When will China create luxury?

More time needed

The WLA anticipates more domestic luxury brands in the next five to 10 years given the growing market. But finding a position will be hard, since European and American brands have already divided and conquered the market.

The past decade gave rise to 18,000 billionaires, 44,000 millionaires and 250 million middle- class families who can afford to splurge. At least 195 million people in China can afford luxury goods, and they are consuming in core markets like Beijing, Shanghai, Guangzhou and Hangzhou.

French luxury brand Louis Vuitton entered China in 1992, and its sales volume has grown 50 percent annually. The sales volume of German luxury brands increased 40 percent compared with a 9 percent growth in the German market.

They are not alone. Gucci opened 29 shops in China and eight in Beijing alone. Versace announced it will double its number of boutiques this year. American luxury brand Coach is planning 55 new stores in the next five years.

“More and more international luxury brands targeting the Chinese market choose Beijing or Shanghai as a starting point Domestic brands are not aggressive enough, and domestic consumers eye them with a curious wait-and-see attitude,” Yu said.

“What China’s luxury brand lack is not culture or quality — they lack the brand itselft takes money and effort to build a luxury brand: two things Chinese businessmen are notoriously unwilling to invest. All they want is short-term profits as soon as possible,” he said.

The shortage of brand specialists only complicates matters. “Anyone competent at brand building will go work for a foreign luxury brand instead,” he said.

“Due to the poor operations, Chinese consumers look at domestic ‘luxury’ labels the way they look quality teas, porcelain and wood furniture: as collectables,” he said.  

While the ability of Chinese brands to penetrate foreign markets is promising, the home market will continue to be dominated by foreign brands through at least 2030, he said.

It may be true that time heals all: with many domestic brands only 20 years old, it will be a while before Chinese makers have the age and clout needed to impress their own countrymen.