Luxe à la chinoise

Anyone visiting Shanghai cannot help noticing all the luxury shops on Nanjing West, HuaiHai Road, the Bund or Luijiazui, and not only their sheer number but their size, which is by any standards just very big. Close to the East Capital office there is for instance a 900 square meters Louis Vuitton shop. Do not expect it to be crowded. As people would say, it is not about many clients buying small things but about the few very wealthy clients buying the big (i.e. expensive) things. I think some of these shops are also primarily intended to impress, hence the size and the level of efforts put into the shop itself, and contribute to brand building.

As a matter of fact 50% of the Chinese luxury spending takes place abroad because of lower prices and better product selection. By shopping abroad you also minimize the risk of shopping pirated luxury goods by mistake. Most of this overseas spending is done in Hong Kong and Macau, but recent statistics show that Chinese clients have become the single largest overseas shopper group for the retail luxury shops in Paris and Milan. The Chinese use their Schengen visa to shop around in Europe, and London retailers are actually missing part of these opportunities.

 
Back to China, Shanghai has the greatest concentration of wealthy people in China, hence the concentration of shops here, but what I find most interesting is the trend of these brands making sure that they are rightly positioned to cater for an even faster growing markets in the smaller cities. There are 180 cities with more than 1 million people in China. Estimates show that overall the number of Chinese high net worth individuals - defined as individuals with more than 1.5 million USD of investable assets - is projected to rise to almost one million people by the end of 2011.

But one does not need that much money to buy a few bags or a watch; indeed what makes all luxury brands excited about the Chinese market is the hundreds of millions that are joining the middle class in the cities, are used to save to buy something expensive and are looking for status symbols.