Sales luxury goods expected to drop further - Rupert Hoogewerf

Rupert Hoogewerf

Sales of luxury goods dropped in 2013, the third year of decline, and is expected to drop even further in 2014, according to a new Hurun report. "In terms of traditional luxury - leathers, accessories, watches - this year is going to be flat if not a little bit down," Hurun founder Rupert Hoogewerf tells Reuters. 

Reuters:

"In terms of traditional luxury - leathers, accessories, watches - this year is going to be flat if not a little bit down," Hurun Report founder and chief researcher Rupert Hoogewerf told Reuters. 

"For luxuries like tea, healthcare, even education, we are still looking at a booming market." 

The crackdown on conspicuous spending, which began in 2012, is part of a vow made by Chinese President Xi Jinping to be tougher on graft. He has focused in particular on gifts made to government officials often in exchange for preferential treatment or contracts. 

As a result, many wealthy Chinese now buy luxury goods for themselves, rather than as gifts, Hoogewerf said. 

Products by Hermes, Chanel, LVMH's Louis Vuitton brand, Apple Inc and Gucci remained among the most sought-after brands for gifting, the survey showed. 

Less popular were Bulgari - another LVMH brand - Salvatore Ferragamo, Tiffany and Co and the fiery baijiu liquor made by Chinese firm Kweichow Moutai Co Ltd, once the top tipple of Communist Party officials. 

Affluent Chinese often shop online for the best price globally. They have also become more confident about their fashion choices, mixing high-street clothing and accessories with branded goods 

"There is a much savvier consumer out there," Hoogewerf said. "There will be more purchasing done overseas than in China. For a brand that's global it's fine."

More in Reuters.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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Chinese shoppers fund French luxury tycoons - Rupert Hoogewerf

Rupert Hoogewerf

The world's most successful luxury tycoons can be found in Paris, like Bernard Arnault of LVMH and Liliane Bettencourt of L'Oreal. Most of the luxury goods market is funded by Chinese shoppers, tells Hurun China rich list founder Rupert Hoogewerf in the People's Daily. 

The People's Daily:

The average wealth of the people on the Hurun Luxury Tycoon Rich List is double that of Hurun's global rich list, with the combined assets of the 33 wealthiest people in the luxury industry totaling US$289 billion, Hurun said. The list has a US$1 billion threshold.

Rupert Hoogewerf, chairman and chief researcher of the Hurun Report, said Chinese consumers helped those tycoons make roughly 20 percent of their money.

"The Chinese luxury consumer is today the most important customer group in the world for luxury brands, especially now that the Chinese luxury consumer has started to travel around the world," Hoogewerf said.

Luxury sales on the Chinese mainland are reckoned to have grown just 7 percent last year, compared to a 30 percent surge in 2011, according to consulting firm Bain &Company, with China's shoppers buying 60 percent of their luxury items abroad.

As this trend grows, luxury stores in China will serve more as a shop window for brands,Hoogewerf said.

Bernard Arnault of LVMH, whose fashion house Louis Vuitton is the preferred brand for gifting by Chinese millionaires according to the Hurun Chinese Luxury Consumers Survey 2013, tops the tycoon list with a US$51 billion fortune.

Liliane Bettencourt of L'Oreal comes second with US$30 billion, followed by Bertrand Puech and family of Hermes with US$24 billion.

They are among seven people on the list who live in Paris, home to more luxury tycoons than any other city.

The Chinese mainland holds no place in the luxury billionaires' club. Not because it doesn't produce luxury goods, Hoogewerf said. Furniture made from precious wood, liquor from Moutai and Wuliangye, and health products such as Cordyceps sinensis are sold at extremely high prices, he said.

However, some producers don't see themselves as producing luxury goods that fit in a category dominated by French names. Chinese brands still lack international renown, Hoogewerf said.More in the People's Daily.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

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Why Louis Vuitton cannot afford to be too popular - Shaun Rein

Louis Vuitton in Paris

Being popular in China seems attractive to many luxury products, but - argues retail analyst Shain Rein in CNBC - Louis Vuitton is becoming so popular, it might wipe away its attraction as a luxury asset. What should Louis Vuitton do?

Shaun Rein:

My firm conducted interviews with several dozen mega wealthy with investible assets of more than $10 million. The majority told us they no longer wanted to buy Louis Vuitton. As a woman in Beijing, who is worth billions, said, "Louis Vuitton has become too ordinary. Everyone has it. You see it in every restaurant in Beijing. I prefer Chanel or Bottega Veneta now. They are more exclusive." 

Soaring wealth and obsession with luxury products provides huge opportunities for luxury retailers. The number of Chinese millionaires are estimated to more than double in the next five years. The Hurun Report estimates there are 271 billionaires, up from 189 in 2010. That growth is also causing challenges for Louis Vuitton and other historically dominant players like Zegna and Omega to maintain market share because the truly wealthy no longer want to buy the same fashion brands everyone else has... 

To stave off competition from very exclusive brands, and premium brands like Coach, Louis Vuitton is going to have to spend more on marketing to maintain its exclusivity. So far it has kept ahead of the curve, launching multi-story flagship stores in key shopping areas and marketing initiatives in conjunction with the Beijing National Museum. 

Celebrity endorsers like Angelina Jolie also help add luster. These initiatives are key to maintaining status but will become increasingly costly, squeezing margins, as rent and labor costs go up. 

Louis Vuitton’s parent group, LVMH, should consider more acquisitions at the higher end to capture wealthy consumers tiring of its flagship brand. It has bought stakes in Hermes but should try buying high-end brands outright to capture the truly wealthy segment.

Shaun Rein

More in CNBC


Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

More links to Shaun Rein's activities in storify.

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