More than 100 guests from some of the world’s leading luxury brands attended ‘Luxury Goods in China and Brazil: Know Your Consumers’, a luxury forum held in Paris and hosted by BBDO/Proximity Live, an integrated communications agency helping brands engage with China’s affluent consumers.
With annual growth around 8%, the global luxury market is more than healthy. This feat is mainly due to emerging – or rather definitely emerged – countries such as China and Brazil, a fact that brands have long grasped.
The forum painted a picture of the consumers driving luxury consumption in these two distinct luxury markets.
Speakers at the event included:
• Hong Huang, blogger, author, businesswoman, and the publisher of fashion magazine iLook. Listed as one of the world’s 100 most influential people by Time Magazine in 2011.
• Hans Lopez-Vito, Executive Planning Director, BBDO China
• Paulo Coelho Mendez, Planning Director, ALMAP-BBDO (Brazil)
The speakers discussed key consumer trends in China and Brazil and highlighted that in China two very different consumer categories are driving the Chinese boom for luxury brands.
1. The middle classes
China and its inhabitants feel fine. They have the impression the future belong to them. Many first-timers on the market are young and save up to buy the products of their dreams. Many middle-class consumers buy luxury products, not just to acquire status but increasingly to make their imagination and knowledge more sophisticated. In China, the market has moved beyond the frantic consumption of luxury bags and is now franticly learning about the luxury sphere by immersion.
But men and women are not on an equal footing when it comes to luxury consumption. In a country where the single child policy has fostered the birth of boys, and where there are likely to be 40 million single men aged 15-34 by 2020, young men under growing social pressure have to spend more and more conspicuously to be seen as a good catch. The luxury watch is a way to gain alpha male status, much more than the hedonistic approach that is typical of the objects of their affection.
Moreover, in this vast country with authoritarian power structures and controlled information, influencers like bloggers (especially female ones) have far more clout than in Western countries. Their following and adulation also comes from the fact that they represent a safety valve for a population in need of entertainment.
2. The new nobility
The other identified category of consumer in China forms a more discreet, less ostentatious social class. The industrial and Party elite form a new nobility instilled with conventional codes and values that prefer to remain in polite society rather than show off at flashy events. This class sets the tone for good taste. And brands have to be very careful: the new nobility is profoundly nationalistic, and increasingly attracted to domestic luxury brands.
The Brazilian Mosaic
In Brazil consumers can be roughly segmented into four categories according to the combination of economic capital and cultural capital. The only shrinking group is “Western-style” consumers with large spending power and deep knowledge of luxury. All the others (young manager households, nouveaux riches, privileged youth) are dynamic and devoid of both knowledge and prejudice. They are scattered across different states, mainly in the southwest of the country.
They are evolving on a market where the frontier between premium and luxury is extremely vague: the obstructive tax framework means an iPad costs twice as much in Brazil as in the USA. In that context, even a Topshop product shines like a prestigious brand.
For these new consumers, a luxury brand is primarily defined by thoughtfulness and service. Moreover, Brazilians are willing to spend much more in a local store for what they could find cheaper when traveling: they feel like they are treated and understood better when they are served in their language. Local brands have assimilated this. Supported by the new generation, they are growing more and more like Dona Santa, a famous, extremely successful store in Recife that primarily features Brazilian designers.
The lessons for brands
While acknowledging this great heterogeneity, one common factor can be pointed out: the emergence for different reasons of local luxury: due to a nationalistic reflex in China and the open recognition of teeming local creativity in Brazil.
Brands can draw some general conclusions. They should adopt five stances:
1. The guardian: The brand’s business has to be strictly defined. This means drawing the lines between luxury and premium and between fads and major fashion houses.
2. The teacher: Brands cannot settle for just selling product. They must educate consumers and have them discover an imagination framework and a culture that are new to them. And these pupils learn fast.
3. The historian: Brands shouldn’t think twice about telling their own story, relating their historical foundations and celebrating the great of the past. There is less risk of appearing outdated in these new countries than in a new Europe that is struggling to see its own future.
4. The diplomat: Adaptability is the keyword here. Brands need to feature local faces and publish highly limited special ranges for those consumers. A certain nationalistic streak needs to be flattered in countries that are increasingly the centre of the world.
5. The gymnast: Brands have to be flexible and reinvent themselves. Particularly in terms of distribution, they need to explore new e-commerce avenues and be aware that speaking to the Brazilian and Chinese markets also means speaking to Brazilians and Chinese who are traveling abroad.