China isn’t just cheap goods anymore: an interview with Shaun Rein

China isn’t just cheap goods anymore: an interview with Shaun Rein

[Update: The End of Cheap China is now available on Amazon.com]

We recently caught up with Shaun Rein, the author of the upcoming book: the End of Cheap China and had the opportunity to chat with him about the China luxury consumer:

Many are calling Chinese tourists the “next Japanese tourists” in reference to their travel and shopping habits. Do you agree? How are Chinese tourists different from Japanese tourists?

Chinese consumers absolutely are the new Japanese tourists and brands need to start catering to their needs better or else miss out on the boom. Middle class Chinese all the way up to billionaires are crazy for luxury products, buying we estimate $15.6 billion USD of luxury products in 2011. Despite the world economic climate and inflation fears, we expect growth to be 20% in 2012, as confidence among luxury buyers remains high.

Like Japanese, Chinese love to shop as tourists.  I was in Paris recently and nearly the entire LV store were mainlanders.  Only 40% of luxury sales are currently completed in mainland China as there is more prestige for buying a Louis Vuitton bag in Paris than in Beijing so brands need to capture the Chinese tourists much as DFS captured Japanese.  That said, we expect sales on the mainland to hit 50% in the next several years, so brands need to develop the right regional growth strategy domestically while still capturing tourists.

What characteristics would you use to describe China’s “emerging” wealthy? How do they differ from comparable consumers in US/Europe?

Many brands target the wrong consumer in China by only targeting the uber wealthy. The book includes interviews with many Chinese who make $1000 USD a month but buy $800 Gucci bags and why they do that. Unlike in the US, even relatively poor Chinese save all their income to buy luxury products to show their status and have arrived as global sophisticates, so brands need to perhaps widen their target markets here.

What % of luxury purchasing decisions do you think are being made by women? How are women shaping luxury purchase decisions?

Far too many luxury brands make the mistake of only targeting men. Historically, men have been the biggest earners and have fueled luxury sales, buying from brands like Zegna and Dunhill.  But we have found that women now account for more than 50% of luxury sales so understanding the Chinese women is critical for luxury retailers. My book has a whole chapter on the purchasing habits of women and how they think.

Which luxury brands are “getting it right” in China, and why?
LV has really dominated in China. Their popularity though is a double edged sword. We interviewed several dozen ultra wealthy Chinese with more than $10 million USD in investable assets. The majority said they no longer want to buy LV because it is too common.

Three years ago everyone wanted LV. That is no longer the case as consumers mature, become more individualistic and more sophisticated. LV will continue to do well for another 5 years – literally there are tens of millions of Chinese girls who will make LV their purchase luxury bag purchase – but the shifting climate means a great opportunity for other brands like Chloe or Lancel to make massive inroads if they understand the Chinese consumer and execute properly.  The key to succeeding here will be catering to the specific needs of Chinese consumers.

Shaun Rein is the author of “The End of Cheap China: Economic and Cultural Trends that will Disrupt the World” http://www.amazon.com/End-Cheap-China-Economic-Cultural/dp/111817206X/ref=sr_1_1?ie=UTF8&qid=1316638994&sr=8-1 and the Founder of the China Market Research Group (CMR), www.cmrconsulting.com.cn

Check out his book on Amazon and pre-order now.

 

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