J-10
06-14-2004, 01:00 PM
By Doreen Hemlock
Business Writer
Posted June 14 2004
SHANGHAI, China -- Bulgari. Prada. Lancome. Bentley. Cadillac.
In a country where workers just 25 years ago donned shapeless blue Mao suits and were lucky to pedal bicycles, these brands may seem out of place.
But a generation of reform and blistering economic growth has turned communist-led China -- the world's most populated nation -- into the newest mecca for luxury goods.
Visit the gleaming Plaza 66 in this booming, skyscraper-filled city and see an upscale five-story mall so popular there's a waiting list for companies to get in, with Gucci among them.
Near a sunlit atrium where couples in designer suits sip coffee and tea, shops bustle with employees polishing displays and lavishing attention on customers, often Chinese entrepreneurs with their families or executives of multinational firms.
At the newly opened Italian leather goods boutique Tod's, stocked with lemon-yellow handbags, manager Sabine Brunner-Franzosi sums up mainland China's allure.
"It's the market where we see the biggest potential in the world," said Tod's South Asia retail manager. In contrast, growth in the luxury goods market remains sluggish in Europe and only moderate in the United States, though both from bigger baselines, she said.
210,000 millionaires
Open any newspaper or magazine in China, and read about the upscale: fashion designer Giorgio Armani in Shanghai to open a flagship store, golf legend Greg Norman visiting and fanning the golf craze, or carmaker Volkswagen launching its Phaeton priced at about $100,000.
A report by the state-run Xinhua news agency recently estimated China's luxury goods market at about $2 billion a year -- and soaring.
Eydie Cubarrubia, a former journalist in Fort Lauderdale, never fathomed a luxury market so large when she took a job in China's capital this year as editor of monthly English-language magazine Beijing Talk. But she adores the buzz around her "What's Hot, What's Cool" column on the tech products, spas and restaurants. And she's astounded that the upscale magazine, started for expatriates, now draws about 40 percent of readers from local Chinese, who have cash to burn.
"It drove home the point that China is new and changing, when people want to read about such things" as golf courses, foreign travel and swing dancing, she said.
Hong Kong-based publishers of the magazine are so hot on China that they've just launched in Macao, where Las Vegas casino companies seek to draw millions of rich mainlanders on gambling trips.
Of course, most Chinese can't afford such luxuries as Rolls-Royce cars or Lalique crystal, just as most Americans or Europeans can't.
Even with white-hot economic growth averaging 9 percent a year, China managed to post average incomes of only $1,000 per person last year. Researchers estimate that at least 900 million Chinese still struggle to make ends meet, largely in rural areas.
But luxury brands aim for the rich and middle class, and in China, even a thin layer of 1.3 billion residents means staggering opportunity. Cap Gemini Ernst & Young estimated that China had 210,000 millionaires in U.S. dollar terms last year. And studies put China's middle-class at 150 million-plus, mainly in cities -- more people than live in any European nation.
Moreover, the ranks of China's affluent are forecast to mushroom, as Beijing aims to triple average annual incomes again in a generation, this time to $3,000 by 2020.
Luxury brands are getting a boost, too, from China's 2001 entry into the World Trade Organization. Membership requires slashing import duties and opening markets.
Golden opportunities
Already, lower duties have helped make China the world's fastest growing auto market, with such luxury carmakers as Porsche and BMW cashing in.
Bentley's sales are so robust -- more than 50 have cars sold in the past two years at an average price topping $400,000 -- that the carmaker expects mainland China soon to overtake Japan as its third-largest market, trailing only the United States and the Britain .
"We are looking at a lot of golden opportunities looming on the horizon, namely, the growing affluence, the 2008 Olympics ... and entrepreneurs' growing wish to project their status," said Wilson Ho, a Bentley spokesman in Beijing.
That helps explain why General Motors Corp. announced this month its Cadillac division will start assembling its luxury sport-utility vehicle in China next year, the first to be built outside the United States.
So far, China's luxury market is fairly concentrated in a few areas: the sprawling capital of Beijing, with more than 10 million residents; the industrial Pearl River Delta in the south around Guangzhou, formerly Canton; and the booming Yangtze River Delta in the east around Shanghai, China's largest city, with 14 million-plus people.
Still, even a booming and concentrated market can't guarantee success. In China, competition is stiff, distribution systems fragmented and government regulations sometimes unpredictable. And while labor rates are among the world's lowest, building a brand name in any new market requires hefty investment in training, logistics and advertising, managers said.
In addition, Chinese tastes sometimes differ from those in other major markets. For example, clothing sizes tend to be smaller than in the United States. Men tend to prefer more conservative and looser fitting suits than Europeans. And in makeup, product lines with skin-whiteners are especially popular, as in other parts of Asia, marketers said.
"It's important for foreign companies to work with the right managers who know the local market," said Margaret Wu, a manager for the Lalique shop in Shanghai's prestigious Plaza 66 mall.
Brands also face an extensive challenge from widespread counterfeiting, with open-air markets full of knockoffs from Chanel, Hermes and others. China is known as the world's largest producer of fake goods.
Yet affluent Chinese seek out the authentic items, often traveling to nearby Hong Kong to buy them at lower prices because of lower import duties. Indeed, mainland Chinese have emerged as the top spenders in Hong Kong, snapping up diamond-encrusted watches and the latest Burberry purses.
Little wonder then that Lillian Teh, an Asia manager for Calvin Klein's underwear division, is thrilled her firm scored a spot in the Plaza 66 mall and opened there May 14.
"We want to be a pioneer and gain experience," said Teh, who is based in Hong Kong. "In the coming 10 years, China will be a great market."
From (http://www.sun-sentinel.com/news/local/southflorida/sfl-zchinaluxury14jun14,0,295982.story?coll=sfla-home-headlines)
Business Writer
Posted June 14 2004
SHANGHAI, China -- Bulgari. Prada. Lancome. Bentley. Cadillac.
In a country where workers just 25 years ago donned shapeless blue Mao suits and were lucky to pedal bicycles, these brands may seem out of place.
But a generation of reform and blistering economic growth has turned communist-led China -- the world's most populated nation -- into the newest mecca for luxury goods.
Visit the gleaming Plaza 66 in this booming, skyscraper-filled city and see an upscale five-story mall so popular there's a waiting list for companies to get in, with Gucci among them.
Near a sunlit atrium where couples in designer suits sip coffee and tea, shops bustle with employees polishing displays and lavishing attention on customers, often Chinese entrepreneurs with their families or executives of multinational firms.
At the newly opened Italian leather goods boutique Tod's, stocked with lemon-yellow handbags, manager Sabine Brunner-Franzosi sums up mainland China's allure.
"It's the market where we see the biggest potential in the world," said Tod's South Asia retail manager. In contrast, growth in the luxury goods market remains sluggish in Europe and only moderate in the United States, though both from bigger baselines, she said.
210,000 millionaires
Open any newspaper or magazine in China, and read about the upscale: fashion designer Giorgio Armani in Shanghai to open a flagship store, golf legend Greg Norman visiting and fanning the golf craze, or carmaker Volkswagen launching its Phaeton priced at about $100,000.
A report by the state-run Xinhua news agency recently estimated China's luxury goods market at about $2 billion a year -- and soaring.
Eydie Cubarrubia, a former journalist in Fort Lauderdale, never fathomed a luxury market so large when she took a job in China's capital this year as editor of monthly English-language magazine Beijing Talk. But she adores the buzz around her "What's Hot, What's Cool" column on the tech products, spas and restaurants. And she's astounded that the upscale magazine, started for expatriates, now draws about 40 percent of readers from local Chinese, who have cash to burn.
"It drove home the point that China is new and changing, when people want to read about such things" as golf courses, foreign travel and swing dancing, she said.
Hong Kong-based publishers of the magazine are so hot on China that they've just launched in Macao, where Las Vegas casino companies seek to draw millions of rich mainlanders on gambling trips.
Of course, most Chinese can't afford such luxuries as Rolls-Royce cars or Lalique crystal, just as most Americans or Europeans can't.
Even with white-hot economic growth averaging 9 percent a year, China managed to post average incomes of only $1,000 per person last year. Researchers estimate that at least 900 million Chinese still struggle to make ends meet, largely in rural areas.
But luxury brands aim for the rich and middle class, and in China, even a thin layer of 1.3 billion residents means staggering opportunity. Cap Gemini Ernst & Young estimated that China had 210,000 millionaires in U.S. dollar terms last year. And studies put China's middle-class at 150 million-plus, mainly in cities -- more people than live in any European nation.
Moreover, the ranks of China's affluent are forecast to mushroom, as Beijing aims to triple average annual incomes again in a generation, this time to $3,000 by 2020.
Luxury brands are getting a boost, too, from China's 2001 entry into the World Trade Organization. Membership requires slashing import duties and opening markets.
Golden opportunities
Already, lower duties have helped make China the world's fastest growing auto market, with such luxury carmakers as Porsche and BMW cashing in.
Bentley's sales are so robust -- more than 50 have cars sold in the past two years at an average price topping $400,000 -- that the carmaker expects mainland China soon to overtake Japan as its third-largest market, trailing only the United States and the Britain .
"We are looking at a lot of golden opportunities looming on the horizon, namely, the growing affluence, the 2008 Olympics ... and entrepreneurs' growing wish to project their status," said Wilson Ho, a Bentley spokesman in Beijing.
That helps explain why General Motors Corp. announced this month its Cadillac division will start assembling its luxury sport-utility vehicle in China next year, the first to be built outside the United States.
So far, China's luxury market is fairly concentrated in a few areas: the sprawling capital of Beijing, with more than 10 million residents; the industrial Pearl River Delta in the south around Guangzhou, formerly Canton; and the booming Yangtze River Delta in the east around Shanghai, China's largest city, with 14 million-plus people.
Still, even a booming and concentrated market can't guarantee success. In China, competition is stiff, distribution systems fragmented and government regulations sometimes unpredictable. And while labor rates are among the world's lowest, building a brand name in any new market requires hefty investment in training, logistics and advertising, managers said.
In addition, Chinese tastes sometimes differ from those in other major markets. For example, clothing sizes tend to be smaller than in the United States. Men tend to prefer more conservative and looser fitting suits than Europeans. And in makeup, product lines with skin-whiteners are especially popular, as in other parts of Asia, marketers said.
"It's important for foreign companies to work with the right managers who know the local market," said Margaret Wu, a manager for the Lalique shop in Shanghai's prestigious Plaza 66 mall.
Brands also face an extensive challenge from widespread counterfeiting, with open-air markets full of knockoffs from Chanel, Hermes and others. China is known as the world's largest producer of fake goods.
Yet affluent Chinese seek out the authentic items, often traveling to nearby Hong Kong to buy them at lower prices because of lower import duties. Indeed, mainland Chinese have emerged as the top spenders in Hong Kong, snapping up diamond-encrusted watches and the latest Burberry purses.
Little wonder then that Lillian Teh, an Asia manager for Calvin Klein's underwear division, is thrilled her firm scored a spot in the Plaza 66 mall and opened there May 14.
"We want to be a pioneer and gain experience," said Teh, who is based in Hong Kong. "In the coming 10 years, China will be a great market."
From (http://www.sun-sentinel.com/news/local/southflorida/sfl-zchinaluxury14jun14,0,295982.story?coll=sfla-home-headlines)