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November 2019 investment update

October was a surprisingly good month but the wall of worry mounts, writes our Head of Investment Management, Simon Black. Download your copy of our November 2019 investment update and watch our briefing video to find out more.

Family finance is a women’s issue

Wealthy women are bringing a more collaborative approach to the business of managing family wealth, leading to better thought through investment strategies with greater client buy-in

Dolfin launches Private Investment Club

Today we announced the launch of our Private Investment Club. The new offer is available to existing clients, providing exclusive, pre-screened investment opportunities across a variety of sectors and regions.

China’s millennials seek home-grown luxury

Could Chinese challenger brands take on the likes of Chanel and Dior in the high-fashion stakes?

3 July 2019 / Lifestyle

In the fast-moving technology and mobile communications sectors, China’s domestic brands are gaining global recognition for innovation and affordability – but what of high-ticket consumer goods? At Shanghai Fashion Week in March this year, a record number of independent designers presented fashions based on street styles to appeal to young consumers. “They’re not cheap – they’re definitely not fast-fashion priced,” says blogger Jamie QQ Wu. “You’re looking at anything from US$300 to US$800 for a top or a pair of trousers, sunglasses or funky street-fashion jewellery.”

Chinese consumers represent a huge market for western luxury brands, with 32 per cent of global luxury purchases in 2017 made by Chinese consumers. Chinese consumers will be responsible for 44 per cent of spending on luxury by 2025, spending US$150bn annually.

Chinese consumers will be responsible for 44% of spending on luxury by 2025.

“My clients are very aware of the top luxury brands and limited editions – they want unique things,” says Melody Lin, Project Manager for Dolfin’s China Desk, who advises high-net-worth clients in Greater China. “They travel a lot and part of that is purchasing iconic designer items that reflect the history and culture of the places they’ve been.”

Changing tastes

But things are changing. Research by Ruder Finn and CSG shows that Chinese shoppers’ motivation has shifted from buying luxury goods to ‘show off to outsiders’ to a ‘reflection of personal taste’. And Chinese consumers are demanding, with more (89 per cent) looking for ‘creative and bold’ products than their counterparts in Hong Kong and South Korea (79 per cent) and requiring ‘personalisation’ (90 per cent vs. 79 per cent).

This shift is driven by younger shoppers: close to 50 per cent of luxury-goods shoppers in mainland China are under 30. In 2019, millennials accounted for 10.2 million consumers in the Chinese luxury-goods market, spending RMB 41,000 (US$6,000) on average. Gen Z (those born in the 1990s), spent RMB 25,000 a year (US$3,000).

In 2017, women comprised 50% per cent of total luxury spending in China.

Lin points out that women are a force behind luxury market growth: in 2017, women’s clothing, jewellery, cosmetics, perfume and personal care products comprised 50 per cent of total luxury spending in China – up more than 20 per cent on the previous year. She points to a phrase used on social media platform WeChat – ‘hungry for three days’ – marking the lengths young women will go to to fund their designer acquisitions.

She says, “These younger people reject the notion that ‘imported is better’ and are looking for brands that reflect their experience at home.” As China’s economy continues to grow, overtaking Japan in 2011 to become the world’s second-largest, Chinese shoppers born since Deng Xiaoping’s 1979 measures to liberalise the economy are less likely to be impressed by the legacy associations of established luxury brands and more open to innovative designs based on current trends.

To succeed with this demographic, Chinese designers need to innovate: “A local-born Chinese luxury brand would have a very different story – it would be a China story that the international and Chinese markets find unique,” says Wu. And interest is on the increase: 74 per cent of affluent Chinese consumers know at least one Chinese designer and 45 per cent intend to purchase more Chinese designs in the next year).

Early moves

An early initiative to tap into the made-in-China ethos came in 2009 when Hermes launched Shang Xia, ‘a luxury Chinese brand with a French soul’. Wu says: “It was a visionary move but it remains niche in the luxury sector – it’s a recognisable aesthetic but it’s not a household name domestically or internationally.”

Another bellwether could be home-grown brand Comme Moi, founded by model Lu Yan, which is distributed in Lane Crawford department stores. But it doesn’t draw specifically on Chinese themes: “It’s internationally recognised contemporary design for the modern woman, whether Chinese or foreign,” says Wu.

It’s only a matter of time before a home-grown luxury brand strikes it big.

According to Wu, one couturier to watch is Shanghai-based Guo Pei, who designed the dress Rihanna wore to the Met Ball a few years ago. “If there was one Chinese couturier that qualifies as haute couture in China today, I’d give it to her.”

Economic growth and changing demographics suggest it’s only a matter of time before a home-grown luxury brand strikes it big – and investors are starting to bet on it: Fosun launched Fosun Fashion Group in 2015 to acquire growing luxury brands. “Fashion is an area of interest to many investment clients,” says Lin. “Chinese tech brands such as Huawei and Xiaomi are known all over the world – we look forward to seeing Chinese luxury goods follow.”

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