Bromleyisms: Politics

Potential and problems for luxury market in China and India
PARIS (AFP) - New lands to conquer for luxury brands, China and India both represent markets with a strong potential but which will need tailor-made approaches to take account of the different brakes on their development.

China is now the world's third biggest market for luxury goods, the director general of the polling institute IPSOS-France, Stephane Trucchi, reminded an international seminar on the luxury industry organised in Paris. China now accounts for 12 percent of sales, after Japan (41 percent) and the United States (17 percent), the French economic daily Les Echos reported.

In 2010, 250 million Chinese consumers, that is 17 times more than today, will potentially buy luxury goods.

Is the sky falling? Is the U.S. doomed? Will the Chinese have more Gucci bags than have we? Horrors, those damned Chinese are buying -- French stuff!

This is obviously a francofilian conspiracy to get back at Americans for going au goût to California wine and heading hors d'oeuvre to Wisconsin cheese. (Habits I applaud, for it makes good French wine and cheese cheaper for the holdouts like me.) Ah, oui, the pauvre French have found that they can't foist overpriced scarves, cut-glass, and baths-in-a-bottle, a.k.a. perfume, on the great American middle class. Americans, you know, have no taste. And they already mortgaged the house and car and so can't afford a third leverage for an overpriced wristwatch. Worst of all, Bulgari just isn't willing to choke up to the Walmart discount.

I'm not surprised that Japan is the largest consumer of "luxury goods," at least according to French standards. And I'm not surprised that China is on the way up in that category. You see, now we know what they're doing with all those spare greenbacks. Glad it's going to some use, if not a very useful use. Seeing the Asians recycle our debauched dollars spent on cheap Asian crap on expensive European crap is quite the lovely little irony. It all goes around completely when a good many of those lost dollars head back home as worldwide consumers get suckered into American branding:

Of a list of top worldwide brands, eight of the top ten are American, and zero of those are "luxury goods':

BRANDZ Top 10 (value in $million):
1. Microsoft - 62,039
2. GE - 55,834
3. Coca-Cola - 41,406
4. China Mobile - 39,168
5. Marlboro - 38,510
6. Wal-Mart - 37,567
7. Google - 37,445
8. IBM - 36,084
9. Citibank - 31,028
10. Toyota - 30,201

(See World’s Most Powerful Brands 2006 from FinFacts, quoting from Millward Brown Optimor

Of the next ten top brands (see top 100 chart from the article), the only European ones are BWM, Nokkia, and Vodafone. The first to appear from the "luxury" category is Luis Vuitton, ranking at 24, just ahead of American Express. Throughout the rest of the Top 100, the principle categories for non-American brands are automobiles, telecom/cellular, consumer electronics, and banks. American branding prevails with such mundane, but hugely diffused products as Gillette, Dell, Wrigley, and ebay. The occasional mass-market Euro brand appears, but they are near American in their image and marketing, such as Carrefour, Ikea, and H&M (inexpensive clothing). The paucity of mass-market European brands is downright scary, and it has nothing to do with the size of respective domestic markets.

Clearly a nation that defines itself by luxury brands is defining itself by exclusivity of wealth and not by its spread.

Americans invented the mass market, and continue to dominate it, not because of innovative American business techniques, but because of the democratization of American consumption that rewards mass over exclusion. Sure the U.S. is no. 2 on the "luxury goods" list, yet ahead of China, but no one here gives a damn. L'Oréal? Chanel? Cartier? Rolex? Hermès? Gucci and Esprit? All but those first two fall below Target -- er, Tarjé, which stands at number 77, 71 slots behind Walmart and the slew of great American mass market brands, and not far from L'Oréal's 52nd place.

There are plenty enough Americans with the money to toss at branded luxuries, so that's not much for comparison. What's more significant is that Americans are not obsessed with the luxury brands. I walked through a department store with this article in mind today, and I felt out of place. While my brand-conscious daughter ran after this clothing line and that perfume, I felt no connection. I felt about as comfortable as I do in a Walmart, thinking to myself, "whatever." I'm equal in either place, but I'm more likely to be in a segment killer shop, or the drug store. Either way, this is true democracy: we all fit in everywhere. Those same American hyper-consumers who eat up the "luxuries" more frequently visit the mainstream American brands.

And here are their numbers:

18.5 million households with annual income over $100,000
9.1 million households with net worth over $1 million
64,000 households with net worth over $30 million.¹

That buys a lot of French scarves. It also buys one helluva lot of Nikes, Colgate, Budweiser, and Coca-Cola.

More importantly than that incredible depth of wealth is the rest of America:

Sixty percent of American households have an income over $34,000

Sixty percent! Forty percent have an income over $53,000, and twenty percent are over $90,000.² Unbelievable? No, it's called the United States of America. And there's not a country close to it. It's not the size or buying power of the American economy that matters, it's the breadth.

Too bad the rest of the world spends more time trying to figure out what's wrong with America rather than emulating what's so very right.

¹ From Luxury Institute Segments Wealthy Consumer Market; Marketer-friendly Format of Fed Data Provides Actionable Insights for Banks, Brokers, Realtors, Luxury Goods Firms, Travel Providers, Wealth Managers, and More

² From Federal Reserve document, Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey
of Consumer Finances [* Warning: pdf file! *]

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