Friday, February 15, 2013

China’s demand for luxury keeps Louis Vuitton in a job

I must admit that I am not rich enough to buy products from high end brand such as Chanel and Louis Vuitton but having recently spent time in China I have become interested in their relationship with these luxury brands. Louis Vuitton has recently become China’s favourite luxury brand and the Chinese are their top customers.

It has been especially interesting to see how the Chinese have continued to purchase high end products despite a global financial crisis and a decline in the ability of the rest of the world to afford such products. It seems that the Chinese fascination with these products has kept Louis Vuitton in a job and will continue to do so in the future.

It has been said by Bain & Co that the Chinese purchases of luxury brands in 2012 has gone up by 31% (although a HSBC reports claims that it is only 25%) while globally there has been a 7% growth. CLSA, a large investment bank in Asia, claims that by 2020 China will be responsible for 44% of the purchases of luxury goods worldwide.  Although it is important to remember the majority of what is purchased by the Chinese is done overseas. A HSBC report noted that only 10% of purchases are in mainland China.

As you can see the figures are astounding and this got me thinking of why the Chinese are responsible for supporting such brands as Louis Voitton and Chanel when much of the rest of the world is limiting what they spend on products that are considered extravagant. I am also interested in the impact that this increase has on Chinese society.

The reasons for the growth of China’s interest in anything extravagant and opulent are many and varied but essentially can be seen as an indicator of their own success.    

The past 20 years dramatic changes in the Chinese economy. Not only are their manufacturing sector growing to meet the needs of the world technology and clothing needs but because of the lack of welfare state in China, they are required to save for their own retirement and it is this block of saving is that is funding US debt.

But times are changing. With the opening up of the Chinese economy and the transition from a planned economy to a market based one, Chinese people are now choosing to spend their money on goods that they perceive to raise their status and give them importance in a society where your place in the social ladder is of great importance.

While I think there is no doubt that economic progress and the growing Chinese middle class are good things, the rise of consumerism without any insight into the effects of such behaviour is a negative side effect of this development.

The most obvious side effect it the environmental impact of overconsumption. Luxury items are by their very nature transitory, they are never in vogue (literally) for very long. As a result, products are brought and then discarded to make way for the latest model.

Whether it is luxury goods or technological goods, this culture of just discarding products because it is out of fashion or there has been a new model released has a great environmental impact.

The downsides of China’s interest in luxury items.

There are social implications of China’s passion for anything luxurious. In a article on why Chinese love luxury items, Jiao Haiyang describes what happens when consumerism comes into conflict with traditional Chinese values. He notes, ‘If the people of a state become materialistic and especially worship the luxury goods, it will mislead and distort people's value of the society, increase the psychological imbalance of low-income groups and affect the social harmony and stability’.

I never really looked at the consumption of luxury products from this prospective before but it does make sense that if a society does become too materialist, what society values such as community spirit, supporting others (especially those who aren’t well off or those who could not describe as sophisticated, trendy and come straight from Paris Fashion Week) and cultivating more than just your physical appearance.           

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...