Luxury Brands Long to Bond With China’s Millionaires
Diamond earrings glistened, stiletto heels tapped and the sequins on a mermaid gown shimmered as Miss China sashayed down a New York catwalk, passing within a perfume waft of a compatriot named Lina Li.
Ms Li was among a group of wealthy Chinese who had paid for a behind-the-scenes glimpse of western luxury at Bergdorf Goodman, a genteel department store for the affluently elegant, which put on a fashion show in their honor this week.
“I liked it a lot. It was my first fashion show,” said an enthusiastic Ms Li. She glanced down at her sweater and jeans and added sheepishly: “I didn’t dress properly.”
The co-founder of a Shanghai recruitment agency, Ms Li is the kind of person that Bergdorf Goodman and other luxury retailers want to meet. But if the feeling is mutual, so is a measure of puzzled incomprehension.
Chinese shoppers have become a fixture of the luxury retail scene in the US and Europe, drawn by prices that can be up to 50 per cent lower than tax-elevated levels at home. But many upscale brands have yet to bond with the truly wealthy – China’s million millionaires.
“It’s like they’re dancing with each other but sometimes going past each other,” says Christine Lu, co-founder and chief executive of Affinity China, a luxury club that organized the New York tour, named Dragon Week, to coincide with the lunar new year.
That is why several brands agreed to host some of the 80-plus Chinese participants, among them Mont Blanc, the pen maker, which squeezed a Steinway piano into a store for a recital by Lang Lang, the Chinese pianist.
Piaget, a watch brand, unveiled a $58,000 timepiece engraved with a gold dragon. Estée Lauder gave them a tour of its eponymous founder’s corner office and the first samples of an expensive new eye balm. J Mendel, a fur coat maker, showed them its workshop.
According to provisional figures from the Chinese Tourism Academy, Chinese took 70m overseas trips in 2011 and spent a total of $69 billion, an increase of 25 per cent from the previous year. They are also increasingly discerning.
Even when luxury brands get the basics of hiring Mandarin speakers and accepting the China UnionPay credit card, Ms Lu says that misunderstandings with the wealthy can still arise.
Western luxury retailers like to ingratiate themselves by building “unique relationships” that depend on employees learning about customers’ lives and anticipating their needs.
But Ms Lu says that China engenders a “natural distrust” of pushy sales associates and that many of the rich guard their privacy jealously. “We cater to a demographic that doesn’t want you to know who they are.”
Retailers can also make the error of judging people by appearances. “I remember one guy,” says Kaan Cedric Turk, US general manager for Zilli, a French clothes maker that sells a $26,000 ostrich leather jacket.
“He came without speaking a word of English. Wearing sneakers and a raincoat … And he spent an amount of money that was mind-boggling.”
Bain & Co says that in 2010 one-quarter of the 212 billion yuan that mainland Chinese spent on luxuries was outside the mainland, Hong Kong and Macau. Coach, the handbag brand, says that at peak travel times Chinese tourists can account for 15-20 per cent of its sales in New York, Las Vegas and Hawaii.
While ordinary Chinese overwhelmingly prefer group travel, research by the Hurun Report last year found that 80 per cent of the wealthy eschew it and its association with hurried bus tours.
Dragon Week provides the opposite. “It’s kind of like a concierge service, offering them access and experiences they can’t get otherwise,” says Renee Hartman of the China Luxury Network, part of Affinity China.
Champagne is abundant and the guests – most of them under 50 and proficient in English – get a list of events and choose their own itinerary. For a Dragon Week pass, excluding flights and hotels, they paid nearly $4,000.
China’s rich are no more homogenous than anywhere else’s, so while some seek pampering, Affinity helped others to research private schools and buying a US home.
As a vogue for bling fades, many wealthy Chinese are also eager to understand why the high prices of luxuries are warranted. “They are interested in understanding the history of the product, how it’s made, the quality, how to take care of the leather,” says Victor Luis, president of Coach’s international business.
Ms Li, the Shanghai recruitment agent, came for something else. “We are looking for new lifestyles,” she says at a cocktail party as Diane von Furstenberg and Oscar de la Renta, the designers, greeted guests nearby.
“I don’t know fashion. I want to know the world a little bit more. I’ve been working hard for 10 years. I didn’t have time to buy.”