Government Pushing Support Of Local Brands To Compete With International Giants
NE-TIGER founder Zhang Zhifeng recently claimed “the only high-end Chinese brand is mine.”
Following the release of the Chinese government’s 12th five-year plan, which prominently advocates the nurturing of domestic Chinese brands that can compete on a global level and move up the value chain, we’ve seen a significant rise in the number of Chinese-language articles asking: just how far off are actual home-grown Chinese luxury labels? While a new generation of independent designers is now active in Beijing and Shanghai, pumping out a steady supply of avant-garde-leaning collections, influential brands are scarce. With the notable exception of Chinese brands supported by major international partners, such as the Hermes-backed Shang Xia, the Richemont-backed Shanghai Tang, and the French-Chinese jewelry house Qeelin, few clear leaders have emerged in the running to become China’s first internationally successful premium marque.
A lack of competitive brands hasn’t only annoyed the Chinese government, but has been, according to Chinese Ministry of Commerce officials, a key factor in the much higher prices charged for luxury brands in mainland China. In response to inquiries about the markup on high-end imports, which can cost up to 50 percent more than in Europe or North America, one official recently said there are three main factors causing prices to be so high: First, China’s luxury and consumption taxes, which some countries simply do not have; Second, high transaction costs in China; Third, regional differences in promotions and a lack of unified pricing. However, as MSN China points out, some industry experts have added a fourth reason for China’s high prices: an absence of domestic premium brands. As a result of the lack of local competition, these analysts say, foreign luxury brands can engage in “unreasonable discriminatory pricing” in the China market vis-à-vis their home markets.
From MSN (translation by Jing Daily team):
The article goes on to note that the most important change that can wean Chinese consumers off of their single-minded pursuit of imported luxury brands will be a transition from the “show-off stage” of consumption to the stage of appreciation and rational consumption. This obviously won’t happen in an instant, but will likely happen over the course of an extended, tiered timeline. While a small minority of elites may make the transition to “rational consumption” (理性的奢侈品消费) — which is to say, purchases based on personal interest in brands and quality rather than trends — and nurture the development of domestic luxury brands, it will take far longer for the nouveau riche or the emerging middle class to reach this level. As such, we’re likely to see foreign brands like Louis Vuitton occupy that coveted spot at the top of the luxury heap in China for quite some time.