Are Wealthy Shoppers Ready for a Made-in-China Luxury Brand?

Reputation takes years to build. In China's case, one might argue it has taken centuries. But recent images, while redolent of power and scale, are more aligned with affordable mass market sensibilities than with exclusivity and luxury.

That may be about to change. Hermes and Chinese partners are launching a Chinese luxury brand to bring exotic Asian craftsmanship and aura to a market segment that has viewed the country with fascination but not with credit cards in hand. The challenge is to change perceptions while selling customers on the potential for quality and uniqueness. It has been done before. Mostly recently by Japanese brands that also ran counter to their nation's reputation for pedestrian manufacturing prowess.

The goal seems achievable given the interest the Chinese themselves have in better quality products made by their own. But this will of necessity be a longer term project. Given their success in other commercial realms, betting against the success of this venture would not appear to be wise. JL

Normandy Madden reports in Advertising Age:

Is the West ready for a "Made in China" premium luxury brand?

Philippe Lamy hopes so. Earlier this year, the French executive left L'Oreal after a 17-year career, including five in Shanghai as VP and general manager of its luxury division in China, to put a new twist on selling upscale brands. Instead of marketing western luxury products to Chinese, he helps market the best Chinese products to western consumers.
Now he oversees the global expansion of Shang Xia, a collaboration between one of China's leading designers, Jiang Qiong Er, now the company's CEO and artistic director, and Hermes.

While the French luxury company is part owner of Shang Xia, the brand is focused solely on Chinese craftsmanship, heritage, and traditions of careful craftsmanship like exquisite furniture made of rare zitan wood, ultra-thin eggshell porcelain bowls and agate tea pots.

Mr. Lamy, Shang Xia's chief operating officer, admits that China has an image problem after years of mass-market, low-end production and scandals over poor quality, but he insists that foreign buyers appreciate that country's history dates back 5,000 years.

"It's just a matter of awakening that part of their vision of China," he told host Trevor Lai this week on "Thoughtful China," an online marketing affairs talk show produced in Shanghai.

Shang Xia celebrated its first anniversary this fall with an exhibit in Shanghai's upscale shopping and dining district Sinan Mansions, making it one of the youngest local luxury brands in China, and one of the most expensive. Those porcelain bowls retail for thousands of dollars.

Yet Shang Xia is far from alone. The Hong Kong-based fashion label Shanghai Tang, now part of Richemont, has set up stores worldwide since launching in 1994. Earlier this month, Shanghai Tang announced plans to almost double the number of stores in China.

Other up-and-coming local players include fashion brands such as Omnialuo, Dorian Ho, Mary Ching and NE-TIGER, and Qeelin, a jewelry retailer often referred to as the Tiffany & Co. of China. (Qeelin was started by Ms. Jiang's husband, Guillaume Brochard, and creative director and designer Dennis Chan.)

None of these brands, including Shang Xia, is solely aimed at western buyers. On the contrary, they are eager to get a share of China's consumption of luxury goods, valued at $10.7 billion at the end of March 2011. China overtook the U.S. as the world's second largest consumer of luxury goods after Japan in 2009.

"There is an opportunity for small, homegrown brands to find presence," said Alison Mary Ching Yeung, founder and creative director of Mary Ching, which specializes in footwear and accessories.

Shang Xia, a premium brand, faces an additional challenge: Chinese consumers often buy luxury products to display status and affluence in a hierarchal society.

Does Shang Xia work on that level? "Not at all," Mr. Lamy said, but he believes there is a segment of China's ultra-rich that will buy the products for their beauty and strict attention to traditional production techniques.

Shang Xia talks to "cultured luxury consumers, who appreciate the finesse of having zitan wood furniture which has been almost sculpted and taken 3,000 hours to produce [a] tea table," said Chloe Reuter, founder of ReuterPR and a specialist in China's luxury market.

One of the main challenges facing local brands is their lack of history, said Edwin Song, Synovate's managing director, global capabilities, Greater China. Many western luxury brands date back to the 19th century or even earlier, but Chinese "don't have that kind of heritage that can be used to create aspirational stories."

Marketers also need to appreciate the differences between Chinese and western luxury brand shoppers, said P.T. Black, Thoughtful China's senior creative director.

In much of the West, taste is defined as having a unique, personal style, so "the only sin is insincerity," Mr. Black said. "China is different. Thousands of years of rigid society have left a deep mark. People here acknowledge a difference between low and high. Taste is not about knowing yourself, it's about improving yourself."