THOUGHT LEADERSHIP

 

Handbags, the National People’s Congress, and China’s Luxury Market

Sep 18, 2013 Michael Palan



The annual ‘Two Sessions’ of the National People’s Congress and Chinese People’s Political Consultative Conference are always sure to raise some spirited online debate, however this year, China’s netizens were up in arms over the participants’ sartorial decisions as much as their political ones.

The explosive growth in Chinese luxury consumption was well represented by members of the CPPCC, causing online commentators to question some of the immodest fashion choices (read: designer furs and dizzyingly priced handbags) however though we might expect skeptics to question the sources of funding for all these name brands, the style choices themselves raised almost equal controversy.  

Ironically perhaps, it seems that the congress truly does represent its people. With China ranking as the 2nd largest luxury consumer globally and expected to account for almost 20 percent of the global luxury market share by 2015 at USD 27 billion, it seems that the members of the CPPCC aren’t the only ones in the Middle Kingdom buying Birkin bags.

And that’s just the issue. As iconic brands such as Hermes, Louis Vuitton and Chanel spread their visibility from tier 1 cities to tiers 2 and 3, the abundance of Birkin bags and the like is pushing ever more sophisticated consumers seek to move beyond simply flashy logos and instant recognition, toward more subtle expressions of individual style. This transition has been dubbed ‘the experience curve’, whereby consumers’ preferences become increasingly sophisticated with time exposed to the luxury market.

In a city like Shanghai this can mean that an upper middle class woman’s first luxury handbag may be something like a monogrammed Louis Vuitton or a Chanel 2.5, providing the assurance of instant recognition. However, as her social circle gets used to the familiar patterns and logos, her next purchase may be more adventurous, with more focus on style and individuality rather than brand, in essence prioritizing a personal experience and expression.

The natural continuation of this trend of course moves far beyond handbag choices, to much more significant lifestyle shifts. China is witnessing the move towards experience over possession, which is likely to manifest itself in a growth in experiential luxuries such as foreign travel, entertainment and health and wellness. This in turn is sure to have even deeper knock on effects, with the potential to affect issues from consumer markets through to environmental sustainability. Fundamentally the Chinese market place is adapting remarkably nimbly to its new position within the global economy and increasingly, Chinese consumers are looking to reap the fruits of their labor.  

Ultimately the exception proves the rule. When some of the highest ranking politicians in China are accused of tackiness on SinaWeibo simply because they’re still at the beginning of the experience curve, clutching Louis Vuitton and Hermes, it only attests to just how far the country’s luxury market has come.


About the Author

Michael Palan is an Analyst at SmithStreet, a growth consultancy based in Shanghai.

Follow SmithStreet on Twitter.



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