A voracious appetite for consumer goods, youthful exuberance and sheer numbers are the main reasons why luxury companies are flocking to China, Frederic de Narp told a group of luxury marketers in New York.
“Everybody talks about China, China, why China?” Harry Winston’s president and CEO said to members of the Luxury Marketing Council Wednesday night. “They spend more than anybody else and they are younger than everybody else.”
When de Narp mentions affluent consumers, he is talking about what he defines as the “uber-wealthy,” those with about $30 million in liquid assets that Harry Winston targets. He says those with the greatest wealth in China are 15 years younger than their counterparts in the U.S. About 80 percent of the truly wealthy in China are under 45 years old while 70 percent of their counterparts in the U.S. are over 45 years of age.
DeNarp discusses the luxury market
In addition, the number of uber-high-net wealth people is expected to increase dramatically, far more than anywhere else in the world. In ten years, he said China is forecasted to be the number one luxury market in the world. The country is already the top export market for Bordeaux wines in value (according to the Conseil Interprofessionnel du Vin de Bordeaux) and the biggest destination for luxury watches.
“In ten years we expect the uber-high-net wealth population, the people with $24,000 in disposable income, to be multiplied by 12 in ten years—from one to 12 million. That is why everybody’s going to China,” he said.
De Narp was one of three speakers who discussed “Canadian Luxury” at the Conde Nast Building on Times Square. The Toronto-based company is both a diamond miner and luxury retailer. He limited his talk to the worldwide luxury market and the company’s brand and retail strategies.
While the Chinese luxury market is the fastest growing in the world, De Narp said that the luxury market for the uber-high-net wealth population is doing well everywhere.
“It’s booming,” he said. “The brand (Harry Winston) is on fire but luxury is booming around the world.”
In the most recent assessment, the worldwide luxury market is project to grow 9 to 10 percent in 2010.
“I’m talking about true luxury brands,” he said. “There’s a world of confusion among luxury brands and true luxury brands. A luxury brand, to me, represents timeliness and it is a truly a different business model. True luxury brand are doing extremely well—hard luxury, watches and jewelry.”
Among countries, China’s growth for the years is projected to be 10 percent, the rest of Asia 4 percent, North America 12 percent and Europe 6 percent. The Japanese market is projected to fall 1 percent. All of the numbers are far better than what was predicted in the beginning of the year, he said.
While the world’s Gross Domestic Product decreased by 2 percent, the uber-high-net wealth population of approximately 98,000 people with more than $30 million in liquid assets grew by 19.4 percent.
“So there is enormous wealth created around the world and of course Harry Winston being the most exclusive watch maker in the world, gets positioned with the best.”
Among countries with the most billionaires, last year china had 24. This year it has 64 billionaires. “I’m sure there are more than 100 billionaires. This is the power of China,” he said. “But still, America is still the strongest market by far.”
New York has 60 billionaires and there are 27 billionaires in Los Angeles. Among other cities around the world, there are 32 billionaires in London, 15 in Moscow and 28 in Istanbul. “Who would have guessed that,” he said.
Consumer trends differ around the world. In the developed world, people want more simplicity. Young people are looking for products and services that are environmentally and socially responsible.
Three major western trends in Europe and American are exclusivity, durability and heritage. “In Europe I don’t think this is new for anybody,” he said. “Engagement and experience at the point of access is extremely important.”
In china they want visible logos, western brands and the look for novelties.
“Today, nothing is too beautiful for China,” he said. “It’s a matter of only wanting the best. They believe in the value of investing in precious stones.”
Japan, is “losing their passion” for luxury, he said. However, they want niche brands that are not readily available to the general public.
“An exclusive brand with only five salons, not in the malls, not in the department stores,” he said. “We are extremely well-positioned in Japan.”