500 17 1,000
850 16 60
 Erdos 4,000    
  Hohhot 3,200    
Chongqing 12,500 18 1,000
800 20 70
Heilongjiang 11,800 19 800
780 21 50
  Harbin 6,500   -240
450   40
Jiangxi 9,600 20 600
830 17 70
Anhui 9,200 21 700
900 15 50
Jilin 8,000 22 500
520 23 40
Yunnan 6,000 23 500
540 22 40
Guangxi 5,400 24 400
400 24 30
Hainan 4,200 25 200
170 27 10
Guizhou 3,200 26 200
280 25 20
Xinjiang 3,200 26 200
260 26 20
Ningxia 870 28 70
95 28 5
Gansu 750 29 50
85 29 5
Qinghai 650 30 50
55 30 5
Tibet 430 31 30
45 31 5
Total 1,020,000   60,000
63,500   3,500
*Not including Hong Kong, Taiwan and Macau

The number of HNWIs in Hong Kong increased by just over 26% in 2012 and was equal to nearly 233,220. The combined value of their wealth was worth around USD 1.1 billion, with almost 40% of their wealth held abroad. In 2012, the real estate asset class captured a 35.6% share of Hong Kong’s total HNWI assets, which made it the dominant asset class. It was followed by business interests, equities and cash. In the same year, the number of UHNWIs was 3,308, with each holding around USD 104 million on average. 

The number of HNWIs in Hong Kong will likely increase by 29% between 2013 and 2017, climbing to approximately 339,700 by the end of the forecast period. The HNWIs’ wealth is poised to grow by 34% through 2017 and amount to USD 1.7 billion by 2017.   Source

Below the super-rich, Forbes counts 10.3m Chinese as wealthy
Forget the super-rich; how did the merely wealthy mainlanders – with liquid assets of US$100,000 to US$1m – fare last year, magazine asks
Saturday, 30 March, 2013 [UPDATED: 06:11]
Celine Sun in
  • forbes_graphic.jpg
Personal wealth
Reports about China's uber-rich have become common, with Forbesmagazine and the Hurun Report regularly compiling lists of the wealthiest and their relative fortunes.
In September, for example, Hurun published its list of the 1,000 richest people in China, who had average wealth of US$860 million. The list was topped by beverage magnate Zong Qinghou, worth an estimated US$12.6 billion.
Three weeks later, Forbes issued its annual list of the 100 richest mainlanders, again topped by Zong, whose fortune it estimated at US$10 billion.
Now Forbes has turned its focus on the lower rungs of the wealth ladder, calculating that the number of people with liquid assets of between US$100,000 and US$1 million reached 10.26 million last year, and is expected to top 12 million this year.
More than a third of them were born in the 1970s and the top three industries they were involved in are finance, trade and manufacturing, its study said.
Three-quarters of respondents surveyed said they had no plan to emigrate, but the same percentage expressed a wish to send their children to study overseas. The United States was their first option.
Forbes, which surveyed 1,196 people with the required disposable assets and extrapolated the total based on statistical models, said private investable capital on the mainland totalled 83.1 trillion yuan (HK$102.7 trillion) by the end of last year, up 13.7 per cent from 2011.
The assets of the mass affluent came mainly from salaries, bonuses and investment income; the most popular investment channels for them were wealth management products, stocks and property.
Around 55 per cent were male, more than half were university graduates, and they had average disposable assets of 1.33 million yuan.
According to Forbes, around 54 per cent of the respondents had annual household incomes of 110,000 yuan to 500,000 yuan, 27 per cent had incomes of 510,000 yuan to 1 million yuan, and 14 per cent earned 1 million yuan to 5 million yuan.
Two-thirds said their annual household spending was below 300,000 yuan, and their three major expenditure items were daily expenses, their children's school fees and investments.
Most had increased spending on travel, a major leisure activity for them. Other popular pastimes included exercising, driving cars and collecting antiques, luxury goods and modern art.
The survey found 40 per cent owned at least three properties.
For many of the respondents, achieving financial freedom was their ultimate goal. Nearly six out of 10 said they had yet to realise this, and more than half said it would take 6 million yuan to 30 million yuan to get there.


Quote by Ken Kwan, author of Crazy Rich Asians

  • U.S. retailers pushed to relax rules for the Chinese to visit to facilitate visas so that they could come to spend money at retailers.
  • The average Chinese tourist spends $6,000 while in the U.S. according to the Commerce Department.  -- 2012   BUSINESS WEEK BLOOMBERG 
  • Wealthy Chinese spent ~$7.2 billion during their spring holidays abroad this year, a study by the World Luxury Association was reported by the Shanghai Daily.  
    Chinese tourists accounted for 62 percent of Europe's luxury sales, a 12 percent year-on-year rise.
    Hong Kong, Macau, Taiwan and North America were the favourite destinations for Chinese travellers.  
    The country spent $12.6 billion last year on luxury products, excluding private jets, yachts and cars, representing 28 percent of the global figure.   --  2012 February 2 SIFI NEWS
  • That's our good friend Yolanda with Karl Lagerfield.   She graced the cover of Tatler in April.   >> MORE 
Harrods, like everyone, is now setting out its stall for the Chinese: it has hired 60 Mandarin-speaking assistants.  In the first quarter of 2011, its sales to this community were up year on year by 40%: it seems they’re as happy as the rest of the world to buy global bling wrapped in the signifiers of tourist-board Old England.   >>  MORE

 New & Young Chinese Money 
Keen for the New Rich Chinese



Asians account for ~ 50% of LVMH's sales
'At this point in time we are missing demand from the Asian part of the world, which is obviously a key driver," Mr Guiony said, adding that consumers from the region account for about 50 per cent of Vuitton sales. LVMH raised Vuitton prices by about 12 per cent in Japan and by 3 per cent to 4.5 per cent in other parts of the world in the quarter, the CFO said.   -2013 April 18   BUSINESS TIMES

Monotony of being: LVMH is including more leather and fewer logos in Vuitton's product mix as it seeks to make its biggest brand more desirable amid concern that consumers are tiring of its monogrammed laminated canvas bags. - PHOTO: LOUIS VUITTON

In China’s tier one and two cities it seems that there is a luxury mall on every street. In Shanghai, for example, the growth and expansion seems endless; on the 20 minute drive from my home to the office I pass three new mall developments – each of them plastered with huge billboards advertising the new luxury stores that are soon to open.
Nevertheless, according to market reports, the growth in demand for luxury products is actually slowing. So is the market going to become the number one in the world, overtaking Japan as people expect, or are we about to see a bumpy landing?

According to the consulting company Bain, the market for luxury goods in China grew by 233 per cent between 2007 and last year. This astonishing rate of growth couldn’t last forever, but apart from this natural slowdown, let’s take a look at some of the other factors that may be at work.
Without a doubt the crackdown by the new leaders on gift-giving is playing a part. The ban on government agencies buying luxury goods came into effect in October of last year and resulted in luxury sales slowing in the December quarter.
Traditionally, officials often bought luxury goods, such as watches and bags, as ‘gifts’ for other officials or business contacts to help smooth deals and improve relationships. Of course the real effect of this is impossible to gauge, but one client confessed that the policy was having a big effect on sales in her boutiques across China.
However, it is estimated that less than 25 per cent of luxury spending last year was spent on ‘gifts’, so other factors must also be considered.
The average age of luxury consumers in China is much younger than that in Europe or America. While in London, the luxury consumer tends to be at least 40 years old and wealthy, in China consumers tend to be younger and willing to spend much more of their disposable income on luxury goods.
This does offer grounds to suggest that growth ought to be robust for many years (if a brand can catch someone young, they can keep them for life), but the youthful market in China also holds some potential problems.
First, the Chinese consumer is rapidly maturing – shoppers in Beijing and Shanghai are now truly global consumers and are therefore shifting away from ‘logo’ and high profile signs of luxury spending.
Instead, more and more, they are embracing uniqueness and understatement in luxury items.
Second, these young urban consumers are increasingly experienced in luxury shopping in other markets. Therefore brands are being forced to offer the same consumer experience to Chinese consumers as they do elsewhere.
Luxury brands need to embrace this new consumer or risk losing more and more sales to shopping tourism.
A final factor behind some Western brands reporting a growth slowdown is the increased competition in the Chinese market. As China’s First Lady Peng Liyuan is proving, there are some very hip local luxury brands, often more subtle and individual experiences than their Western rivals.
Additionally, bridge luxury brands -- brands that sit between ‘luxury’ and ‘the high street’ in China are expanding more quickly aided in part by an emerging middle class and a growing online fashion community.
So there are definitely growth opportunities, but brands are going to have to be a little savvier to find them.
For consumers in China though, the loosening of the luxury brand’s traditional grip on the market is exciting, with more choice than ever before.