In our first column on the rising influence of Asian consumers, we touched on the region’s growing affluence and whether brands are adapting fast enough. Despite some companies failing to connect with Asia’s middle class, the region’s love of western brands hasn’t shown any signs of slowing down. This is particularly true when it comes to luxury goods.
Historically it has been somewhat averse to change but in terms of the Asian migration the luxury sector is ahead of the curve. Rather than relying on Asian consumers purchasing £1000’s of luxury goods when they’re here on holiday, Western brands have decided to go straight to the source and invest more resources in their eastern operations.
Chinese consumers account for more than $7.4bn in annual spending on luxury goods and the country is expected to have the most affluent households in the world by 2021. As for right now, more than 7.6 million spend upwards of $10,000 on luxury goods annually, twice what French or Italian households are spending. Cash-rich Chinese millennials are splurging on everything from jewellery and fashion, to cosmetics and handbags.
The explosion of Western luxury in Asia has been aided, in part, by the likes of Wendy Yu and Fosun Fashion Group, who have brought Western brands with wide consumer recognition into China and exposed those collections to young audiences.
The recent acquisition of many high-profile luxury brands by Asian investors – including Hong Kong-based IT Group’s recent deal for a minority stake in Swedish brand Acne Studios – combined with the large number of young creatives working their way up in major fashion labels means many are doubling down on their regional investments.
In China, some millennials are choosing to remain in the country’s outlying provinces, shunning more expensive, larger cities such as Beijing and Shanghai. Luxury brands have met the trend by opening new stores in China’s smaller, less developed cities.
Acne Studios chose Chengdu and its impressive Taikoo Li complex for the location of its forth Chinese store. Prada, which recently reported promising half-year earnings thanks to its Chinese business, opened seven stores this year in Xi’an – home of China’s Terracotta Army. LVMH opened a store in the sprawling central city of Wuhan, which is populated by 11 million people, while jewellery brand Chaumet opened a store in the city of Wuxi, outside Shanghai.
The British makeup artist, Charlotte Tilbury, will also be participating in the east to west migration. One of her stores will shortly be opening in Hong Kong, at Lane Crawford, with a second store opening at Lane Crawford’s IFC mall store. The beauty brand is already available via Lane Crawford’s online store and ships to 27 countries.
There are also Asian brands making substantial headway in the West. Selfridges even has a mini-department dedicated to East Asia’s most progressive beauty brands. With plenty of style and technological innovation in tow, South Korean eyewear brand Gentle Monster began its first phase of European expansion when it opened a 450 sq. meter store in London’s West End last year.
So, what does this mean for talent? Competitive and diverse markets in Asia and the West have forced all consumer-facing sectors to get creative and luxury brands are no exception. To ensure their success, they’ve taken a variety of approaches.
Most luxury brands have tended to rely on expat talent. Although in most cases, expats are only hired when they represent superior skill and experience compared to locals, it cannot be ignored that this kind of talent is useful in attracting foreign investment. However, there is danger in overlooking local talent, especially in such competitive times as these. If brands don’t localise appropriately, they will absolutely fail to capture their intended markets. As more Eastern brands look west to expand, a valuable piece of advice would be to bring in regional talent as early as possible. There are, of course, exceptions. Uniqlo, for example has relied heavily on Asian talent and continues to roll out successful integration strategies in most (if not all) of its markets.
Japanese brands have long had a place in the beauty cupboards of Westerners – think skincare giants such as Shiseido, SK-II and Shu Uemura. The Japanese beauty industry is one of the oldest in the world, anchored by a commitment to historic rituals. Authentic Eastern ingredients that have been relied upon for centuries, like calming camellia oil, restorative, antibacterial green tea and anti-ageing cherry blossom, are paired with advancing technological knowledge of extraction, resulting in a process that has been perfected over generations.
Take global cosmetics giant Shiseido. Even as the company expanded, acquiring brands including Nars, Bare Minerals and Laura Mercier, it abided by the ethos of its first president, Shinzo Fukuhara: “Let the product speak for itself.”
Today, Shiseido is the eighth largest beauty group in the UK with close to 1,500 employees. To further cultivate global talent, the company has plans to widen its scope by building personnel training centres in key regions including Singapore, the U.S. and Europe.
What we’re experiencing is a paradigm shift as luxury brands reconsider their priorities and increase their reliance on both regional and expat talent. And rightly so because without it, companies loose unique insights into regional markets, cultures and dynamics.
Whether it be teaming up with native ecommerce platforms or moving their operations to more rural regions, luxury brands have acknowledged what it takes to remain competitive in Asia. The question now is which sectors will follow suit?