Luxury the Chinese Way

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1 Luxury the Chinese Way

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3 Luxury the Chinese Way New Competitive Scenarios Serena Rovai La Rochelle Business School, France

4 LUXURY THE CHINESE WAY: NEW COMPETITVE SCENARIOS Serena Rovai 2016 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission. In accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 2016 by PALGRAVE MACMILLAN The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire, RG21 6XS. Palgrave Macmillan in the US is a division of Nature America, Inc., One New York Plaza, Suite 4500, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. ISBN E-PDF ISBN: DOI: / Distribution in the UK, Europe and the rest of the world is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. A catalog record for this book is available from the Library of Congress. A catalogue record for the book is available from the British Library.

5 To Matilde. For her unique gift for understanding when East meets West.

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7 Contents Prologue Preface Acknowledgements ix xi xiii Introduction 1 Part I The Luxury Industry and the Chinese Sociocultural Context in Transition 1 The Birth of Luxury in China and Trends since Imperial Times 15 2 The Impact of Cultural Values and Habits on the Luxury Market 26 3 Chinese Institutional and Legal Barriers to the Development of a Luxury Industry 38 4 The Chinese Aesthetic and the New Creative Movement from East to West 49 Part II Chinese Customers Insights into the New Chinese Luxury Experience 5 The Impact of Geographical Expansion and New Urban Dynamics on Client Segmentation 63 6 One-, Two-, and Multiple-Segment Chinese Luxury Clients and the Rise of the Middle Class 74 7 Digital Innovation and Its Key Role in Chinese Luxury Consumption 86 8 The Chinese Luxury Client: Current Profile and New Attitudes 98 vii

8 viii Contents Part III The Emergence of the Creative Phase From International to Chinese Brands 9 Luxury Tourism: The New Shopping Perspective The Identity of International Luxury Brands Chinese Luxury Brands: The New Creative Phase and Identity in the Local Market Chineseness in Luxury: Future Challenges and Perspectives 145 Conclusion 156 Notes 167 References 168 Index 179

9 Prologue Though the Metropolitan Museum of Art Gala couture creations chosen by the VIPs invited to the 2015 event were the centre of press coverage and attraction, the real star that grabbed the attention of luxury and fashion experts was the theme of the huge exhibition celebrated by the gala. Curated by Andrew Bolton and Wong Kar-Wai, China: Through the Looking Glass, a major exhibition of 140 couture dresses, together with Chinese movies, antique art, and porcelain, was not only a celebration of Chinese creation but also the epitome of Chinese aesthetic influence and a celebration of Chinese art and culture as an inspiration for global luxury and fashion. It was a representation of China s growing supremacy in the luxury industry worldwide, and the key role it played, not only in the aesthetic moment of creation, but also in the profitability of the luxury industry business. The exhibition displayed China as a whole, rather than focusing exclusively on dresses created by the main global luxury fashion designers through Chinese-inspired moments. It included such key international creations as a China-exclusive dress designed by Valentino for the Shanghai catwalk in 2013, an Yves Saint Laurent gown inspired by the Chinese stereotype of the dragon lady, and a Chanel version of a qipao inspired by the British American film The World of Suzie Wong. The dragon, once the symbol of the Chinese emperor, has now become the symbol of China itself. It has also been adopted by creative directors of fashion and luxury brands to communicate attractiveness and strength, as well as sensuality. In China, the so-called dragon robes were court wear denoting rank and standing, and the same dragon inspired the Versace gown worn by Jennifer Lopez for the Met exhibition inaugural gala. However, the path of the Chinese dragon began before the exhibition (Vogue, 2015a). The Metropolitan Museum of Art s new Costume Institute exhibits define the creations in China: Through the Looking Glass as the ways in which numerous international top designers have long viewed Chinese fashion designs that focus on fictional China fantasies nearly always created almost entirely for Western consumption. As highlighted by Andrew Bolton during an interview conducted by Flora and Zhao for Jing Daily (2015) at the press preview before the Met Gala, in answer to a question on why Western designers were incorporating Chinese aesthetic elements in their creations, Chinese inspirations ix

10 x Prologue sometimes came though cultural events related to Mainland China, but not always: I think sometimes it s triggered by cultural events; sometimes by exhibitions that are staged in cities. But I think part of it is just the ongoing romance of China in designers imaginations. I think a lot of designers are not inspired by the real China they re inspired by this fictional China that just really exists as a Western fantasy. However, he further evidenced that chinoiserie not only was influencing global luxury and fashion brands in their creative design for cultural and inspirational reasons but also led to the assumption that Chinese consumers are officially the main customer segment for luxury brands. It will be increasingly interesting to see how global luxury brands engage with contemporary China, as well as how China s own creative luxury and fashion lifestyle brands emerge which could be the follow-up for a future exhibition. As evidenced by Jing Daily in an article on the exhibition, despite most of the dresses displayed at the Met having been created recently, in relation to the global trend in luxury, they now represent a bygone era in the global luxury and fashion industry market. Currently, Chinese customers are the main target for most luxury brands, and consequently, creative directors should not only create clothes or luxury goods about China, but also focus more definitely on creating luxury goods for China (Jing Daily, 2015). For luxury creative directors and fashion designers, it will ultimately be wealthy Chinese consumers, with their purchasing attitude and power, who make the final judgement. However, global luxury brands will have to develop a specific understanding of the Chinese sociocultural context in order to maintain their position and be sustainable; China cannot be solely limited to a role as a source of inspiration for creations, but has to be perceived for its importance in and strategic impact on the luxury market. Despite the slowdown of recent years, Chinese luxury spending has increased tenfold since the beginning of 2010 and still accounted for 30 per cent of the global luxury market in 2014 (

11 Preface Luxury the Chinese Way: New Competitive Scenarios will answer key questions regarding how the luxury industry can operate successfully in the Chinese market in relation to its sociocultural, economic, ethical, and institutional specificities, as well as the changes and challenges associated with the Chinese context. Contrary to expectations that China is just one more case of the expansion with marginal adaptations of globalized luxury, the book argues that corporations need to face an endogenous culture of luxury that is shaping luxury industry strategy and development, as well as customers behaviour, in a distinctive way. Luxury products and services that dominate the growing Brazil, Russia, India, China, and South Africa (BRICS) economies come from brands founded in Europe or the United States. However, when thinking of world rather than corporate history, one can easily see that, since the 3rd century BCE, China has played an active role in the internationalization of luxury goods, namely, silk, gems, and spices. While the traditional Silk Route has been replaced by new technology and political and economic agreements, this link demonstrates that the concept of luxury trade had its origins in China. As a result, the growing Chinese market currently poses many challenges to international brands. Chinese society today has a tendency to prefer Western luxury products over local ones, but this preference is not uniform across all social strata or cities. The country s recent changes in its institutional system, the surprising challenges related to economic changes, and the potential development embedded in the appearance of a fast-growing middle class have created a new environment conducive to the development of the luxury industry in China. In particular, strategic factors such as: the impact of innovation on luxury brands; the new forms of brand identity development through Sino-foreign alliances; institutional control of luxury orientation for Chinese citizens ; the new purchasing orientation towards personalized goals and services with a Chinese touch; the influence of the Chinese aesthetic and culture on the moment of creation of global luxury brands; and xi

12 xii Preface the new identity of Chinese luxury brands and consequent customer purchasing attitudes are forging a new path for the successful entry and positioning of luxury brands in the Chinese market and with regard to Chinese consumers.

13 Acknowledgements I would like to thank Professor Nicola Bellini, who, besides being my partner in life, as a highly esteemed scholar spent his precious time going through this book with me, continuously and patiently supported me during the writing of it, and spent endless hours of passionate discussion with me on the topic. You were always there! Thank you for being with me during this journey...it could not have happened without you. The journey into the luxury world in China began in 2008 during my role as Director of the Italian Agency for the Internationalization of the Higher Education System at China Uni-Italia in Beijing. Numerous Italian schools of business and fashion, as well as Italian universities, contacted us in order to gain support for their students recruitment and mobility activities in China, and also in tailoring luxury and fashion programmes to train talents to work for international luxury brands in China. Five years later I found myself at the Grenoble Ecole de Management, one of the top 25 business schools in Europe, with a new dream and a new challenge for my competencies: opening new programmes in luxury brand management. Thanks to the trust and the support of the director general and the dean, two Master of Science (MSc) degrees in Fashion, Design, and Luxury Management one in Grenoble and one in London started from scratch, a Master of Business Administration (MBA) specialization in Luxury Brand Management began in London, and a Bachelor specialization in Fashion, Luxury, and Design was initiated in Grenoble. Experts from luxury brands, as well as academics and researchers from the fashion and luxury field, contributed to creating a pool of highly specialized multicultural programmes. My own journey in creating, implementing, and directing those programmes began with a path into the world of luxury worldwide, and in China in particular. At the end of 2013, I joined La Rochelle Business School with new challenges for internationalization in Higher Education and luxury development. No specialization in luxury existed and I had the chance to contribute to the implementation of the MBA Luxury specialization and to its development in teaching and researching in the sector. Thanks to my dean and associate dean, that I could find the time to pen this book. xiii

14 xiv Acknowledgements Thank you to Liz Barlow from Palgrave Macmillan for believing in this book, and to Liz Eggleston who spent precious time reading and revising it. There would also be an endless list of people to thank if I were to add the colleagues, luxury experts, and students who contributed to the development of this book. I would like to thank them here. In particular Dennis Valle, former CMO at Versace and VP at Dolce & Gabbana brands who guided my journey into the world of luxury with unique expertise. Lastly, I would like to thank two unique women. Thank you to my daughter, Matilde, who contributed, with her acumen and intriguing questions, to the development of the book. Thank you for your patience in accompanying me through the writing and for being there...always. Thank you to a wise, caring, and loving woman who has always believed in me: you will always be there!

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