Brighter fu­ture seen for China’s lux­ury goods in­dus­try

The Pak Banker - - BUSINESS -

Re­tail­ers, in­vestors and in­dus­try in­sid­ers be­lieve China's lux­ury goods in­dus­try, de­spite losses for the se­cond year in a row in 2015, is still well on its way to a brighter fu­ture, coast­ing on the mo­men­tum of dou­ble- digit growth in re­cent years, said con­sult­ing firm Bain & Co.

The For­tune Char­ac­ter In­sti­tute's re­search find­ings ap­pear to con­firm the op­ti­mistic out­look. In 2015, Chi­nese con­sumers bought 46 per­cent of the lux­ury goods con­sumed world­wide. But 78 per­cent of it was bought out­side China.

Chi­nese con­sumers of high fash­ion and lux­ury goods are be­com­ing in­creas­ingly dis­cern­ing too. Not for them any brand that is eas­ily avail­able or vis­i­ble. By buy­ing and en­cour­ag­ing the best among the ex­ist­ing lux­ury brands, Chi­nese con­sumers are emerg­ing to be trend­set­ters. To ride the ris­ing wave of fash­ion con­scious­ness among Chi­nese con­sumers, Shan­dong Ruy­iGroup, one of China's lead­ing tex­tile pro­duc­ers, re­port­edly joined the bid­ders for French fash­ion group SMCP on Jan 20, ac­cord­ing to a Bloomberg re­port.

SMCP is es­ti­mated to be worth more than $1 bil­lion. The group owns af­ford­able lux­ury brands such as Maje and San­dro, which have been en­joy­ing surg­ing pop­u­lar­ity among China's ris­ing middle class in re­cent years.

Shan­dong Ruy­iGroup is ranked among the top four of China's 500 lead­ing tex­tile en­ter­prises. Its con­sol­i­dated an­nual rev­enue hit a record 30 bil­lion yuan ($4.7 bil­lion) in 2013. The group de­clined to com­ment on its re­ported in­ter­est in ac­quir­ing SMCP.

Any such ac­qui­si­tion would be "just a drop in the bucket as the Chi­nese are fast climb­ing on to the up­per chain of the lux­ury in­dus­try", said Zhou Ting, di­rec­tor of the For­tune Char­ac­ter In­sti­tute. "The (lux­ury) mar­ket re­mains one of the most lu­cra­tive for now and (shall re­main so over) the next decade. This means, if Chi­nese com­pa­nies and in­vestors want a share, they should be more ac­tively in­volved in ev­ery link of the sup­ply chain, from de­sign­ing and man­u­fac­tur­ing to mar­ket­ing and re­tail­ing."

Things have been mov­ing in that di­rec­tion of late. For in­stance, China's home­grown on­line fash­ion re­tailer Vip­shopHold­ings, known for its dis­counts, in­vested sev­eral mil­lions of pounds in Novem­ber for a mi­nor­ity stake in Bri­tish fash­ion-maker BrandAl­ley, to in­tro­duce more Bri­tish brands in China.

A month ear­lier, its com­peti­tor, Se­, cre­ated quite a splash by open­ing the first cross-bor­der ex­pe­ri­ence store at Pi­azza Del Duomo, one of Mi­lan's most-vis­ited shop­ping ar­eas. Li Rixue, founder and CEO of Se­, es­tab­lished the web­site seven years ago in Bei­jing. He called the Mi­lan store "part of the com­pany's ten-year glob­al­iza­tion plan".

In­dus­try in­sid­ers said that Se­'s ag­gres­sive ex­pan­sion re­flects a strat­egy to tar­get high-spend­ing Chi­nese tourists in Europe. Zhou said what, where and how the Chi­nese buy will likely de­ter­mine where Chi­nese, and prob­a­bly global, in­vestors' money would be pumped in.

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