Red Luxury's latest report from China highlights the extreme difficulties faced by Western companies when they enter the Chinese market.
As market research company Access Asia's founder Paul French points out " For Chinese consumers, Confucian group-think is important and at the moment they are still buying status to show that they have achieved things". Or as Red Luxury put it:
"In China, the only thing that may be more important than being rich is looking rich"
Indeed according to Red Luxury there are infact 2 Chinas, and most Chinese feel the desperate urge to distinguish themseves from the majority of the country's population which still lives in great poverty. This is particularly the case with the middle class which finds itself stuck between the two extremes desperately trying to achieve the higher status while at the same time doing all that it can to distinguish itself from the poorer classes.
For those Chinese who left the poorer rural areas to move to the Cities in search of fortune what they buy will be an indication to those who stayed behind that they've achieved a certain status.
It is with this in mind that one can understand why certain companies have flourished in China and others are pretty much doomed to failure particularly in the short term.
For example high end lingerie companies such as Agent Provocateur and La Perla have failed to succeed in China, the main reason being that most Chinese women see no reason why they should spend what they view as a small fortune on something that only their husband will see!
As much as their need to 'show off their new found status' is paramount, so is their need to feel part of a group and not stand out like a sore thumb. For example they are not keen for Versace which for them is too 'bling' and in your face or as French put it " No one wants to look like Elton John'. The opposite of their nouveau riche counterparts in Russia! Indeed companies such as Zara and H&M who have made their fortune in the West satisfying their client's need for 'individualism' have had to customize their collections and marketing startegies and are now selling copious amounts of black and white basics!
That said however, a certain group of the Chinese nouveau riche, particularly the younger ones, have started to 'discriminate' between luxury brands. Indeed Louis Vuitton, the number one luxury goods seller in China according to Heron research group, is now starting to be viewed as too brash, the kind of thing a 'coal mine owner' would buy - as Red Luxury put it.
As with their Western counterparts the Chinese are starting to differentiate between 'rich' and 'rich', coming all the more closer to becoming the new luxury consumer described by Antoine Arnault who no longer wants the 'bling' and prefers to invest in 'heritage, carftsmanship and durability' showing a more sophisticated taste and different understanding of luxury.