Major international luxury brands looking to expand into the industry’s second-largest market, China, are all courting the likes of wealthy entrepreneur Diana Wang.
Based in Shanghai, Diana Wang is an investor who also owns a fashion brand. A jewelry collector, she regularly shops at Cartier, Tiffany and Chopard.
In the world of luxury, the premium clientele (very important client, or VIC), is a coveted market segment for companies which must make it possible to compensate for the decline in purchasing power of the Chinese middle class.
Last month, Diana Wang attended a gala dinner hosted by LVMH subsidiary Tiffany LVMH.PA , which also launched a new jewelry collection and is holding private sales for a select clientele.
“Luxury brands give you that event experience, that personal experience, and you feel privileged,” Diana Wang told Reuters. “That’s a big part of what makes me want to buy the brand.”
As demand for luxury goods in China has rebounded less than expected following the country’s post-pandemic reopening, major brands are favoring the sale of fewer, higher-value items, relying on the 5 % of consumers who, according to HSBC analysts, represent more than 35% of their turnover in China.
This strategy had not yet been deployed on a large scale in China, where brands were instead seeking to attract new consumers. Today, the housing crisis and record youth unemployment have forced retailers to attract fewer, wealthier customers.
INTIMATE AND EXCLUSIVE
Making Chinese VICs feel privileged is at the heart of this strategy. For her gala in Shanghai, Tiffany ensured that a celebrity was seated at each table, Diana Wang said. Versace recently organized an intimate dinner for around forty people with designer Donatella Versace.
Gucci, Chanel and Dior have also reserved more retail space in Shanghai, exclusively for their wealthiest clients.
“We pay a lot of attention to details and anchoring in local culture,” said Cyrille Vigneron, president and CEO of Cartier. The brand will organize its annual “Cartier Women’s Initiative” award in May in Shenzhen, China, intended to promote women entrepreneurs.
LVMH managers are also very attached to this local dimension. Louis Vuitton recently opened a pop-up bookstore and cafe in Shanghai, with a billboard in the local dialect, and launched a podcast in Mandarin.
NURTURE THE HABIT OF LUXURY
Even as they narrow their scope, luxury brands remain optimistic about the potential of China, which is expected to account for nearly 40% of global sales by 2030, according to consultancy Bain.
“We consider that the medium-term and long-term development potential remains strong,” said Éric du Halgouët, financial director at Hermès.
According to Mario Ortelli, luxury consultant, several companies in the sector are protecting their backs by extending their presence elsewhere in the world. This year, many events and openings took place in South Korea, Japan and Thailand, as well as China.
“But you must always invest in your most important market, the one that is the engine of growth,” Mario Ortelli said. “The only way luxury companies can protect themselves is to make their brand as desirable as possible so that they are the last one that cost-cutting customers will stop buying.”
(Report by Mimosa Spencer and Casey Hall, French version by Augustin Turpin, edited by Kate Entringer)