* Wealthy Chinese shun Louis Vuitton, Gucci as too popular
* Hermes, Chanel gaining ground
* China poised to become world's biggest luxury market in
* Brands create bespoke items for top clients
By Melanie Lee
SHANGHAI, June 7 Daisy Liu epitomises China's
obsession with luxury brands: her shoes are Guiseppe Zanotti,
her brooch Chanel, a floral Hermes scarf is stylishly knotted
over one shoulder. She won't, however, tote a monogrammed Louis
Vuitton handbag ever again.
Wealthy shoppers like Liu are increasingly turning up their
noses at labels they believe have been tainted by the common
touch, seeking out understated, and exclusive, merchandise from
the likes of Chanel or Hermes instead. That is
becoming a big challenge for designers hoping to cash in on the
world's fastest growing luxury market.
"I have two Louis Vuitton handbags but I no longer carry
them although they are still in fashion," said Liu, a
31-year-old employee at a multinational cosmetics firm.
"I don't think the brand fits me any more."
More than a decade of strong economic growth has helped
swell the disposable incomes of millions of Chinese, creating
legions of men and women with a voracious appetite for status
symbols regardless of the cost.
China's importance for firms such as Louis Vuitton's parent
LVMH and Gucci's PPR SA is indisputable:
last year, as Europe was mired in financial crisis and the U.S.
economy faltered, mainland Chinese shoppers spent an estimated
111 billion yuan ($18 billion) on luxury goods, according to
consultants Bain & Co.
China is the world's third biggest market for personal
luxury goods, worth at least 160 billion yuan ($25 billion). In
the next three years, it is expected to leapfrog over Japan and
the United States to take the top spot, with the luxury segment
expanding to 180 billion yuan ($28 billion).
As it grows, the market is also maturing, moving from
so-called aspirational luxury, where bling is king, to what
experts call absolute luxury: the desire to be seen as both
wealthy and discerning.
"In the past, it was just a checklist. If you were one of
the top five brands out of some magazine, you found that people
in China just checked the checklist and bought according to the
list," said Vincent Liu, partner at Boston Consulting Group.
"Going forward, people will be more selective. They know
what and where and when to use what brands and products."
For sophisticated consumers like Liu, that means purchases
such as a $2,000 Chanel mini bag and a Prada clutch. She's also
eyeing a coral lambskin bag from Bottega Veneta, the Italian
fashion house renowned for its signature woven leather goods.
"The truly wealthy, the real millionaires, they will not
want to buy LV Louis Vuitton or Gucci because they are too
commonplace," said Shaun Rein, managing director, China Market
Research Group. "Rich people are getting richer and they want
exclusiveness and more self-indulgence."
China's luxury market is poised to grow 18 to 20 percent
this year, steeply outperforming the single-digit forecasts for
Europe, the Americas and Japan, according to Bain, explaining
the rapid expansion of larger luxury firms such as LVMH.
For years, LV's Monogram "Speedy" tote, a dome-shaped
classic favoured by Audrey Hepburn, was one of the most
desirable bags for Chinese women because it was a clear signal
of having made it: the handbag costs double the $400 an average
Chinese worker earns a month.
The brand is LVMH's cash cow and revenues are almost double
those of Gucci, widely considered its closest competitor.
But as LVMH grew in China - there are currently about 38
Louis Vuitton stores there, including in remote areas such as
the southern Guangxi autonomous region, compared to the 57 or so
in Japan - it lost some of its cachet.
"In China, Louis Vuitton is seen as the brand that even your
ai-yi, or domestic helper, can afford," said a retail consultant
who declined to be named in order to be candid.
When asked to comment, LVMH told Reuters via email it
expected to "gain a brand new lead on the market" via a new
store set to open next month in Shanghai's swanky Plaza 66 mall.
"The Plaza 66 will confirm Vuitton as the trendsetting brand in
China," the email said.
Gucci did not immediately respond to requests for comment.
LV remains one of China's most popular labels - a recent
survey by a strategists Digital Luxury Group put it at the top
of web searches by consumers.
But brands such as Chanel and Hermes are catching up fast.
A recent study by consultants Bain shows twice as many
Chinese now covet Hermes, creators of the iconic Birkin and
Kelly handbags, and the brand is the third most likely to be
purchased after Gucci and Louis Vuitton.
"Some prefer Hermes because our products are more subtle and
not over exposed," the brand's China president, Leo Liu, told
Reuters in an emailed statement.
SOME LIKE IT HAUTE
For Gao Jie, 27, a public relations employee who routinely
buys luxury goods, Hermes is the ultimate status symbol: their
bags are handmade, come in limited quantities, cost anything
between $9,000 to $150,000 and are generally not within the
reach of the general public.
Gao says this year she aims to buy a brightly coloured Kelly
Candy handbag that costs at least four times her monthly salary
of 20,000 yuan ($3,100).
"There are some things that are classic by design and widely
recognised by the market. I really hope to one day be able to
own all these classic designs," said Gao, who regularly sets
aside some of her salary, and income from investing in stocks,
to buy shoes and bags.
To attract shoppers like Gao, LVMH and other larger luxury
brands are trying to strike the difficult balance between
exclusivity and popularity to remain profitable.
LVMH is offering customers increasingly expensive and
bespoke services to try to retain a mystique around the Louis
Vuitton brand, whose creations are seen as being both too common
and easily copied.
The company is also careful about rolling out new stores,
aware that the brand would suffer from too much visibility.
Whether these strategies will convince savvy Chinese
shoppers like Daisy Liu to carry their LV bags is unclear.
"Luxury, embedded in that, is this notion of exclusivity:
that not everybody has it. It's always a fine line that the
brands need to tread," said Torsten Stocker, partner at business
strategists Monitor Group.