Development

Luxury heavyweights convene at Shanghai summit

By Matthew Fulco (China Daily Shanghai Bureau)
Updated: 2010-11-23 15:42

SHANGHAI - Executives from top luxury brands convened over a summit Thursday and Friday held by the event company China Decision Makers Consultancy to explore how technological innovation could be used to strengthen their positions in the China market.

China is the world's second largest consumer of luxury goods. As the nation's commercial hub and fashion center, Shanghai serves as a gateway for luxury brands to the vast Chinese market.

The Inno-luxury Summit was the first large-scale event of its kind held in Shanghai to focus on the role of advanced technology in accomplishing design, communication and retail objectives for high-end brands.

The summit's speakers included executives from Bally, Salvatore Ferragamo, Porsche Design and Shang Xia, the aspiring Chinese luxury brand launched by Hermès in September.

One of the principal topics addressed by the forum was the scant online presence of luxury brands in a nation of 420,000,000 Internet users.

Guy Salter, vice president of Walpole, said that luxury brands have been slow to set up China websites because of a fragmented digital environment lacking a premium image and the dominance of traditional retail and distribution channels.

Chinese consumers have also been hesitant to shop for luxury products online due to concerns over authenticity and a belief that the purchasing experience was not the same, he added.

To attract online buyers, Salter urged luxury brands to set up interactive Chinese e-commerce websites customized for the local market, incorporating customer reviews, social media and detailed product information. Citing the market potential, he said 47% of China's luxury consumers are ready to buy online.

No major luxury brand yet operates a China e-commerce site, although this looks set to change soon. On the first day of the summit, Dinesh Tandon, chief executive officer of Bally North Asia, announced his company would launch an e-commerce site in China by the early spring of 2011.

Members-only Glamour Sales is one step ahead, having launched its China site in April. The company specializes in online private sales and sources bags, jewelry and cosmetics directly from brand partners including D&G, Diesel and Miss Sixty.

Chief executive officer Thibault Villet said Glamour Sales already has 250,000 members in China.

Yet Dr. Pierre Xiao Lu, assistant professor of marketing at Fudan University's School of Management, stressed the limitations of online channels in China.

"The wealthiest Chinese rarely use the Internet; they don't have time," he said. "Luxury brands usually can only reach young consumers via online channels."

Lu is an internationally-trained expert in prestige brand management, Chinese luxury consumption and selective retailing. He is visiting professor of marketing in the LVMH Chair position at ESSEC Paris, and has consulted for eminent brands including Lacoste, LVMH and PPR-Gucci.

At the summit, Lu advised luxury brands to improve service quality in their retail outlets and expand in second tier cities, where he predicts the number of wealthy will eventually exceed those in established first tier markets like Shanghai and Beijing. He cited Hangzhou as an example.

"Hangzhou is classified as a second tier city, but it is first tier for luxury brands because it is home to so many wealthy Zhejiang entrepreneurs," he said.

Alessandro Paparelli, regional human resources director of Salvatore Ferragamo in the Asia Pacific region, said stores in first tier cities can serve as showcases for luxury brands.

"Chinese from lower tier cities travel to places like Shanghai and Beijing to get an understanding of luxury brands, and so you have to present your products to them in the best possible way," he said.

Ferragamo's new Shanghai flagship store opened in the upscale IFC mall in April and officially launched in October. The IFC store is the company's second-largest outlet in Asia after its Macau flagship.

Paparelli said that from a human resources perspective, it was necessary to find a diverse range of staff who understood the expectations of Chinese consumers.

"In China, we are building a rich team, which can include both overseas returnees and locally-hired westerners and Asian expats with strong industry experience," he said.

Another key topic at the Inno-luxury Summit was innovation in product design, a category in which Porsche Design stood out. Group CEO Dr. Juergen Gessler presented innovative products like the ShakePen, a ballpoint pen that extends or retracts with a flick of the wrist, and the Bounce S2, the first running shoes with mechanical suspension. "Our core positioning is to work for the highest functionality in our products," said Gessler.

The high functionality of Porsche Design's products has served it well in China, its largest market with 12 stores. "China is the most important market for us," said Frank Schuermann, managing director of Porsche Design in the Asia Pacific region.

While international luxury names currently dominate the Chinese market, the arrival of the homegrown Shang Xia has raised eyebrows industry-wide about China's potential to develop indigenous high-end brands.

Jiang Qionger, chief executive officer and artistic director of Shang Xia, said that her brand is revitalizing traditional Chinese craftsmanship by finding new ways to use objects from the past.

"Shang Xia is a product of innovation," she said."We design in China, create in China, and build for the future."