China Calling

MEN'S FOLIO Singapore - June/July 2013 by ARAVIN KUMAR

CHINA CALLING

Meet Angelito Tan, the man helping fashion and luxury brands make sense of, and power ahead, in the complex, competitive China market

From economic data to the shenanigans that its citizens get up to, hardly a day goes by without some mention or reference to China in the news. For those working in the fashion and luxury goods and services industry – this scribe included – the country, its consumer habits, its ever-changing demands, often dominate entire conversations in the office and at networking events.

 

There are endless anecdotes to be shared and mused about – how mobs of Chinese tourists throng luxury boutiques overseas, snapping up everything in sight and paying in cold, hard cash; how said tourists contribute to snaking queues at airport tax refund centres; or how Chinese culture is influencing global players like Alfred Dunhill and Nike to dream up zodiac-themed product offerings such as snake motif cufflinks and snakeskin Air Force One sneakers, respectively.

 

But in the last six months, the global economy’s poster child of growth and consumption found

From economic data to the shenanigans that its citizens get up to, hardly a day goes by without some mention or reference to China in the news. For those working in the fashion and luxury goods and services industry – this scribe included – the country, its consumer habits, its ever-changing demands, often dominate entire conversations in the office and at networking events.

There are endless anecdotes to be shared and mused about – how mobs of Chinese tourists throng luxury boutiques overseas, snapping up everything in sight and paying in cold, hard cash; how said tourists contribute to snaking queues at airport tax refund centres; or how Chinese culture is influencing global players like Alfred Dunhill and Nike to dream up zodiac-themed product offerings such as snake motif cufflinks and snakeskin Air Force One sneakers, respectively.

itself experiencing winds of change. Its affluent population’s hunger for luxury goods and services eased. Political uncertainty and a number of scandals in late 2012 dampened the country’s time-honoured tradition of gift giving among its politicians and businessmen. New ‘anti-extravagance’ campaigns and policies drafted by the Chinese government, headed by President-elect Xi Jinping in response to widespread corruption and inequality, have also amplified the slowdown this year.

Amid reduced demand, sales have slumped. Following several years of exceptional growth in the Asia Pacific region, luxury conglomerate Richemont, which distributes fashion, jewellery and watch brands such as Alfred Dunhill, Cartier and Montblanc, reported in January 2013 that sales were flat compared to figures for the same quarter last year, citing China in particular.

To shed light on the current situation, we thought it best to engage an authority right in the thick of the

But in the last six months, the global economy’s poster child of growth and consumption found itself experiencing winds of change. Its affluent population’s hunger for luxury goods and services eased. Political uncertainty and a number of scandals in late 2012 dampened the country’s time-honoured tradition of gift giving among its politicians and businessmen. New ‘anti-extravagance’ campaigns and policies drafted by the Chinese government, headed by President-elect Xi Jinping in response to widespread corruption and inequality, have also amplified the slowdown this year.

Amid reduced demand, sales have slumped. Following several years of exceptional growth in the Asia Pacific region, luxury conglomerate Richemont, which distributes fashion, jewellery and watch brands such as Alfred Dunhill, Cartier and Montblanc, reported in January 2013 that sales were flat compared to figures for the same quarter last year, citing China in particular.

action. That honour fell to Angelito Tan, a veteran in China’s luxury business landscape. Based in Shanghai, Tan is a founding partner and managing director of Robert, Tan and Gao Consulting (RTG), a strategic consultancy dedicated to aiding companies succeed in the complex China market. Tan’s clients include powerful conglomerates like Louis Vuitton Moet Hennessy (LVMH) and its subsidiary brands TAG Heuer and Zenith, as well as Italian powerhouses like Ermenegildo Zegna.

On China’s recent slowdown, Tan asserts: “With China maintaining a 2013 GDP growth target of seven-and-a-half per cent for the second year in a row, there is little doubt that the global financial crisis also had its effect on China. But we must keep things in perspective when analysing China’s luxury market, acknowledging that for a long time, its growth was abnormal.”

To shed light on the current situation, we thought it best to engage an authority right in the thick of theaction. That honour fell to Angelito Tan, a veteran in China’s luxury business landscape. Based in Shanghai, Tan is a founding partner and managing director of Robert, Tan and Gao Consulting (RTG), a strategic consultancy dedicated to aiding companies succeed in the complex China market. Tan’s clients include powerful conglomerates like Louis Vuitton Moet Hennessy (LVMH) and its subsidiary brands TAG Heuer and Zenith, as well as Italian powerhouses like Ermenegildo Zegna.

On China’s recent slowdown, Tan asserts: “With China maintaining a 2013 GDP growth target of seven-and-a-half per cent for the second year in a row, there is little doubt that the global financial crisis also had its effect on China. But we must keep things in perspective when analysing China’s luxury market, acknowledging that for a long time, its growth was abnormal.”

Men’s Folio: What changes have you noticed in China’s luxury consumer behaviour over the last five years?

 

Angelito: I believe the tastes and behaviour of Chinese luxury consumers are evolving faster than anyone had anticipated. It’s widely acknowledged that there has been a move from heavily logo-centric goods as a way of demonstrating social status, to more and more consumers being interested in understated luxury and experiences. This is a natural evolution that has occurred in all markets as any country develops. With that said, we have to keep in mind that given the enormous population of China, the luxury consumer base is constantly expanding. So as consumer tastes evolve up the luxury pyramid, there is a constant influx of new luxury consumers entering from the middle class. As this has never happened before with such a large population, it’s a tremendous opportunity for doing business in China.

How will the swelling ranks of China’s middle class affect growth in the luxury market?

 

While we predict continued growth at the top end of the market as consumer tastes continue to evolve, we also see increasing growth in the accessible luxury range, with newer, more nimble brands entering the market and targeting China’s upper middle class. Today’s consumers have many more choices compared with years ago, so it is essential that fashion and luxury goods companies have a clear brand positioning and local strategy if they want to truly succeed in this market.

 

 

Who are the top decision makers shaping China’s fashion and luxury goods landscape?

 

I think the government is always the top decision maker shaping China’s luxury landscape. Its tax policies and attitude towards the industry obviously have far reaching effects. In addition, China’s established media have and continue to play a pivotal role as well. We are seeing more influence by credible trendsetters and key opinion leaders, which is great. Hopefully it will continue to grow.

Why are men so important to China’s luxury goods market?

 

Men currently account for at least 55 per cent of China’s luxury market, well above the global average of 40 per cent. This can partially be attributed to the fact that Chinese men don’t just buy luxury for themselves or for their ladies, they also buy luxury items as a means to build relationships in business. In addition, the average Chinese male millionaire is considerably younger than their global counterpart, and therefore has different purchasing habits. In general, a younger consumer is more likely to purchase a greater percentage of luxury goods (as opposed to costs such as school fees or retirement planning) in relation to their total spend.

 

 

How do you predict the luxury goods market will perform in 2013?

 

We certainly are not predicting growth at the abnormal rates seen in previous years. However, with continued increase of personal incomes, a policy set out in the 12th five-year plan of the government, China will still see further growth in overall luxury demand this year. The figure is currently about 10 per cent, with growth expected to be over 20 per cent by 2015.

ANGELITO TAN

FOUNDING PARTNER, CEO

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