“Why are millions of Asians, not all of them rich, rushing to buy outrageously expensive designer-label bags, shoes, clothes, watches, jewelry, and accessories? Why do they queue for hours outside stores in Paris, often putting up with degrading treatment, all for the sake of a logo-splashed bag? Why is it “normal” for Hong Kong people, whether wealthy tycoons or your average Joe, to own several expensive Swiss watches? Why do South Korean office ladies purchase Ferragamo shoes on installment plans? Why do junior executives in Shanghai happily shell out their entire month’s salary for a Gucci purse? Why do some Japanese teenagers even sleep with middle-aged salarymen just to get money together for that all-essential luxe bag?”
This socio-cultural phenomenon of “luxeplosion” is reverberating throughout Asia. New money is upsetting old ways, allowing people to purchase their way up the status ladder. The practice of “gifting” and a cultural emphasis on conformity contribute to the craze.“Many Asians of moderate means are simply spending their way up the social hierarchy, often in amounts totally out of whack with their real income.”
“In today’s Asia you are what you wear,” so Asia’s fashionistas are carrying Louis Vuitton and Hermès bags, wearing Gucci and Ferragamo shoes, buying Zegna suits, and telling time with Cartier, Rolex and Piaget watches. Products from these high-priced, luxury brands are flying off the shelves in Japan, Hong Kong, South Korea, China, India, Singapore and other Asian countries. And this trend is expected to keep growing. What explains the relatively new phenomenon of Asia’s love affair with luxury? The region is undergoing a massive transformation “politically, socially and economically.” Asians are redefining the rigid social orders of the past. Now the class you are born into no longer dictates your status for the rest of your life. Instead, money defines the new social order. What better way to display wealth than to wear the easily identifiable logos of the rich and famous.“Luxury brands are a modern set of symbols that Asians are wearing to redefine their identity and social position.”
Asia is responsible for some 37% of the $80 billion global luxury industry. The U.S. buys 24%, Europe takes 35% and other nations only 4%. Of Asia’s 37%, Japan accounts for a whopping 62%, followed by Hong Kong (12%), South Korea and China (8% each, but China’s share is growing faster); Taiwan, Singapore and Southeast Asia (3% each), and India (1%). The top 10 brands Asians love most, in descending order are: Louis Vuitton, Rolex, Cartier, Gucci, Burberry, Hermès, Chanel, Prada, Tiffany and Armani.The spread of luxury mania in Asian countries typically follows a five-stage process:
- “Subjugation” - Under authoritarian rule, most people live in poverty.
- “Start of money” - Economic growth reaches the masses; elites begin buying luxury.
- “Show off” - People purchase deluxe brands to display their growing wealth.
- “Fit in” - Everyone wants a little luxury in order to conform.
- “Way of life” - Luxury brands become a necessity rather than a lavish expenditure.
Japan
The Japanese have had an insatiable appetite for luxury since the mid-70s. Today, luxury is a way of life. Three Japanese social forces drive this passion: the need to conform, a lack of other ways to display a high standard of living and women’s societal status.
“In Japan, even the fishmongers tuck away their cash receipts in Louis Vuitton bags - every section of society, every country in Asia, is falling under the spell of Western luxury brands.”
Japanese society views conformity as the path to harmony, so when a trend takes root, everyone wants to join. Rebels face ostracism and even ridicule from their peers. Thus, fashion magazines wield a lot of power. People want an authority to provide expertise and guidance. Japan’s economy provides many citizens with substantial wealth, but people have few ways to display it except on their bodies. Homes are small by necessity, space is limited and parking is scarce. Male domination of society has given rise to a generation of “parasite singles”: women in their 20s and 30s who choose to remain single and live with their parents. They are Japan’s largest luxury consumer segment.Hong Kong
“Shopping is a way of life” in Hong Kong, where the culture encourages over-the-top consumption and fosters a multibillion dollar luxury market. The retail scene is a shopper’s delight. High-end shops are interlaced throughout residential and commercial areas, making the city “one big shopping mall.” Malls are embedded into multi-use complexes, so you pass luxury window displays on your way to work, on your way home, when you go out to eat or even when you catch the train.
Tourists love to shop in Hong Kong. It is duty-free and there’s no sales tax. More than 23 million tourists visit Hong Kong each year, spending more than $12 billion. The locals, who pay very low income taxes, also love luxury. The members of one group of luxury gourmands are known as “tai-tais.” Each of these high-society wives of billionaires and tycoons spend as much as $1 million a year on luxury goods. Hong Kong has 50 to 100 such women, and some 300 more who spend $500,000 to $1 million annually. It also has a substantial group of working women with money who might indulge in $15,000 to $50,000 in deluxe goods each year. Lastly, the office ladies and up-and-comers dabble in luxury on a budget, buying well-chosen items now and then.
China
Why discuss luxury brands in a country where most people are poor? China is undergoing a reawakening, its economy is accelerating and its potential is boundless. The luxury market is already growing 25% per year. China’s 400 wealthiest people have a combined worth of $75 billion. More than 300,000 Chinese millionaires make up the next level, and the rich spend heavily. The practice of “gifting,” bestowing presents when you do business, also boosts the luxury market. Deluxe goods have replaced cash in greasing the wheels of government and commerce. Something small and pricey makes the perfect gift, to the benefit of such brands as Hugo Boss, Dunhill and Rolex. Several other factors pave the way for these goods. The explosive growth of the economy has lured expatriate Chinese back home, bringing their knowledge of western brands back with them. The Chinese are also traveling and shopping abroad for the first time in decades, and tourists are flowing into China, ready to shop. China’s emerging modern cities, such as Shanghai and Beijing, host world-class restaurants, hotels and nightclubs. As the new metropolises boom, the retail trade keeps pace. Hot brands, like Vuitton and Armani, are already expanding in China.
South Korea
South Korea suffers most from a “clash of values.” The country is obsessed with beauty, so luxury brands are a natural magnet. But, unlike in Hong Kong, where conspicuous consumption is encouraged, the South Korean culture considers unnecessary excess downright sinful. Yet, the desire for luxury brands runs rampant. Women are fixated on perfection. Cosmetic surgery is the norm. Estimates say that more than half of South Korean women in their 20s have indulged in a little help from the scalpel. Dermatology clinics, hair salons and spas cater to this obsession. With your perfect face and body, you need the perfect designer handbag. Recent access to easy credit also fuels this craze. Bustling local markets, like Dongdaemun, display Ferragomo shoes, Hermès bags, and other popular luxury items, both originals and counterfeits, in great abundance.
India
The masses are beginning to make money. The economy is booming, the IT industry is making an impact on the world market and the stock market is rising, but name brands have not yet made a significant impact. In fact, the luxury market is only some $100 million. But India is where China was a decade ago, in the “start of money” stage of the luxury model, poised to grow very rapidly.
Luxury marketers can target four major groups in India: First, “the old-money industrial dynasties” have been shopping globally for years. These sophisticated consumers are comfortable with luxury brands. Second, “new-money entrepreneurs” show a propensity for “bling” and designer wear, although they need more education to join the sophisticated elite. Third, the “gold collars of the corporate world” are earning large salaries and upping their lifestyles. However, they want long-term value rather than just a short-term boost. Fourth, India’s youth are earning precedent-setting IT salaries. They yearn for the latest high-tech gadgets, stylish clothes and other emblems of the good life. And, they’re willing to spend their newly earned money to get them.
Two other factors might drive designer brand growth in India. First, people already spend substantial amounts on elaborate four- or five-day weddings. This show of opulence paves the way for luxury, from the trousseau, to luggage, suits and gifts. The second factor is the celebrity sway of Bollywood, which produces more than 1,000 popular movies every year. A celebrity endorsement or product placement can set off a national trend.
Fakes
The quality of counterfeit luxury items has given birth to the oxymoron, a “genuine fake.” These copies bring in more than $27 billion annually, equivalent to a quarter of the legitimate luxury trade. More Asians buy copies than the real thing. Culturally, this indulgence is not viewed as breaking any laws. Westerners might be aware that they are doing something illegal, but they do it anyway. Fake markets abound, with South Korea and China leading the way. Who are the counterfeiters? Many producers originally were trained by and worked for a luxury brand company. Their expertise proves more valuable on the black market, where counterfeiting brings in $10 for every dollar invested - on par with the drug trade! Of course, Asian countries have laws against counterfeiting, but they are not well-enforced. Luxury brands are trying to fight back by lobbying local governments and bringing in lawsuits, but it’s an uphill battle. After all, everyone is doing it.
HKblog
