Shanghai Tang

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7th International Scientific Conference “Business and Management 2012” May 10-11, 2012, Vilnius, LITHUANIA

ISSN 2029-4441 print / ISSN 2029-929X online ISBN 978-609-457-116-9 CD doi:10.3846/bm.2012.037 http://www.bm.vgtu.lt © Vilnius Gediminas Technical University, 2012

CAN CHINA DEVELOP ITS OWN LUXURY BRANDS? A CASE STUDY OF CLOTHING BRANDS Changting Zhou1, Xiaosong Zheng2 Sydney Institute of Language and Commerce, Shanghai University, 201800 Shanghai, China Email: 1MilkT@shu.edu.cn; 2xiaosong.zheng@shu.edu.cn Abstract. Based on the prediction of Altagamma Worldwide Marker Monitor, Chinese luxury consumption will reach EUR18.5 billion in 2015, representing 20% of the global market and becoming the largest luxury market in the world. Since 2006, consumption of luxury goods, which is EUR9.2 billion in 2010, has been growing at a CAGR of 27%. The opportunity for investment attracts all the luxury giants tapping into Chinese luxury markets, causing a fierce competition in Chinese luxury industry. This article aims to explain the underlying reasons for Chinese luxury boom in the aspects of economy, society and psychology. By studying the case study of traditional cheongsam company Shanghai Tang, the bright future of domestic luxury brands can be seen. Through SWOT analysis of local apparel companies, accessible advice to build Chinese luxury brands is provided, especially in the apparel industry. Keywords: luxury brands, clothing, apparel industry, SWOT, China. Jel classification: M39

1. Introduction In December 2011, the world’s leading strategy consulting firm Bain & Company released a report concerning Chinese luxury market. As the report noted, the growth of Chinese mainland luxury market remained strong in 2010. The total consumption of luxury goods in China has reached nearly 212 billion Yuan, of which only 27% was spent in the mainland China and the remaining was spent in Hong Kong, Macau, and overseas. Moreover, about 60% of the growth came from new consumers, indicating that the rise of the new affluent class and the upgrades of consumer demand are the main reasons for driving the Chinese luxury goods sales. According to the survey, China's domestic luxury market began to accelerate; the sales volume of upscale watches and bags dominate the market growth. In fact, the mediumpriced luxury watches (RMB25,000 -50,000) promote a strong rebound to the watch category; bags, a major personal and business gifts of choice, are expected to maintain the previous growth trend (Bain 2011). Such a strong momentum arouse our curiosity to question why the boom of luxury goods exists in China and whether it brings positive or negative effects on Chinese economy. Based on the prediction of Altagamma Worldwide Marker Monitor, Chinese luxury con-

sumption will reach EUR18.5 billion in 2015, representing 20% of the global market. Since 2006, consumption of luxury goods, which is EUR9.2 billion in 2010, has been growing at a CAGR of 27%, (Jia 2011). The opportunity for investment attracts all the luxury giants tapping into Chinese luxury markets, causing a fierce competition in Chinese luxury industry. In 2012, Rupert Hoogewerf published ‘ Hurun Best of the Best Awards 2012’, the Chinese liquor brand Maotai and Wuliangye ranked 4 and 7, while Louis Vuitton, Hermes and BMW ranked top 3 in the list of ‘2012 Hoogewerf ten most valuable global brands of luxury’. This is the first time that domestic luxury brands are awarded in this authority report. The report points out that Maotai is even more valuable than Hennessy, Moet & Chandon champagne and Remy Martin. This news arouses our curiosity; other than alcohol companies, can China successfully develop other luxury brands? Previous research recognizes the potential for Chinese luxury market; however, little attention has been given to the huge potential of Chinese local luxury brands. Therefore, this article aims to explain the underlying reasons for Chinese luxury boom in the...
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