THE CULTURE OF LUXURY

We connect brands to culture We connect brands to culture

We study Culture people language perception behavior We study Culture people language perception behavior

INTRODUCTION What is Luxury?

INTRODUCTION In the 14th century, luxury was originally a pejorative word, denoting sinful self-indulgence. 14

Luxury is the opposite of vulgarity Coco Chanel Luxury is not the opposite of poverty; it is the opposite of vulgarity Luxury is the opposite of vulgarity Coco Chanel Luxury is not the opposite of poverty; it is the opposite of vulgarity

INTRODUCTION WE DONT NEED IT

INTRODUCTION But it is interwoven into our own sense of self

~LUXURY~ Its unbelievable how much you dont know About the game youve been playing all your life-Mickey Mantle ~LUXURY~ Its unbelievable how much you dont know About the game youve been playing all your life-Mickey Mantle Luxury is something that we continue to study, something that in every generation gets its definitions, something that keeps developing and in movement continuously.

Luxury brands are regarded as images in the mind of consumers that comprise associations about a high level of : PRICE, QUALITY, AESTHETICS, RARITY &SPECIALITY. (By Klaus Heine Dec 2011) 2011 12

Authentic Brands deliver Poetry Authentic Brands deliver Poetry According to Forrester studies.brands that distinguish themselves on emotional attributes can capture 60 percent greater loyalty.

The compass for luxurys new codes of meaning. These four codes reflect polarities of meaning and reflect a sense of how brands must balance the realities of how culture shapes their relevance.

Rank The last bastion of conspicuous consumption. Rank The last bastion of conspicuous consumption.

1990s Consumption as a culture of keeping up 1990s Consumption as a culture of keeping up you drove a Hyundai to get here tonight, I drove an eighty thousand dollar BMW.

Rank relies on how informed you are Maestro Dobel tequilas small Batch production is noted by handwritten date and bottle numbers, as well as distiller name Dobel

We are forced to reflect on our consumption in ways we have never done before. We are forced to reflect on our consumption in ways we have never done before. We are forced to reflect on our consumption in ways we have never done before. We are forced to reflect on our consumption in ways we have never done before.

Restraint trumps decadence Guccis initiative toward FSC paper and cutting down excess packaging is only one angle of a larger sustainability campaign. FSC

With choice come Responsibility If you can afford all the riches in the world, its impossible not to feel the gravity of choice and be compelled to give back or take action.

Perfection Perfection A relentless pursuit of perfecting the process by which an object is crafted.

Control of process Is Critical Chanel buys seven of the most specialized ateliers in Paris, Ensuring continuation of the houses own couture techniques

Troon NL Dutch Dockland 18 Perfection should feed transcendence. Its emotive to do something special that no one else can

Freedom Freedom The pursuit of personal acquisition and creative accomplishments.

The power Of one The power Of one Freedom is about Creative beginnings.( like Coco Chanel)

We need to indulge In playful stories Poking fun at himself, The bitter Chocolatier tells his tales of Misfortune throughout his life through different flavors. Bitter Chocolatier

Globalization has broadened the Narrative Globalization has broadened the Narrative More than half of the growth in global demand for imports is now originating in developing countries. RECASTING ASSUMPTIONS RECASTING ASSUMPTIONS SPOTLIGHTING IRONIES SPOTLIGHTING IRONIES

100 MILLION CHINESE LUXURY CONSUMERS. INTRODUCTION

ALREADY THE SECOND LARGEST LUXURY MARKET IN THE WORLD. INTRODUCTION

INTRODUCTION THE WORLDS TOP LUXURY MARKET BY 2015. 2015

INTRODUCTION THE ONLY COUNTRY WHERE MEN CONSUME MORE LUXURY THAN WOMEN.

INTRODUCTION THE WORLDS YOUNGEST LUXURY MARKET, WITH PEOPLE IN THEIR 30S. 30

INTRODUCTION WHATS NEXT ?

INTRODUCTION THE NEXT GENERATION

INTRODUCTION THEY WILL LOOK AND BUY DIFFERENT.

BUT HOW? INTRODUCTION

To identify the potential for any brand behind these over-whelming figures, we need to understand what luxury buyers try to achieve and sell them what they need to succeed INTRODUCTION

Analyze changing life drivers and desires of Chinese luxury consumers to identify upcoming consumer requirements towards luxury brands. Analyze changing life drivers and desires of Chinese luxury consumers to identify upcoming consumer requirements towards luxury brands. -Which social changes shape the life drivers and motivations of chinas consumers? -Which new consumer needs will challenge Chinas rising luxury market? -How to address to these needs with products, marketing and services?

Agenda Agenda 1. Peoples Republic of Change 2. Luxury in a shift 3. 2010 Faces of Luxury 2010 4. 2011 2011 4 Tapping Chinas luxury goods market 2011 by McKinsey&company April 2011.

Peoples Republic of Change Peoples Republic of Change The future of luxury is based on a fundamental change of social values from the past to the present. The future of luxury is based on a fundamental change of social values from the past to the present. Within the last 60 years Chinese consumers underwent two major value shifts, which significantly impacted their lives, beliefs and buying habits.

Three decades of communism were followed by three decades capitalism. Now China slowly transitions into three decades of consumerism. Three decades of communism were followed by three decades capitalism. Now China slowly transitions into three decades of consumerism. Peoples Republic of Change

The Chinese market is influenced by three generations, who possess contrary ideals. The Chinese market is influenced by three generations, who possess contrary ideals. 1.Baby Boomers 2.Generation X X 3.Generation Y Y Peoples Republic of Chang Peoples Republic of Change Peoples Republic of Change

Baby Boomers (1950-1964): Dominated by political figures and movements. They respond to politics and believe in heroes. 1950-1964 Peoples Republic of Chang

This generation lost its creativity with the Cultural Revolution. Following and imitating others was the only way for social development. Money is power and power is everything! The baby boomers are frugal people ,trained not to desire material goods and creaturely comfort. Nowdays some of them are the richest people in china. They splurge to impress. Money is power to them and power is everything. People republic of change

Generation X(1965-1979):A generation of realists Who wake up after Tiananmen Square protests, Who believe only in themselves . X 1965-1979 Peoples republic of change Peoples republic of change

Mr. &Mrs. X are opportunists. They were educated by Mao and trained by Bill Gates. They are open to new things and appreciate originality. X Money can change your life Generation X suffers a collective insecurity from living through so much change. They therefor trust in material security and status. 60% of them buy luxury goods to increase their self-confidence! Their heroes are the rich and famous entrepreneurs who made it. X 60% Generation X is the majority of these who keep the 80% of Chinese private business running. 30% X They make money, show off the money, and spend the money. Peoples Republic of change

Generation Y(1980-1995):Possesses a Chinese mindset but a global life style Shaped by McDonalds, Google and MBAs Y 1980-1995 MBA Peoples Republic of change

Self made web-clips offer the best insight to Chinas youth detailing their dreams and believes first hand: tudou.com tudou.com I am what I am. You're serving me! Generation Y is the first Chinese generation born into consumerism. They grew up in the information age with internet and mobile phones. Y They are overwhelmed with information and personal choices. Are you Hello kitty or Rebel? Gym or yoga? Stay in china or go abroad? Artist or businessman? They are the first generation with the right to choose their career ,lifestyle and cultural affinity. Peoples Republic of change

For generation Y there is nothing wrong with hedonism and self rewarding. Y They buy because the product emotionally bond with their self identity, because of peer pressure, because its a fad. They are often educated outside China and will spend more on luxury products, because they wont know what it means to be without money. They are not frugal, nor do they buy status, believing that consumption is a part of self- expression. Generation Y represent the future of China. Today they are the ones dictating what is cool and what is not. This generation will be the first where business and political elites will be surpassed by design and style elites. Y People s Republic of change People s Republic of change

Chinas culture today is mainly determinate by security, harmony, control and formation than lust, strangeness or sensuality. Peoples republic of change

The next generation will open the door for value shift towards consumerism, self-expression and hedonism. Peoples republic of change

China turns into a global society China turns into a global society The fundamental value shift from communism to capitalism to consumerism will unleash a new type of consumer with advanced preferences towards brands, products and services. Peoples Republic of change Peoples Republic of Change Peoples Republic of Change

Agenda Agenda 1. Peoples Republic of Change 2. Luxury in a shift 3. 2010 Faces of Luxury 2010 4. 2011 2011 4 Tapping Chinas luxury goods market 2011 by McKinsey&company April 2011.

This new luxury will possess elements of showing ones Status and self-reward. But the way to achieve it will shift The next level. Luxury in a Shift

There are four types of luxury consumers based on social background ,luxury experience and income level. Luxury in a Shift

While most of Chinese luxury shoppers are the Nouveau rich, many of them are still looking for their place in the world of lux. Luxury in a Shift

Nouveau Rich: Showing-off works! 65% of Chinese are convinced that who own luxury brands are successful people! 65 Luxury in a Shift

Nouveau Rich: Movie star Fan Bingbing is preferred star in advertisements and one icon for the Nouveau Rich in China. I want to stand out! Background: Entrepreneurs, celebrities or young business who are the first in their family, who can afford luxury. They still rank themselves with average people. Motivation: They want to show their success and want to stand out from the mass. They dont care about others, but due to their cultural background formation still rules. Habits: To balance formation and their longing to be special they buy the most popular brands with high mass reputation. (Armani,BMW,Mercedes,Rolex,Gucci) Luxury is in a Shift

Understaters: Not show but know! About 70% of Chinese believe that owning Luxury brands doesn't necessarily mean one is fashionable. 70 Luxury in a Shift

Understaters: Successful actor Lu Yi spends his time with his family Instead on superficial glamorous events. I want to fit in! Background: successful creative ,rich people from behind the scenece or experienced luxury consumers. They are international, speak English and understand luxury as life style. Motivation: They want to fit in to a sophisticated group of international and stylish people. They want differentiate themselves from superficial show-off attitudes. Habits: They mix establish brands with niche brands to create their individual style as long as it fits into the peer group. They tend to be a bit artistic and edgy(MINI,Y-3,Issey Miyake,Marc Jacobs,MIU MIU) Luxury is in a Shift

Connoisseurs: Already today about 60% of Luxury consumers, buy luxury to reward themselves. 60 Luxury is in a Shift

Connoisseurs : Jiang Wen is a famous movie director and king of the Chinese film. He enjoys his life away from hustle and bustle. I want to enjoy my life! Background: either they are self-made businessmen with a good self perception pr they grew up in a financial hedge. Money is seen as a key not as a treasure. Motivation: They want to enjoy life. Life balance and sensuality are very important. soft luxury is highly appreciated. Habits: They often live a quite life, Enjoy excellent foods, traveling but also doing charity activities. Luxury brands have to offer them a personal relationship, a buying experience and high quality(Bulthaup,patek philippe,ferreti yatchts, cohiba, Hennessy) , Luxury is in a Shift

Spirituals: They often overseas born Chinese. With a growing number of Chinese returning back home this group is slowly rising. Luxury is in a Shift

Spirituals: Wang Fei is a talented singer who incarnates Asian musical culture. She lives an international, individual and edgy lifestyle. I wan to find myself! Background: Grow up in a well off environment or with an artistic background. Luxury goods are nothing more than commodities for them. Motivation: They want to find the meaning of their life. They are looking for authenticity and spiritual experiences. Habits: Spirituals are often involved in charity and fundraising. Though they are highly individualistic, striving for spiritual adventures and bored by the superficial world of luxury. Reversion to nature and the primordial dominates their lives(Yo,Linda Loudermilk, Leica). , Luxury is in a Shift

Luxury is in a Shift Brand preferences of different consumer types

Luxury is in a Shift Chinas luxury market will be dominated by the Nouveau Rich and Under- Staters,but Connoisseurs will have a significant impact on them.

Luxury is in a Shift Chinas luxury market will give birth to new attitudes towards luxury to keep pace with developing mindset of Chinese luxury consumers

These upcoming attitudes are the output of sustainable shift in the mindset of luxury consumers These upcoming attitudes are the output of sustainable shift in the mindset of luxury consumers Sensuality: Authenticity Lust : Enjoyment Strangeness : Experience

With a rising consumers variety Chinas luxury market will be more diversified. Luxury is in a Shift

Chinas luxury shoppers of tomorrow are brand savvy. For them the big price tag and an even bigger label name doesnt make a product luxury. Luxury is in a Shift

Agenda Agenda 1. Peoples Republic of Change 2. Luxury in a shift 3. 2010 Faces of Luxury 2010 4. 2011 2011 4 Tapping Chinas luxury goods market 2011 by McKinsey&company April 2011.

63% of young Nouveau Rich want to enjoy the present moment as much as possible and 76% would pay more to buy natural healthy foods. 63% 76% The experiential, authentic and enjoyable side of luxury products and brands will determine if consumers consider them luxury or not. Faces of Luxury 2010 2010

Marketing Approaches In the future luxury consumers will save as much as possible, adhering to the motto: Make luxury an investment to make most of ones life. Encourage national pride but dont try to be Chinese. Revive your brand with enjoyable and entertaining content not with a painful interruption of it. Take over responsibility and share your success. Charity is highly appreciated within the community of luxury buyers. For the majority of Chinas upper class1 luxury will be out of reach. Affordable accessories will be a market to target. Marketing will be dominated by seduction, education and establishing 1-to-1 customer relationship Faces of Luxury 2010 2010

POS Service Approach The rich has less time. Time saving services and efficiency at the POS are appreciated by customers. Chinese are comfort junkies. Space, silence and customization are important. Escapism is common in darwinistic China. Offer a shopping experience which allows to escape from reality for a moment. Luxury buyers adopt a global lifestyle and are eager to learn about a brand. Coaching is more than welcome. Nowadays loneliness is pervasive in all social classes. Make your brand to a place where customers find kindred spirit. Service makes the difference between counterfeit and original. Innovative services will be key in strong customer relationships. Faces of Luxury 2010 2010

- - - - Product Packaging is often the first brand experience for luxury consumers and therefore most important. Chinas hyper-growth left a lack of pureness and authenticity. Products that tell a story about their origin and ingredients promise a desirable piece of pureness. Chinese consumers live between national pride and global attitudes. Global luxury goods touching Chinese tradition will find a grateful audience. Chinese are opportunists and believe what they see. They dont just buy a product, they buy a bit of an admirable world of lux, not made in China. Products give brands a body and an appearance to make brand values alive. Therefore authentic luxury needs to be an experience for all senses. Faces of Luxury 2010 2010

The following cases illustrate a scenario of the Chinese world of deluxe In 2010. 2010 Many brands which are successful in the west, flop in china. Therefore, fine-tune global strategies regional distinctions. Many brands which are successful in the west, flop in china. Therefore, fine-tune global strategies regional distinctions. Faces of Luxury 2010 2010 Faces of Luxury 2010 2010

Authenticity of a brand means consistency in design, communication, service and also manufacturing Gucci re opens factories in Italy Insight: 70% of Chinese appreciate the superior quality of Luxury brands but doubt that superior quality can be made in China. 70 Solution: While brand awareness is still low, The country of origin is more important. Therefor Gucci decided ro re establish some of their factories in Italy. An Europe made Gucci bag not only guarantees for superior quality but can be easily identified as counterfeit. Output: The trust in the quality of Gucci products increased while the number of Counterfeits slightly declined. Faces of Luxury 2010 2010

An individually made stamp and personally by Oppenheim's Factory-an experience customers are willing to pay for. Oppenheim sold stamp edition in 30 days. 30 Insight: After two decades of Westernizing Chinese consumers rediscover their roots and appreciate luxury that revive their tradition. Solution: Oppenheim, maker of high-quality writing instruments, released an edition of signature stamps, which have a long tradition in China. After launching a jade made USB-stick last year, Oppenheim proved again its excellent consumer understanding. USB Output: Customers appreciate the classical look of the black-white stamp but also the high quality of the stamp signature, which is handmade in Chinas oldest stamp factory. Faces of Luxury 2010 2010

The staff in showrooms are important communication of the brand and a strong influence on the nouveau rich who have little brand knowledge. LV succeeds with sophisticated staff. LV Insight: Customers complain about pushy badly trained staff in luxury stores. Solution: Louis Vuitton recognized this challenge early and educated its staff partly in Hong Kong. They offer specific courses and international staff exchange to push their staff to the same sophisticated level as their customers. Output: Since LV also offers home visits to save customer's time, customers begin to build personal relationships with their style consultants during their style-time together. LV style-time Faces of Luxury 2010 2010

Luxury market is like a dating : its about long term relationships. If customers think you just want money, they want a divorce. Many women felt in love with HERMES Insight: In a rushing , anonymous world with over populated cities also luxury consumers are looking for attention and unique experiences. Concept: Hermes took-up this desire when they introduced its new collection of Luxury finesse. With a handwritten, poetic letters store manager Li Dan indulge the senses of Beijings luxury elite. It took three days to write all letters but in response many women felt in love with the French luxury brands Hermes. Outout: And as its said Li Dan indulged not only the senses of his upscale clients but also their wallets and credit cards. Faces of Luxury 2010 2010

Consumers look for new, inspirational shopping experiences that excite the senses. Three on the Bund opens Men Only Zone Insight: Chinas Connoisseurs are spending more for cosmetics and fragrances. They look for shops that cater to their special needs- shops which are bold clean and cool. Concept: Together with Lancme Homme Shanghais lxury shopping venue Three on the Bund has established a pink-free world for male toiletries,providing everthing indulgent men need to look and feel great. Output: The royal comfort experience helped Lancme to introduce many other products and made Three on the Bund the first choice of men. Faces of Luxury 2010 2010

Agenda Agenda 1. Peoples Republic of Change 2. Luxury in a shift 3. 2010 Faces of Luxury 2010 4. 2011 2011 4 Tapping Chinas luxury goods market 2011 by McKinsey&company April 2011.

Tapping Chinas luxury goods market By 2015, Chinese consumers will account for more than 20%OR 180 billion renminbi ($27billion)of the global luxury sales. 2015 180 20 27 McKinsey&company April 2011 2011 4

Tapping Chinas luxury goods market McKinsey&company April 2011 2011 4 Even during the global recession in 2009,sales of luxury goods increased by 16%,to about 64 billion renminbi 2009 16% 640 (-DOWN FROM THE 20%GROWTH OF PREVIOUS YEARS BUT FAR BETER THAN THE PERFORMANCE OF MANY OTHER MAJOR LUXURY MARKETS.) 20%

13 million households in Chinas upper middle class (incomes between 100,000 and 200,000 renminbi) Offer the biggest new growth opportunity. 1300 10 20 13 million households in Chinas upper middle class (incomes between 100,000 and 200,000 renminbi) Offer the biggest new growth opportunity. 1300 10 20 Tapping Chinas luxury goods market

Tapping Chinas luxury goods market McKinsey&company April 2011 2011 4 12% 2015 22%

Tapping Chinas luxury goods market McKinsey&company April 2011 2011 4 12% 2015 22% 2010 2010 2015 2010 12 1 0.15

McKinsey&company April 2011 2011 4 McKinsey&company April 2011 2011 4

Tapping Chinas luxury goods market 2015 60 30 By 2015 luxury sales in urban areas such as Qingdao,Wuxi will triple over the next 5 years, and could pass 500 million renminbi( in more than 60 cities compared with 30 today.) McKinsey&company April 2011 2011 4 New Geographic markets

Tapping Chinas luxury goods market Much of luxurys allure comes from the opportunity to share in the rich cultural heritage associated with a brand. McKinsey&company April 2011 2011 4

The fusion of inspirational elements from French and Chinese culture captures the ethos of Qeelin, Chinas first luxury jewelry brand. The brand was founded by Dennis Chan and Guillaume Brochard who share the mutual dream of combining the rich aesthetic heritage of China with the French mastery of luxury craftsmanship to create stylish, contemporary jewelry. Launched in Paris, 2004, Qeelin swiftly became an international brand. All Qeelin collections are exclusively made of precious metals and stones, such as gold, platinum, diamond, sapphire, ruby and naturally, the Chinese national stone, jade

All the the facts and information of this presentation are based on researches made by the following companies: 1.Asia-Pacific Group. 2.SenarioDNA company SenarioDNA 3.McKinsey&Company COPYRIGHTS COPYRIGHTS