Although the consumption of luxury goods among the wealthy has decreased relatively, the preference for quality overseas lifestyle brands remains.
According to the South China Morning Post (SCMP) in Hong Kong on the 10th (local time), Osim, a Singaporean massage chair manufacturer, Ikea, a Swedish furniture company, and MUJI, a Japanese lifestyle brand, are stepping up efforts to continue opening new stores in mainland China. They believe that despite growing concerns over low growth in the Chinese economy, wealthy Chinese people are still opening their wallets to high-priced foreign brands. Lily Yang, deputy director of Osim China, met with SCMP at the China International Import Fair (CIIE) in Shanghai and said, “Chinese rich people prioritize quality and trust reputable foreign brands. Even if the price is higher than the market average, if the quality and performance of the purchased product are worth it, we see it as ‘cost-effectiveness’ consumption.” She explained that Osim has 200 stores in mainland China alone, which is half of the world’s stores, adding, “We will continue to expand at the pace of China.”
Japan’s MUJI also plan to add 30 to 40 new stores in mainland China every year. Wu Xu, chief marketing officer of Muji China, said, “We plan to set up larger stores in major commercial districts in the city to attract customers. Consumption demand remains and we are preparing to meet various categories of product demand.” Cindy Luan, vice president of IKEA China, also said, “China is the world’s second largest home improvement market and has great potential. We are trying to find the best way to design and make the right products that satisfy them.”
SCMP pointed out that the companies’ “optimism” is quite different from the atmosphere in the market where “low price war” is taking place due to the recent slump in Chinese consumption. It is also quite different from the luxury goods market, where consumption has plummeted to the point where sales have been hit directly. In fact, Kering Group, which owns Gucci and Bottega Veneta, said on the 23rd last month that its performance this year will be halved from last year, while LVMH, which owns brands such as Louis Vuitton and Dior, also reported a 16 percent drop in sales in China in the third quarter. According to local media, these luxury goods companies even sell at a 50 percent discount to exhaust their inventory.
Experts believe that the recent shift in consumption trends was driven by the growing tendency of Chinese consumers who are obsessed with “cost-effectiveness” to turn to products that do not go out of fashion and that can last a long time. “About 78% of consumers who participated in the recent survey preferred products that could be used for more than five years,” said Derek Deng of global consulting firm Bain & Company. “Chinese consumers still trust large companies more as companies that sell sustainable products and solutions.”
SOPHIA KIM
US ASIA JOURNAL
