ICSC: International Council of Shopping Centers

Asia keeps luxury brands rich

The economic downturn has finally caught up with luxury spending in the West, but Asia’s shoppers are ensuring that the world’s top brands are not losing a wink of sleep. Asia accounts for more than half the world’s expenditure on luxury products, noted a speaker at the 2008 ICSC Asia Expo.

“The fact remains that Asia is head-over-heels in love with luxury brands,” said Radha Chadha, a retail industry consultant who addressed the Expo in Macau Thursday. “All in all, you have nothing short of a ‘luxplosion’ in Asia,” she said.

And that love affair, already in full swing in such developed Asian markets as Japan and Hong Kong, is spreading like a virus through the emerging and developing countries such as India, China and Vietnam, says Chadha, managing director of Hong Kong–based Chadha Strategy Consulting and co-author of “The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury.”

“In Tokyo, 94 percent of women in their twenties have something of Louis Vuitton,” she said. In Korea, Salvatore Ferragamo footwear is so pervasive “it’s like the national shoe.”
In Hong Kong, the wives of the economic elite — a group of about 60 dubbed the “tai-tais” — each spends about $1 million a year on luxury goods, she said.

But extravagance is not the exclusive pastime of the rich. Junior executives in Shanghai will blow a month’s salary on a luxury item, while the young employees of call centers in India — many of whom live with their parents still — are equally carefree with their money.

Brands are enormously important to the identity of Asians, says Chadha, contending that this arises out of the region’s history of subjugation, whether it be at the hands of colonialists or domestic tyrants. “Luxury brands are a modern set of symbols that Asians are wearing to redefine their identity and social position,” she said, likening it to a modern caste system. Not surprisingly, some 70 percent of the goods sold in Asia bear their manufacturers’ logos. “In today’s Asia, you are what you wear.”

Countries go through recognizable stages as they develop, she said. In emerging countries such as India, money is first spent on household appliances and cell phones, with a relatively small elite indulging in luxury goods. People in countries at a later stage of development —China, Korea and Taiwan — use such goods to “show off,” Chadha says. As luxury merchandise becomes yet more pervasive, as in Hong Kong and Singapore, residents are buying it to “fit in,” she said. Finally, in Japan, Asia’s most voracious consumer of posh merchandise, consumers are “addicts,” and their luxury indulgence is reflexive.

Chadha says, luxury brands can prosper even more by adopting Asia’s styles and fashions rather than slavishly holding onto their Western identities. All of which is likely to keep these manufacturers and retailers far too busy to spend much time fretting over a dip in sales in the West.