Sara Mosavi | April 17th 2012 | @GlobalMkts
At the tender age of 14, two friends of mine made a pact to buy a Mulberry bag each with their very first pay-check. But, having a job usually comes with bills, so the pact soon turned to dust. On the other side of the world, reports have emerged of a 17 year old Chinese teenager who chose to bypass the traditional paradigm of going to work, getting paid and buying things. Instead, he thought it would be faster to just sell his kidney to illegal organ traffickers and use the money to buy himself an iPad.
Wang’s story is an extreme anecdote of what is a growing demand for Western brands among Chinese consumers. According to estimates by McKinsey, China will become the world’s biggest luxury market by 2015 (worth $27bn up from $10bn in 2009). The likes of Burberry must be breathing a sigh of relief at the sight of burgeoning middle classes in places like China and Brazil as their traditional Western markets struggle to make a full recovery. The well-known trench-coat maker reported a 36% rise in Asia-Pacific sales for the last quarter of 2011. Having a strong, globally recognised brand will act as a springboard, no doubt: up-and-coming youths in these new markets want to buy into a lifestyle that is still to some extent synonym to wealth and status. Not so different to the dreams of my hopeful friends.
Times are a-changing, however. Chinese entrepreneurs are beginning to build their own army of high-end products. Shang Xia, a recently launched Chinese luxury brand is just one example. In a recent interview with the FT, Jiang Qiong’er, the founder, explained that: “During our history, we had the most refined luxury, during the dynasties of the various emperors. It’s really just a pity that in the last 100 years, that [relationship with the past] was broken … because of the Cultural Revolution”. Shang Xia is not about fast financial returns, the ambition is to rival similar Western brands. Ms Qiong’er realises that it might take as long as 100 or 200 years. It’s worth mentioning that Shang Xia is not going it along – Hermes, a French high-fashion house, is backing the venture.
For much of its economic boom, China has depended on low-value, cheap manufacturing goods. The connotation of Made in China labels won’t go away quickly and it might be some time before Chinese luxury brands can truly rival Western ones around the world. That said, the government is making efforts to harbour innovation and create market-leading products. So, whilst Made in China still doesn’t have much cachet, "designed in China" has a good chance at success — at least for consumers in that part of the world.