China Luxury Market-Not Just a Bed of Rose

Every company on any industry is struggling on the economic meltdown, especially for luxury companies. When Europeans and North Americans tighten their belts, newly-emerging wealthy classes in China are desperately chasing for anything that will shows their affluence and status. However, it is predicted that China will become the one of the biggest luxury market in the future as its neighbor and archrival-Japan, but out of those optimistic hype, it is still a tough nut to crack.

Alcoholic beverages is always the precursor to a new market. Although almost every brewery in China adopts foreign formulas or technologies, luxury liquor producers still doubt with the prospect. Champagne house Taittinger said it could make high-end sparkling wine in China but the market was not ready for it yet, while Lamborghini said the country's tradition of luxury chauffeurs, bigger than sports driving, made expansion there a challenge. The luxury watchmaker's Chief Executive Jean-Marc Jacot said. Taittinger said there were many places in China where it could consider making high quality sparkling wine - champagne can only be made in the northern French region - but Chinese palates were not accustomed yet to the pricey tipple. "It is probably a bit early," Pierre-Emmanuel Taittinger said. "There is not a strong (high-end) wine culture there yet."

Another concern is business culture diversity. Jeweler Van Cleef & Arpels, owned by Richemont, found it tough to get its brand message across, while watchmaker Parmigiani Fleurier worried about finding the right partners. "The specific challenge about China is finding a Chinese company you can trust and who understands the luxury business,"

Counterfeits are always the top obstacles for luxury companies to succeed in China Market. Hermes, whose chic handbags are hand made in France, would consider making goods in China if it could find artisans to make original items, but said it suffered from counterfeiting there. "Our image is strongly damaged by counterfeits. That is why we are fighting it like hell," CEO Patrick Thomas said. "When they (in China) see a counterfeit, they think it is genuine."

Counterfeits cost luxury groups hundreds of millions of Euros in lost sales every year and imitations are becoming increasingly refined and sophisticated.” The challenge in China is being able to explain to 1.3 billion people what your brand is about," said Van Cleef & Arpels Chief Executive Stanislas de Quercize.

While the number of high net worth individuals in China is set to continue to rise steadily, the bulk of the country's population cannot afford up market Western brands. But luxury groups agree that China, where consumers are very brand-conscious, will soon become the industry's No 1 market and this year will be one of the few emerging markets to enjoy growth. So it’s certainly a rose bed but you have to nurture it by heart.