Mon, Dec 06, 2004 - Page 11 News List

Luxury brands eye Chinawith a mix of greed, fear

CHINA'S LURE A growing population of wealthy Chinese has luxury firms excited. But there are also concerns about how to navigate the tricky market

AFP , Hong Kong

The world of fashion and luxury may be fascinated by the enormity of the Chinese market now open to them, but there are fears that the quantity risks destroying the sector's speciality -- quality.

The issue was one preoccupying business people and other industry actors at last week's "Luxury 2004: The Lure of Asia," an international conference in Hong Kong.

Luxury brands have recently rushed to establish a foothold in China, seen as an irresistible and under-exploited market of 1.3 billion inhabitants.

But many participants at the conference recognize that they have to invest, and lose money first, if they are to be among the happy few to reap the harvest when, and if, China becomes the equivalent of a Japan or US -- in 20 to 25 years at best.

They know not every business will succeed there.

"There will be casualties," said Paul Smith, president of Britain's Paul Smith clothing label.

Two of the biggest dangers for western brands will be: being too greedy in a market where the parameters are unclear and the awful nightmare of counterfeiters reproducing products to perfection in what is now the world's biggest factory.

But another, more subtle risk remains, one which cuts to the heart of the luxury sector -- that the quality of these exclusive products will be diluted by their sheer quantity.

"How do we divide between mass and class? How to differentiate between fashion and what is just fashionable? How to make luxury retain its cachet?" asks Adrienne Ma, managing director of the exclusive Hong Kong department store Joyce Boutique.

Participants at the Hong Kong conference pointed to the sudden profusion of dozens of brands, undistinguishable from the other to the Chinese consumer, and companies diversifying into areas far from their original areas of expertise as potential problems. For instance, Armani now makes chocolates, Versace dog collars.

These problems are haunting an industry, which for some 15 years has been rapidly expanding.

But the dangers are seen as more acute in China. Reaching out to the mainland's ambitious middle class means introducing a product to tens or hundreds of millions of people, most of them still unsophisticated.

"Roads have become highways, but are they still roads of luxury. Is the world of marketing and glitter forever? I am not so sure," says Christian Blanckaert, vice-president of international affairs at French company Hermhs.

"Today, there is confusion on the market. Everybody makes everything. The quality is so-so," adds Diego Della Valle, chairman and chief executive officer of Italian leather specialist Tod's.

And lastly, the growing power of China means inevitably that Chinese companies will take control of European luxury companies.

"I don't see why a Chinese company could not buy a French company," says Blanckaert, citing the success of North American, Chilean and Australian wines in competing with established French wineries.

The success of the marriage of cultures, he says, will depend on preserving the essential, "the soul, the spirit of a company, creativity and quality."

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