Let’s start at the beginning point of our earlier conversations; branding is about people. It’s not merely about the growth figures; there’s no growth if people don’t get the story.

The real point, however, is about what luxury means; yes – it’s a commodity, but in the west, one thing we consider is what does it mean for a consumer(?); it’s different than regular offerings from the west (and of course, most of these luxury offerings do come from the western part of the planet, in relationship to China, as opposed to your eastern neighbors!) Any kind of capitalist | commerce reach to consumers has to start here – what is the story, who cares about it, and how can they embrace it? With this in mind, a retailer will build a relationship, they will create long term connections that will yield results over time. Luxury holds this challenge in deepest demand, to an answer. The point is: how to retain the true and authentic value of the brand, the “worthiness” of it, the implied status, even while battling the rampant piracy that affects the global luxury trade and its inroads in China. Luxury in China, one of the deepest piracy markets in the world reflects the world of merely acquiring status, regardless of the truth of the acquisition – so, for China, their growth in luxury, how to balance this against the difficulties of this substantial, ongoing loss to the lines will be an issue for debate.

1. What does global luxury goods market look like today? which industry or which products line does luxury mainly exits ?

What does the global luxury market look like today? It’s growing, rapidly. 10.5% growth in 2004, nearly 15% growth in 2005, and added expansion – a whopping 50% per year – the Chinese market alone, in 2006. But the interesting point lies in how it’s growing, as a capitalized market of more than 1 trillion dollars. Luxury spending is increasingly skewing less to hard commodities alone and more to the trend of experience: services, concierge spending, customized shopping attention, personalized products, online private sales, messages and forums, selling environments, private travel. What does that mean? It means that world wide, people are more willing to spend money on the creation of luxury “memories”, experiences, rather than the typical hard objects of desire that suggested the potency of past growth. Still, this is part of the play. Yes, to cars, jewelry, watches, spirits, apparel and accessories – but more to the notion of experience involvement, coupled with these items. So, for reference, in 2005, Americans might have spent, on average, something to the gesture of 12,000.00 in the categories noted above, excluding automotive costs. But they will have spent double that on experiences: vacations, first class travel and expenses tied to ventures that are more about living the luxury life – holistically – rather than merely in acquiring an accessible item that “hints” at the whole package of luxury life. (2006 / Unity Marketing test results)

2. What is China’s luxury goods market today? Which luxury products does

China specialize in?

It’s been said, in various business journals that China is too broad of a market to attempt to categorize holistically; it’s growth is so dramatic (14% in the last 17 months of 2005–2006) that it needs to be channeled to be understood – but in focusing on the biggest cities, there’s a beginning of an index in growth potentials. Most of the larger cities: Beijing and Shanghai as two key examples are experiencing attempts by many of the luxury power brands to infiltrate – dramatically – the retail arenas of these cities. But how successful are they? Sales are dramatic in multiple categories – so, for example, in one accessible aspect of luxury – watches – the sales in this channel alone represented nearly 4 billion US$. Other numbers are phenomenal. The exploratory entry paths, in terms of considerations by various retailers are: Hong Kong, Macau, Taiwan, then Shanghai and Beijing; and there are a number of retailers following this initiatory path of introduction…Still, even with this growth, retailers are being watchful, cautious about exploring. They are scouting and setting up camp. The new, recently sanctioned model, allowing companies to open on their own, without a Chinese “partnership” is attracting more players, who are interested in creating their own brand presence.

The key, again, is…what is the story? With the burgeoning wealth, the massive classes of Chinese of varying levels of financial capacity to purchase, who…gets the story, who gets the “what” of a luxury brand. Western groups need to continue to orient themselves in a manner that will be captivating to Chinese demographic groups. This gets back to the main question – China cannot be easily categorized, demography cannot be simply sorted. The brands that are big, well known, well positioned will reach the furthest.

How about this – to the consideration of Asian power in brand development: most luxury brands achieve 50% of their operating growth from Japan and China.

Who are the brands? China: Gucci rose 58.6% last year alone. Louis Vuitton has never had growth less than 50% per year, annualized growth, since entering the Chinese market; Armani plans 30 stores (2008); Prada has a similar roll out planning model. Bulgari is entering the fray.

3. How many luxury brands have entered China so far, in which cities? I’ve noted the answers to some of this, in the outlines above. How have they developed their brands – through a retail presence, advertising, by which means do they reach the Chinese market? The strategy for insertion into the market is: advertise adjacently in accessible media to the Chinese commonwealth, create emotional links to the appropriate demographics, build aspirational zeal, strategically implant retail expressions in airports, travelpoints and nexus; move inwardly to cities.

What goal do luxury goods hope to achieve with Chinese consumers? Ownership and embraced relationships with some part of the 1.3 billion people of China.

4. How long will take China become a major luxury consumer market? If the world market for luxury can be divided, between a 50% share of Europe and the Americas, and the other half resting in Asia, predominantly Japan, China can be described as controlling roughly 30% of that halved market section; but the key is the growth – at 50% per year, growing aggressively, this stake in the Asian equation will change rapidly. The current positioning of China is that of roughly 15%, which is on par with Europe, and slightly below the US market share – and Japan: 40%.

There is an important consideration in the positioning of the Chinese, to status. Young, affluent Chinese are more than willing to flaunt what they’ve got. The European positioning, long held, to luxury, is that it’s something of a status that is earned – if only by lineage and privilege. The American proposition is that luxury is for all – everyone can have access to it, if they’ve earned it. And luxury, in this context, is something that is accessible at varying levels. You can own a Rolls, have a diamond bracelet from Graff, rare vintage from LVMH, a trunk from Louis Vuitton, or merely a scarf from Hérmes; the American belief is that you access the realm of the luxurious from the place that you are capable. From the highest rung, to the lower fabric – there is a place to share in the dream of luxury experience. In China, there are two demographics: one, the white collar worker who travels and indulges in luxury experience sampling; two the wealthier class, residents in larger cities, that have wealth which dramatically sets them apart, and more to the realm of flaunting – no, shouting out – the excesses to which they are privileged.

5. What’s relationship between The GDP (of any country) and the luxury consuming (in that country)? The relationship is, at present, indistinct. The world leader in Japan (GNP 3 / GDP 4) is at 41%, down the line – at (GNP 7 / GDP 2), the US holds merely a 17% positioning; and in China (GNP 125 / GDP 3) is currently at 12%.

Jonah – I realize your closures are today on this story. Happy to help if there’s relevance. My background is brand strategy / design, for the western as well as eastern markets. I’ve worked as a consultant | retail designer in Tokyo, Seoul, Jakarta, Beijing and soon: Shanghai.

What I might offer is something to the notion of “why luxury” in the west. To China, luxury, historically, is a reference to the outcomes of imperialism; luxury is an expected reflection of royalty. In a way, this concept might align with western intimations.

First, what does luxury mean? The real etymology, in the West, for luxury is about lust. Luxury is something that is “out there” – not in reach, aspirational, a distant dream for many people. But increasingly, the strategy is about how to get fundamental brand connections to average consumers so they can dream the dream, live the life of what might be perceived as luxury space; it’s a dreamworld of fulfillments. The strategic evolution then, for luxury development has unfolded in the manner that many of us know:

Family owned concerns start with a tradition of catering to a high end provision of product.

Louis Vuitton & Company sold customized travel gear to vagabonding vacationers in the latter 1800s, early 20th century.

Gabrielle Chanel offered limited edition couture and specialized clothing – with her attitudes of feminine liberation.

Hérmes spoke to the trades of equine equipage at the beginning of its family heritage.

Guerlain, François Coty, Moulinard, Fragonard…all of these perfume houses began as family enterprises, focused on the most specialized, customized offerings of fragrance, gathered by hand, bottled individually, packaged carefully, sold at their shops. All for those who had the money to indulge; or…the royal pursestrings of monied grace.

Eventually, in the 90s, another merger–based, acquisition strategy emerged, that of the luxury conglomerate, creating value– enhanced luxury brands that benefit by the mutual marketing tactics aligned with this shared holding enterprise. Richemont, LVMH, Gucci Group are the leaders in this realm.

But the point to any of this, in the analysis and exploration of the magnetism of luxury, is lain in the perfumed satchel reaching to a world beyond “your world”: where the fabrics are the most exquisite; the scents the most difficult to gather; the stones the most uniquely cut, mined in the deepest channels; the leather hand cut, stitched and nurtured in the most expert and time–honored tradition. Many of us can’t go there, live that life – BUT WE CAN HAVE A PART OF IT.

Given the vast populations of China, the emerging growth of incomes, the progressive acquisitions of higher priced goods – the potential TO OFFER THE REACH is a tantamount declaration.

I’m sure that you have lots of other facts and figures to the other operational aspects of this offering – what’s happening in the increasing presence of luxury retailers, their strategy in merely “showing a presence” even when there might be a dearth of specifically Chinese clientele.