Wednesday, December 01, 2004

Asia is THE target market for luxury brands! Why?

Seven years of economic woe may have taught Asia's
zealous shoppers some restraint but, with economies
picking up, they are again flocking to luxury goods
stores, only this time with a more discerning eye.

As disposable incomes nudge the record highs of the
mid-90s Asian boom years, consumers have spurned the
spend, spend spend attitude for a more choosy approach
towards the finer things in life.

"The market is more mature now, people are not just
throwing money at the most expensive thing; they have
learned and they are choosing wisely," says Simon Tam,
wine consultant with the Cafe Deco Group chain of bars
and restaurants in Hong Kong.

"They are investing in quality as opposed to the things
they think they should be buying."

Asia is THE target market for luxury brands, accounting
for more sales than any other region, including Europe
and the United States.

For instance, half of Switzerland's eight billion
dollars of annual watch exports come here.

"The barometer of how well a (newly launched) watch will
do depends on two key markets, Asia and Italy,"
Singapore's Sincere Watch executive vice-president Ong
Ban tells AFP.

"If it can do well in these two major markets, it will
usually do well in other parts of the world."

Asia's numbers are huge. For France's LVMH, the world's
largest luxury goods maker and parent of brands such as
Louis Vuitton and Veuve Clicquot, 40 percent of world
sales are generated here. For shoe label Gucci it's 45

Still heading demand is Japan, which for some brands
accounts for a third of global sales.

Although economic problems have cast a shadow over the
past 15 years, designer labels are still investing
heavily. Among them is French retailer Chanel, which
will open a 240-million-dollar flagship store in Tokyo
on December 2 on the famous Ginza avenue, just near
Cartier's building.

"Chanel's revenue in Japan is three times more than in
France," said Richard Colasse, CEO of Chanel Japan.

If mobile phones were icon of the last boom, this one is
likely to be characterised by the smell of cigar smoke.

"In the last year dozens of humidors have opened
throughout Hong Kong -- and all the hotels I speak to
are busy putting together cigar and brandy deals in
their bars," says Andrew Dembina, editor of the newly
launched Cigar Cutter magazine, aimed at Asia's new
generation of stogie chompers. "You didn't see that

"The market is also different in that consumers are no
longer simply buying Cuban cigars because they are the
most expensive. Like the early days of new world wines
people are experimenting and sourcing cheaper cigars of
equal quality from other parts of the world."

Huge changes have been seen in the luxury travel market,
with travellers opting more for private flight charters
in the wake of the September 11, 2001 US terror attacks.
They are also demanding more value for money and healthy

"Guests are getting younger, they are asking for more
for their money and they want more than just gyms," said
a spokeswoman for Hong Kong's Peninsula Hotel, one of
the most luxurious in Asia.

"Guests are indulging themselves still, but they are
doing it with the family or as couples."

Some things, however, are so luxurious that their
attraction remains unaffected by mere economics.

Rolls Royce sells some 15 percent of its bespoke
limousines to Asian customers. Its Phantom model,
released last year, is the most expensive car the
100-year old company has ever produced.

"We launched it during SARS but it still sold as
expected -- about 1,000 a year -- because super-luxury
goods avoid the cyclical nature of economics," Colin
Kelly, the brand's regional director, tells AFP.

While Hong Kong no longer possesses more "Rollers" than
anywhere else, Kelly says the honour has not gone far.

"China is probably up there now -- 25 percent of our
Asian sales go to China now," says Kelly.

If the traditional Asian markets are maturing, the
Chinese luxury market is still in its formative stage --
and revelling in conspicuous spending.

Analysts expect growth in the world's most populous
country to boost Asia's share of world luxury sales to
60 percent.

"Chinese people have no qualms about rewarding
themselves for their success," says Rolls Royce's Kelly.
"It's natural for them to show off their success."

Shanghai's Nanjing Road is proof of the revolution.
Along the metropolis's Fifth Avenue, the titans of
Western luxury have replaced once shabby shops with chic

Christian Dior, which has been in China since 1998,
recently doubled its presence in the elite Plaza 66 mall
and is planning to set up Dior Hommes in December
alongside Prada, Cartier and Gucci. And Italian Ferrari
opened its first office in this September.

"Chinese have expressed a great interest in Ferrari and
the lifestyle that we represent," said Enrico Mussetto,
a top marketing executive with the firm.

"Our customers are successful people who know how to
take advantage of the economic growth that China has to
offer," Musseto said.

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