China market will be the first for luxury brands  

The Shanghai Universal Expo 2010 will put China under the spotlight. It is the opportunity for luxury brands to reaffirm their strategy in the biggest market of the world, a market where potential customers for luxury goods are estimated at 250 million and average age for millionaires is 39.

Today, China is the second market for Louis Vuitton, the first for Hennessy and the first for the top category of premium car brands such as BMW (7 Series) , Audi (A8) and Mercedes (S Class).

Luxury and tradition 

Luxury culture started in China many centuries before Christ and is connected to the fine arts tradition maintained until the 20^th century by the most educated and wealthiest class of the population. This is why, a cultural event such as the Shanghai 2010 Expo is a perfect gate for luxury brands wanting to develop in China. The search for glory is even part of the Confucius teaching developed in the 6^th century B.C. As social codes were broken by the culture revolution, Chinese are now looking for prestigious brands to establish their status.

As a communist country, China has a very hierarchical structure which implies that the social imitation mechanism has to be based on the standards set by the elite.

China specific production

In order to seduce Chinese customers, many brands propose exclusive products, designed or customized for the local market.

In the car industry, wealthy customers have drivers and seek for luxury rear seats in terms of comfort and sophistication. BMW is proposing an extended 5 Series with a chrome decorated interior. Audi already offers an A6 L (L for Limousine) and Mercedes will provide an extended E Class this summer.

Last year, Ferrari introduced a 599 GTB Fiorano unimaginatively called the “China Limited Edition". This car was designed by Chinese artist — and Ferrari owner — Lu Hao. It features an exterior finish influenced by Ge Kiln porcelain of the Song Dynasty. In April, Bentley presented to the Beijing Motor Show two new versions of its Continental, the GT Design Series and the Flying Spur Speed, exclusively available for the Chinese market.

In fashion, Fendi organized a fashion show on the Great Wall and Hermès asked Ding Yi, a contemporary artist, to design a silk scarf called “Rhythm of China”. Chanel created last year “Paris-Shanghai” a new ready-to-wear collection and Dior unveiled “Lady blue”, the third opus of its advertising campaign shot by David Lynch.

The watch industry, Omega and Vacheron Constantin, proposes yellow gold products with diamonds to a young a wealthy clientele. Ultimate luxury, in Sept 2009 Cartier organized, on the theme of the power, an exhibition of historical pieces in the heart of the Forbidden City.

Made for China

More than any other market, China has some very specific requirements in terms of style and quality. This means that luxury brands must be smart and agile in order to adapt their offering to the taste of local customers, even if it does not fit sometimes with the DNA of these brands.

For European luxury, it is a long and exciting road to China.

Yvon Le Gall

Luxury-world

The number two U.S. car maker sold Volvo to a Chinese company  

Stockholm March 28 - After many months of persistent rumours, a Volvo spokesman confirmed last Sunday the signature of an agreement with the Chinese company Geely to sell Ford motor’s Volvo car unit. (source Reuters).

The estimated price of the transaction is $1.8 billion (source Financial Times). The deal is aimed to be closed by the end of the third quarter and will enable the number two U.S. car maker to free up cash in order to focus on its Ford core brand.

Zhejiang Geely Holding Group Company Ltd is the first privately-run car maker in China. The company, funded in 1986, started to sell spare parts for fridges and now has 12,000 employees of which 1,600 engineers in China and sold 300,000 cars in 2009.  Geely is also discussing with Manganese Bronze to acquire the famous London’s black cab maker.

The last act

This is the end of Ford’s adventures in the luxury segment. At the end of the 80’s, Ford decided to create a luxury division called Premier Automotive Group and the company acquired, at high price, notorious brands such as Jaguar in 1989 ($2.5b), Aston-Martin in 1993, Volvo in 1999 ($6.4b) and Land Rover in 2000 ($2.7b).

If Ford is recognized for having dramatically improved the quality of the acquired British brands, it is also charged for having turned Jaguar or Volvo into common cars without personality.

After quite 20 years of non-profitability, Ford sold its entire Premier division in only three years: Aston Martin was acquired by a UK-led consortium with two Kuwaiti investors ($924m in March 2007), Jaguar and land Rover by the Indian Tata Motors Ltd ($2.3b in March 2008) and now Volvo by the Chinese Geely ($1.8 b in March 2010). It will be mostly interesting to see what will happen to these brands owned by companies with no background in the luxury sector and coming from emerging markets.

These extremely low selling prices compared to the purchasing prices are a strong signal from the market that Ford did not succeed to create any value in its luxury division. At the same time, Fiat successfully re-launched Maserati and BMW is doing reasonably well with Rolls-Royce. So, there is no curse on luxury cars segment, just talent and vision.

Yvon Le Gall

Luxury-world

The French house announces Shang Xia, a new luxury brand in China

Paris December 21 – Patrick Thomas, Head of Hermès International unveiled that the French luxury brand is about to launch a new label called “Shang Xia” which literally means upside-down (source la Tribune and Capital.fr). Shang Xia will be a true luxury house with a cultural Chinese heritage in terms of patterns, fabrics and know-how. The brand management and the design studio will be based in Shanghai and the art direction will be under the responsibility of the Chinese designer Jiang Qionger, daughter of a famous local architect. For the launching of its “me too” company, Hermès will start to communicate during spring 2010.

New impulse or remedy?

According to the consulting firm Bain & Co, Chinese will be the main contributor to the luxury sector growth in 2010. Analysts are questioning if this launch represent a major change in Hermès strategy which failed to success in China. The company arrived too late in this huge country and has only 16 shops when competitors such as Louis Vuitton or Gucci have twice as many. Even if the new brand will be extremely luxurious, products crafted in China will be at a competitive price compared to imported goods from Europe.

In order to give some credibility to Shang Xia, Patrick Thomas explained that Hermès is currently discussing with a famous Parisian department store, mandatory visit for Chinese tourists in Paris.

Let’s hope that Shang Xia will be more successful than Shanghai Tang, the luxury fashion brand acquired by Richemont in 1998 which is still chasing success.

Yvon Le Gall

Luxury-world

http://france.hermes.com

Maison Martin Margiela uses Michael Stipe as celebrity collaboration

The avant-garde label Maison Martin Margiela (MMM) is known for not using the usual marketing tricks of the other fashion brands. This is why this collaboration with Michael Stipe, lead vocalist of the 90’s rock band REM, came as a surprise.

The result of this collaboration is a 925 sterling silver microcassette identified as MS09. The jewel comes with a ribbon referring to a cassette tape so that it can be worn as pendant, armband or belt. This is a limited edition: only 199 pieces coming with a special notebook numbered by Maison Martin Margiela and signed by Stipe. This collaborative piece is sold in December in selected points of sales such as concept-stores for a price close to EUR 400.

A consistent partnership

If, at the first glance, this collaboration looks like another celebrity endorsement for a luxury brand, it is actually a very consistent partnership between two very innovative labels.

Martin Margiela founded the eponym brand in 1988 which quickly became one the leading labels of the new avant-garde coming from Belgium where he studied with other designers such as Dries Van Noten or Ann Demeulemeester. Established in Paris, he turned to be the master of deconstruction and reconstruction, mixing innovation and wearability. Margiela himself never appeared during the fashion shows and took care of not being exposed to the usual fame surrounding fashion designers. Thirty years after the creation of his own label, Margiela’s departure was confirmed by Renzo Rosso, CEO of Diesel and main shareholder of MMM (source English Vogue: 3/10/09).

Michael Stipe founded the American rock band R.E.M in the 80’s and the band is often viewed as a pioneering alternative rock band. But Stipe is also a visual artist interested into immortalizing in bronze usual objects such a Polaroid camera, a clock radio or a tape recorder. Also fond of photography, Stipe already collaborated in 2008 with Lacoste to create a special edition, photo printed, of the famous polo shirt of the crocodile brand.

Finally, it makes sense that two very innovative universes join their views in order to create a piece that will surely become a collector for the fans of fashion, music or contemporary art.

Yvon Le Gall

Luxury-world

http://www.maisonmartinmargiela.com

Lorenz Bäumer makes Vuitton shine

PARIS – In October, the French company Louis Vuitton introduced its first high jewelry collection called “L’âme du Voyage”, created by Lorenz Bäumer.  The 43-year old French-German designer is not exactly a new kid on the block: he had been creating jewelry collections for Chanel for the last fifteen years but without any advertisement. He worked for Baccarat too and he also founded his own eponymous company. But this time, Louis Vuitton put him under the spotlights.

In the past, Vuitton experienced fashion jewelry with the in-house art director Marc Jacobs who created small pieces such as rings or charms bracelets to accessorize his fashion shows. In 2007, the brand even collaborated with rapper Pharrell Williams who designed some flashy rings but the consistency with Vuitton’s image was then very questionable.

Today, Yves Carcelle, the CEO of Vuitton, explains that this very exclusive collection results from a long matured strategy (source: Challenges). “L’âme du Voyage” proposes thirty pieces which are the result of three years of work. A new complex diamond cut was specially created for Vuitton: the LV cut with a monogram flower shape. This cut is extremely expensive because it causes a leakage between 40% and 60% says Albert Bensoussan, director of the watch and jewelry division (source: Le Nouvel Observateur). But the result is dazzling: between 65 and 77 facets are playing with the light when a classical brilliant cut offers only 58 facets. The LV shaped diamond is exclusively hand cut in a Tel-Aviv studio. Finally, “L’âme du Voyage” is a breathtaking collection of unconventional pieces mixing precious stones (diamonds and sapphire) and semi-precious (spinels, tsavorites, garnets, opals, aquamarines) with a culminating price of EUR 1.8 million for a necklace called “Ombrelles and eventails”.

Vuitton targets high-end luxury

With this collection, Louis Vuitton clearly positions itself in the very exclusive arena of the top jewelers such as Cartier, Boucheron, Bulgari or Harry Winston.  In terms of image, it is la crème de la crème for a  brand mainly known for handbags and leather goods. High jewelry represents the ultimate luxury in many cultures across the world, especially in the emerging markets, and potentially it can create a strong value for the brand.

This sense of prestige was already identified and targeted by Chanel and Dior which had a similar approach many years ago. For these generalist fashion houses coming from the traditional French haute-couture, they already expanded their offering to fragrances, cosmetics, shoes and accessories. Jewelry was therefore the ultimate brand stretching. But for a long time, Chanel proposed somewhat classical design with mostly white diamonds and Victoire de Castellane, in Dior, focused her creativity on colorful funny pieces mainly in semi-precious stones. Even if these brands performed reasonably well, their creations were not exactly a threat for the major jewelers of the Place Vendôme. In the case of Vuitton, appointing a recognized designer and launching a collection impressive in terms of design, material and price, should create a strong positioning for the brand in an extremely demanding market segment.

Yvon Le Gall

Luxury-world

http://www.louisvuitton.com/hautejoaillerie/