Mainland Chinese given lessons in luxury as high-end sales slump

With the mainland's anti-graft drive hitting sales of high-end goods, firms look to teach Chinese how to appreciate the finer things in life

PUBLISHED : Friday, 06 September, 2013, 12:00am
UPDATED : Friday, 06 September, 2013, 11:03am

Can't tell a Monet from a Van Gogh? Christie's International's China staff can help. Mixing a pricey Chateau Petrus or Chardonnay with Sprite? Sommeliers at Shanghai wine retailer Sarment will explain why not.

As growth in the mainland's luxury industry slows and consumers turn more selective, high-end brands are boosting efforts to educate consumers on the finer points of haute couture and vintage wines to persuade them to pay up.

Mainland growth has decelerated for two consecutive quarters, a government anti-corruption drive is discouraging expensive gifts, and consumers are shifting to more-understated luxury. To shore up sales and convince Chinese shoppers that their products are worth the hefty price tag, luxury firms are offering in-depth lessons in appreciating art, wine, designer clothes, whiskey, and more.

The anti-corruption campaign has "accelerated the change from extravagance to more discerning enjoyment", said Horace Ngai, China managing director at Paris-based distiller Pernod Ricard.

Pernod Ricard's teams have organised trips to vineyards and whiskey regions in France and Scotland and tasting sessions in China. Sales of its liquors priced over 1,500 yuan (HK$1,885) in China rose more than five times in the last three years.

China's big spenders are usually self-made entrepreneurs who have spent years "on their business with less time to be immersed in luxury culture and education", Ngai said. "They now need others to take them on the journey."

Chinese consumers were the world's biggest buyers of luxury goods last year, accounting for 27 per cent of industry sales, according to consultant McKinsey & Co. Until recently, the wealthiest buyers gravitated to logos and bling. That's changing as growing numbers travel overseas and get familiar with the more subdued luxury goods popular in Europe.

President Xi Jinping has since last year limited official spending on high-end banquets and discouraged gifts of pricey watches and alcohol that are common in business dealings. Xi warned in November that resentment at graft and the enrichment of cadres and their families threatened the Communist Party's grip on power.

Mainland luxury industry sales growth is expected to slow to as little as 12 per cent annually in the three years to 2015 from an average 27 per cent between 2008 and 2012, McKinsey forecasts.

Last year "was the tipping point", said Ken Grant, director of luxury consultancy FDKG Insight in Shanghai. "People are being selective on how they spend their money."

Christie's International has seen a spike in Chinese buying art for pleasure or investment and seeking more information on the subject. The number of clients from mainland China bidding at its international auctions has doubled since 2008.

The auction house this year started offering a Putonghua-language art tour, a 14-day, 198,000 yuan course that moves from Beijing to Taipei to Hong Kong to London examining topics from antique Chinese ceramics to impressionists such as Claude Monet.

Many Chinese luxury shoppers are "in stages of discovery", said Yuval Atsmon, a McKinsey partner in London.

While luxury brands invest in educating shoppers globally, they go a step further in China. As the country's middle class expands, some are making their first purchases from Gucci or LVMH. High-end department store Lane Crawford runs personal styling and concierge teams, where customers can make appointments to pick an outfit for a special occasion or even for an image makeover.