When will China create luxury?

By Li Zhixin

The new World Luxury Association (WLA) 2009-2010 global report shows China has overtaken the US as the second-largest market for luxury goods in the world, trailing longtime leader Japan.

Local luxury brands have responded to a flood of foreign competitors with deafening silence.

Why is the domestic luxury brand industry failing to gain the slightest foothold in its own country?

Luxury without a name

Robert Polet, CEO of Gucci Group, said last year young Chinese buyers made up a fourth of worldwide luxury sales.

According to WLA statistics, domestic customers buy 60 percent of their luxury goods while overseas. Travel is a defining factor in boosting luxury goods consumption.

“That wealthy people scramble to buy Western luxury brands has nothing to do with ‘foreign worship.’ It’s because China doesn’t have any luxury brand that is recognized internationally,” said Ouyang Kun, WLA representative to China.

Lin Jingjing, 28, editor of a women’s fashion magazine, spent 6,900 yuan on a Jaeger LeCoultre watch instead of buying Fida, her parents’ preferred domestic brand.

“Fiyta has several fashionable patterns in the same price range and with superior quality I insisted on buying this low-end Swiss product because Jaeger LeCoultre has a bigger name,” she said.

One popular belief is that the more expensive a product, the more luxurious it is.

But China is hardly short on expensive brands: liquor labels like Maotai, Wuliangye and Shuijingfang; fashion labels like Septwolves, Baoxiniao, Bosideng and Yongzheng; and jewelry labels like Dongfangjinyu and Nobel Jewelry are extraordinarily priced.

“You will never see Prince Charles smoking Chunghwa or drinking Shuijingfang, even thogh these products are in top quality,” Ouyang said.

Luxury brands are defined by three qualities: historical recognition, mature consumption and worldwide demand. But not one domestic brand has achieved all three, said Yu Mingyang, director of the Brand Management Research Center at Shanghai’s Jiaotong University.

He calls pricey domestic products “quasi-luxuries.