Transcript
Page 1: LUXURY IN CHINA: Get Rich Is Glorious

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TO GET RICH IS GLORIOUS Being rich a state of mind

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TO GET RICH IS GLORIOUS

Being rich a state of mind

Trend Insight Report

September 2008, Beijing

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100 million Chinese

luxury consumers.

“The money is there.” Glen Murphy, managing director at AC Nielsen in Shanghai

Sourc

e: M

org

an S

tanle

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006

Introduction

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“The money is there.” Glen Murphy, managing director at AC Nielsen in Shanghai

Already the third

largest luxury market

in the world. Introduction

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The world's top

luxury market by

2015.

“The money is there.” Glen Murphy, managing director at AC Nielsen in Shanghai

Sourc

e: G

old

man

Sac

hs,

2007

Introduction

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To Get Rich is Glorious

115 US$-billionaires

in 2007...

Introduction

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To Get Rich is Glorious

The only country

where consume

more luxury than . Introduction

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To Get Rich is Glorious

The world’s youngest

luxury market, with

in their 30’s. Introduction

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To Get Rich is Glorious

¥ $ = ? ? ?

Introduction

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Chinese on the move

What’s Next?

Introduction

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Chinese on the move

The next

generation...

Introduction

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Chinese on the move

Introduction

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Chinese on the move

Introduction

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Chinese on the move

Introduction

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Chinese on the move

Introduction

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Chinese on the move

... they will look and

buy different.

Introduction

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Chinese on the move

But how?

Key Questions

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To identify the potential for

your brand behind these over-whelming figures, you need to

understand what luxury buyers try to achieve and sell them

what they need to succeed.

Introduction

“If you are looking for quick profits, don't go to China. It takes a long time to be profitable.” Nigel Luk, Cartier's managing director for China

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Therefore CIMG and Trendbüro

investigated upcoming needs and rising desires of Chinese

luxury consumers as well as its impact on China’s luxury

market.

Introduction

Research is based on desk research, 24 focus groups, in-depth interviews as well as expert interviews.

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Key Questions

Analyze changing life drivers and desires of Chinese luxury consumers to identify upcoming consumer requirements towards luxury brands.

– Which social changes shape the life

drivers and motivations of China’s

consumers?

– Which new consumer needs will

challenge China’s rising luxury market?

– How to address to these needs with

products, marketing and services?

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1. People’s Republic of Change

2. Luxury in a Shift

3. Faces of Luxury 2010

Agenda

Trend Insight Report: To Get Rich is Glorious

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Within the last 60 years

Chinese consumers underwent two major value shifts, which

significantly impacted their lives, beliefs and buying habits.

People’s Republic of Change

The future of luxury is based on a fundamental change of social values from the past to the present.

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People’s Republic of Change

Three decades of communism were followed by three decades capitalism. Now China slowly transitions into three decades of consumerism.

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1. Baby Boomers

2. Generation X

3. Generation Y

People’s Republic of Change

The Chinese market is influenced by three generations, who possess contrary ideals.

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People’s Republic of Change

Baby Boomers (1950 - 1964): Dominated by political figures and movements. They respond to politics and believe in heroes.

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Serving the people

Between the Chinese liberation in 1949 and the opening in 1978 Chinese consumers were mainly faced with instability and economical chaos.

The Great Leap Forward, the Famine and the

Cultural Revolution threatened China for three decades. In that period, people lost their identity, their privacy and even their right to an education. The only things that couldn’t be banned were their dreams.

Deficiency and limitation of goods shaped daily

life. Even money could not open all doors. Political power was the only accepted currency during this time.

People’s Republic of Change

„The Song of Lei Feng” romanticizes selflessness which shaped the whole

generation until the 80s.

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Money is power and power is everything

The baby boomers are hopeless romantics and fiercely nationalistic. While their romanticism of the Chinese Revolution might have turned into cynicism due to the Cultural Revolution, their

nationalism remained undiminished.

The baby boomers are frugal people, trained not to desire material goods and creaturely comfort. Nowadays some of them are the richest people in China. They splurge to impress. Money is power to them, and power

is everything.

Today, baby boomers are still the policy-makers and the parents who shape the mindset of the next generation.

People’s Republic of Change

This generation lost its creativity with the Cultural Revolution. Following and imitating others was the only way for social development.

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People’s Republic of Change

Generation X (1965 - 1979): A generation of realists woke up after Tiananmen Square protests, who believe only in themselves.

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People’s Republic of Change

In their young adulthood only some Western movies where available. But “Pretty Woman” came to China and libarated the Chinese dream.

First come, first serve

Generation X is influenced by the liberal spirit of the 80s, growing-up while China transitioned from a planned economy to market economy.

These entrepreneurs lived the Chinese dream. But after 1989 they underwent a value shift

from an idea of collective wealth to a focus on self, driven by political reforms as well as the privatization of China’s economy. New business opportunities replaced their enthusiasm for society and turned their hearts

to a single purpose: make money, and make lots of it.

They went from 20 years of depreciation and food coupons to over-supply. From 1,300 private car owners in the entire nation to three million in Beijing alone.

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People’s Republic of Change

Mr. and Mrs. X are opportunists. They were educated by Mao and trained by Bill Gates. They are open to new things and appreciate originality.

Money can change your life!

Generation X suffers a collective insecurity from living through so much change. They therefore trust in material security and status. 60% of them buy luxury goods to

increase their self-confidence1.

Their heroes are the rich and famous entrepreneurs who made it. They believe in Darwinism and they know how to work the system to their benefit. For them there is only an up or down but nothing in between while

the government dismantles its cradle-to-grave welfare system.

Generation X is the majority of these who keep the 80% of Chinese private business running. They make the money, show off the money, and spend the money. 1

TNS,

2006

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People’s Republic of Change

Generation Y (1980 - 1995): Possesses a Chinese mindset but a global lifestyle shaped by McDonald’s, Google and MBAs.

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People’s Republic of Change

Self-made web-clips offer the best insight to China’s youth detailing their dreams and believes first hand: dv.ouou.com

I am what I am. Your are serving me!

Generation Y is the first Chinese generation born into consumerism. They grew up in the information age with internet and mobile phones.

They are overwhelmed with information and

personal choices. Are you Hello Kitty or Rebel? Gym or Yoga? Stay in China or go abroad? Artist or businessman? Fake or real?

They are the first generation with the right to choose their career, lifestyle and cultural affinity. No wonder that 85% of them see

themselves as their role model.1 Consequently, the first generation of only children grows up in a modern environment, full of confidence in their future?

Sourc

e: 1

Sev

ente

en R

eader

s Po

ll, 2006;

Pic

ture

: htt

p:/

/dv.

ouou.c

om

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People’s Republic of Change

For Generation Y there is nothing wrong with hedonism and self-rewards.

Money gives access but no satisfaction

They buy because the product emotionally bond with their self identity, because of peer pressure, because it’s a fad.

They are often educated outside China and will spend more on luxury products, because they

won't know what it means to be without money. They are not frugal, nor do they buy status, believing that consumption is a part of self-expression.

Generation Y represents the future of China. Today, they are the ones dictating what is cool

and what is not. This generation will be the first where business and political elites will be surpassed by design and style elites.

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People’s Republic of Change

China’s culture today is mainly determinated by security, harmony, control and formation than lust, strangeness or sensuality.

Censorship

Communism

Selflessness

Growth

Disparity

Status

Nationalism

Capitalism

Community

Tradition

Sourc

e: S

EMIO

BEN

CH C

N b

y Tr

endbüro

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People’s Republic of Change

The next generation will open the door for a value shift towards consumerism, self-expression and hedonism.

Censorship

Communism

Selflessness

Growth

Disparity

Status

Nationalism

Capitalism

Community

Tradition

Consumerism

Self-Expression

Hedonism

Sourc

e: S

EMIO

BEN

CH C

N b

y Tr

endbüro

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The fundamental value shift

from communism to capitalism to consumerism will unleash a

new type of consumer with advanced preferences towards

brands, products and services. People’s Republic of Change

China turns into a global society

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1. People’s Republic of Change

2. Luxury in a shift

3. Faces of Luxury 2010

Agenda

Trend Insight Report: To Get Rich is Glorious

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Luxury in a Shift

This new luxury will possess elements of showing one’s status and self-reward. But the way to achieve it will shift to the next level.

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Luxury in a Shift

There are four different types of luxury consumers based on social background, luxury experience and income level.

Understaters Nouveau Rich Connoisseurs Spirituals

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Luxury in a Shift

While most of Chinese luxury shoppers are the nouveau rich, many of them are still looking for their place in the world of lux.

Nouveau Rich

Understaters

Spirituals

Connoisseurs

Sourc

e: S

EMIO

BEN

CH C

N b

y Tr

endbüro

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Luxury in a Shift

Nouveau Rich: Showing-off works! 65% of Chinese are convinced that people who own luxury brands are successful people.1

1 T

NS,

2006

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Luxury in a Shift

Nouveau Rich: Movie star Fan Bingbing is preferred star in advertisements and one icon for the Nouveau Rich in China.

I want to stand out!

Background: Entrepreneurs, celebrities or young businessmen who are the first in their family, who can afford luxury. They still rank themselves with “average” people.

Motivation: They want to show their success

and want to stand out from the mass. They don’t care about others, but due to their cultural background formation still rules.

Habits: To balance formation and their longing to be special they buy the most popular brands with high mass reputation

(Armani, BMW, Mercedes, Rolex, Gucci).

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Luxury in a Shift

Understaters: Not show but know! About 70% of Chinese believe that owning luxury brands doesn’t necessarily mean one is fashionable.1

1 T

NS,

2006

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Luxury in a Shift

Understaters: Successful actor Lu Yi spends his time with his family instead on superficial glamorous events.

I want to fit in!

Background: Successful creatives, rich people from behind the scene or experienced luxury consumers. They are international, speak English and understand luxury as a lifestyle.

Motivation: They want to fit in to a

sophisticated group of international and stylish people. They want to differentiate themselves from superficial show-off attitudes.

Habits: They mix established brands with niche brands to create their individual style

as long as it fits into the peer group. They tend to be a bit artistic and edgy (MINI, Y-3, Issey Miyake, Marc Jacobs, MIU MIU).

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Luxury in a Shift

Connoisseurs: Already today about 60% of luxury consumers buy luxury to reward themselves.1

1 T

NS,

2006

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Luxury in a Shift

Connoisseurs: Jiang Wen is a famous movie director and a king of the Chinese film. He enjoys his life away from the hustle and bustle.

I want to enjoy my life!

Background: Either they are self-made businessmen with a good self-perception or they grew up in a financial hedge. Money is seen as a key not as a treasure.

Motivation: They want to enjoy their life. Life balance and sensuality are very

important. “Soft luxury” is highly appreciated.

Habits: They often live a quite life, enjoy

excellent foods, traveling but also doing charity activities. Luxury brands have to offer them a personal relationship, a buying experience and high quality (Bulthaup, Patek Philippe, Ferretti Yachts, Cohiba, Hennessy).

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Luxury in a Shift

Spirituals: They are often overseas born Chinese. With a growing number of Chinese returning back home this group is slowly rising.1

1 F

rom

yea

r to

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r th

e num

ber

of

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rnin

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hin

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isin

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e Book,

2007

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Luxury in a Shift

Spirituals: Wang Fei is a talented singer who incarnates Asian musical culture. She lives an international, individual and edgy lifestyle.

I want to find myself!

Background: Grow up in a well off environment or with an artistic background. Financial problems are not relevant. Luxury goods are nothing more than commodities for

them.

Motivation: They want to find the meaning

of their life. They are looking for authenticity and spiritual experiences.

Habits: Spirituals are often involved in charity and fundraising. Though they are highly individualistic, striving for spiritual adventures and bored by the superficial world of luxury. Reversion to nature and the

primordial dominates their lives (Yö, Linda Loudermilk, Leica).

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Luxury in a Shift

Brand preferences of different consumer types.

Nouveau Rich

Understaters

Spirituals

Connoisseurs

Sourc

e: B

rand p

osi

tionin

g is

bas

ed o

n f

ocu

s gro

ups,

in-d

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Luxury in a Shift

China’s luxury market will be dominated by the Nouveau Rich and Under-staters, but Connoisseurs will have a significant impact on them.

Nouveau Rich

Understaters

Spirituals

Connoisseurs

Sourc

e: B

rand p

osi

tionin

g is

bas

ed o

n f

ocu

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ups,

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Consumerism

Self-Expression

Hedonism

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Luxury in a Shift

China’s luxury market will give birth to new attitudes towards luxury to keep pace with developing mindset of Chinese luxury consumers.

Nouveau Rich

Understaters

Spirituals

Connoisseurs

Consumerism

Self-Expression

Hedonism

Sourc

e: S

EMIO

BEN

CH C

N b

y Tr

endbüro

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Luxury in a Shift

These upcoming attitudes are the output of a sustainable shift in the mindset of luxury consumers.

Sensuality: Authenticity

Lust: Enjoyment

Strangeness: Experience

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Luxury in a Shift

With a rising consumers variety China’s luxury market will be more diversified.

Luxury

Premium

Masstige

True Premium

Prêt-à-Premium Luxury for beginners

Über-Luxury Celebrated excess

The promise of

The cheap has to be more attractive

Hard Discounting Basics have to cost next to nothing

Personal Luxury Personal wellbeing

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Luxury in a Shift

Those who want to succeed in China’s upper luxury segment they have to contribute sustainable value for a global luxury lifestyle.

China’s luxury shoppers of

tomorrow are brand savvy. For them the big price tag and an

even bigger label name doesn’t make a product luxury.

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1.People’s Republic of Change

2.Luxury in a Shift

3.Faces of Luxury 2010

Agenda

Trend Insight Report: To Get Rich is Glorious

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Faces of Luxury 2010

63% of the young Nouveau Rich want to enjoy the present moment as much as possible and 76% would pay more to buy natural healthy foods.1

The experiential, authentic and

enjoyable side of luxury products and brands will

determine if consumers consider them luxury or not.

1 M

cCan

n W

orldgro

up C

onsu

mer

Insi

ghts

and M

arke

t In

tellig

ence

, 2006

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Faces of Luxury 2010

Marketing will be dominated by seduction, education and establishing a 1-to-1 customer relationship.

Marketing Approaches

– In the future luxury consumers will save as much as possible, adhering to the motto: Make luxury an investment to make most of one’s life.

– Encourage national pride but don’t try to be Chinese.

– Revive your brand with enjoyable and entertaining content not with a painful

interruption of it.

– Take over responsibility and share your success. Charity is highly appreciated within the community of luxury buyers.

– For the majority of China’s upper class1 luxury will be out of reach. Affordable accessories will be a market to target. 1

15 m

io. Ch

ines

e w

ith a

nnual

inco

me

about

$ 3

2,0

00;

AC

Nie

lson,

2006

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Faces of Luxury 2010

Service makes the difference between counterfeit and original. Innovative services will be key in strong customer relationships.

Service Approach

– The rich has less time. Time saving services and efficiency at the POS are appreciated by customers.

– Chinese are comfort junkies. Space, silence and customization are important.

– Escapism is common in darwinistic China. Offer a shopping experience which allows to escape from reality for a moment.

– Luxury buyers adopt a global lifestyle and

are eager to learn about a brand. Coaching is more than welcome.

– Nowadays loneliness is pervasive in all social classes. Make your brand to a place where customers find kindred spirit.

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Faces of Luxury 2010

Products give brands a body and an appearance to make brand values alive. Therefore authentic luxury needs to be an experience for all senses.

Product

– Packaging is often the first brand experience for luxury consumers and therefore most important.

– China’s hyper-growth left a lack of pureness and authenticity. Products that tell a story about their origin and ingredients promise

a desirable piece of pureness.

– Chinese consumers live between national

pride and global attitudes. Global luxury goods touching Chinese tradition will find a grateful audience.

– Chinese are opportunists and believe what they see. They don’t just buy a product, they buy a bit of an admirable world of lux,

not made in China.

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Faces of Luxury 2010

Many brands which are successful in the West, flop in China. Therefore, fine-tune global strategies to regional distinctions.

The following seven cases

illustrate a scenario of the Chinese world deluxe in

2010.*

* A

ll c

ases

are

fic

tional

and n

ot

alig

ned

wit

h t

he

nam

ed b

rands.

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Gucci re-opens factories in Italy

Insight: 70% of Chinese appreciate the superior

quality of luxurious brands1 but doubt that

superior quality can be made in China.

Solution: While brand awareness is still low,

the country of origin is more important.

Therefore Gucci decided to re-establish some of

their factories in Italy. An Europe made Gucci

bag not only guarantees for superior quality but

can be easily identified as a counterfeit.2

Output: The trust in the quality of Gucci

products increased while the number of

counterfeits slightly declined.

Faces of Luxury 2010

Authenticity of a brand means consistency in design, communication, service and also manufacturing.

1 T

NS,

2006; 2

Man

y co

nsu

mer

s ar

e co

nvi

nce

d t

hat

som

e lu

xury

goods

sold

on b

lack

mar

ket

are

origin

als

stole

n f

rom

Chin

ese

fact

ories

.

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Oppenheim sold stamp edition in 30 days

Insight: After two decades of Westernizing

Chinese consumers rediscover their roots and

appreciate luxury that revive their tradition.

Solution: Oppenheim, maker of high-quality

writing instruments, released an edition of

signature stamps, which have a long tradition

in China. After launching a jade made USB-stick

last year, Oppenheim proved again its excellent

consumer understanding.

Output: Customers appreciate the classical look

of the black-white stamp but also the high

quality of the stamp signature, which is

handmade in China’s oldest stamp factory.

Faces of Luxury 2010

An individually made stamp and personally delivered by Oppenheim’s factory – an experience customers are willing to pay for.

Pic

ture

: Des

ign/R

ender

ing b

y XLP

lus

Des

ign,

Shan

ghai

; Co

nce

pt

by

Tren

dbüro

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Many women felt in love with Hermes

Insight: In a rushing, anonymous world with

over populated cities also luxury consumers are

looking for attention and unique experiences.

Concept: Hermes took-up this desire when they

introduced its new collection of luxury finesse.

With a handwritten, poetic letter store manager

Li Dan indulged the senses of Beijing’s luxury

elite. It took three days to write all letters but

in response many women felt in love with the

French luxury brand Hermes.

Output: And as its said Li Dan indulged not

only the senses of his upscale clients but also

their wallets and credit cards.

Faces of Luxury 2010

Luxury market is like a dating; it’s about long-term relationships. If customers think you just want money, they want a divorce.

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Three on the Bund opens Men Only Zone

Insight: China‘s Connoisseurs are spending

more for cosmetics and fragrances. They look

for shops that cater to their special needs –

shops which are bold, clean and cool.

Concept: Together with Lacôme Homme

Shanghai’s luxury shopping venue Three on the

Bund has established a pink-free world for male

toiletries, providing everything indulgent men

need to look and feel great.

Output: The royal comfort experience helped

Lacôme to introduce many other products and

made Three on the Bund the first choice of

men.

Faces of Luxury 2010

Consumers look for new, inspirational shopping experiences that excite the senses.

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Q206 opens a World of European Style

Insight: Many Chinese luxury consumers get

bored by luxury offers. Shopping should be

more like a journey to a desirable place.

Solution: Berlin based luxury department store

Q206 feels challenged and opens a World of

European Style in Beijing. It will be more like a

shopping palace where the cafe bar, library,

social club and gallery are part of the brand

experience.

Output: Customers can taste, smell, read and

touch brands facets and meet new friends in an

exclusive environment.

Faces of Luxury 2010

Shopping cathedrals are playgrounds for all senses and a great opportunity for sense branding at the point of sale.

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LV succeeds with sophisticated staff

Insight: Customers complain about pushy badly

trained staff in luxury stores.

Solution: Louis Vuitton recognized this

challenge early and educates its staff partly in

Hong Kong. They offer specific courses and

international staff exchange to push their staff

to the same sophisticated level as their

customers.

Output: Since LV also offers home visits to save

customer’s time, customers begin to build

personal relationships with their style

consultants during their “style-time” together.

Faces of Luxury 2010

The staff in showrooms are important communicators of the brand and a strong influence on the nouveau rich who have little brand knowledge.

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Ritz Carlton sells Grand Home Sweet

Insight: China‘s rich expect maximum comfort

and technology at home. After the kitchen,

attention is now focused on bed- and

bathroom, also installing specialty rooms such

as game rooms, yoga and wine rooms.

Concept: The upscale hotel chain Ritz Carlton

is successfully marketing their furnishings for

private homes. What people are looking for is

better relaxation – but also an exciting

atmosphere for certain moments.

Output: Ritz Carlton brings the mood of a

luxury hotel into people‘s home for sweeter

dreams and a stronger customer relationship.

Faces of Luxury 2010

Luxury consumers expect the same professionalism and quality of experience they enjoy outside in the comfort of their own homes.

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Faces of Luxury 2010

Curious to learn more about Chinese luxury consumers – their aspirations, life-drivers and longings? Contact us!

This summary illustrates only

the highlight of our research results. Please send us specific

questions about your luxury consumer of tomorrow.

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©2007

Contact

Dirk Jehmlich General Manager Asia-Pacific

Trendbüro #2108 Xintai Building | 8 Xiaguangli

Chaoyang District | 100016 Beijing | China [email protected] | http://www.trendbuero.com

Huang Hung CEO & Director of CIMG

CIMG #2 Jiuxianqiao Rd. | Chaoyang District | 100015 Beijing | China

[email protected] | http://www.cimgchina.com

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1. Desk Research online media, books, reports, white papers

2. Focus Groups 24 focus groups (1,5 hours) in Beijing, Shanghai, Shenzhen: 60% of the participants were female, 40% male; aged between 20 to 40 years with an available monthly income of about

3000 RMB. The majority of the participants hold a college or university degree.

3. In-depth Interviews

12 interviews (1 hour) with luxury consumers: 4 female and 8 male interview partner, aged

between 30 to 55 years with personal assets of about 250,000 EUR

4. Expert Interviews 15 interviews (1 hour) with marketing/sales representatives of premium and luxury brands

Research Methodology

From the big picture to the detail


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