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Made-in-China luxury is having a moment. Brands are proliferating and, a decade after Italy’s Prada listed in Hong Kong, Icicle, a Chinese purveyor of top-end fashion, is considering a public offering in Paris. That fits with a country no longer seen as a factory pumping out cheap copycat goods. Instead, there is innovation in the form of electric vehicles from BYD, AI via DeepSeek — and yes, toys courtesy of the ubiquitous Labubu doll.
Homegrown luxury is oiled by government edicts to embrace guochao or national trend, and cultural self-confidence. China chic spans all the hallmarks of status spending: fashion, jewellery, cars and fine wines. Hongqi cars, once known for escorting early communist leaders, now ferry the country’s billionaires.
This is a threat to European luxury companies. First, these goods are priced to go. With the economy lacklustre and younger consumers facing bleak employment prospects, dropping around US$500 (S$633) on a handbag from Songmont is a better proposition than buying one from European brands costing 10 times that.
Business models stack up more easily without the need for a grand store on the smartest streets in Milan or Paris; mall space comes cheaper. Chinese brands are also more willing to sacrifice margin. Bernstein estimates retail mark-ups on prices are four to five times the cost of goods sold, half the multiple charged by European brands.
Second, Chinese brands trump foreign rivals by playing up their local credentials, incorporating traditional motifs in jewellery and heritage aesthetics in furniture. That acknowledges growing interest in history and culture; see, for example, last year’s 17 per cent surge in museum visits over the May holiday.
And third, Chinese companies that win in their home market have form in deploying their competitive edge abroad. So far, they have only dipped toes into foreign markets. Bosideng, which sells outdoor wear, has a flagship store in London and is available in France. But the trajectory of BYD shows what’s possible when a Chinese challenger reaches escape velocity.
Some overseas players staked an early claim on Chinese luxury. Exor, the holding company of Italy’s Agnelli family, bought Hermes’ stake in Shang Xia, purveyor of high-end furniture and lifestyle goods, in 2020. Winery Ao Yun is owned by Louis Vuitton parent LVMH, whose Gucci-owning peer Kering bought jeweller Qeelin in 2012.
Chinese luxury companies are still relative minnows, but are growing rapidly. Laopu Gold, a fast-growing jewellery house, now boasts a market cap of nearly $18 billion (S$22.76 billion) — up from less than US$1 billion (S$1.27 billion) when it listed in 2024. Add on a takeover premium and it would comfortably top the inflation-adjusted price LVMH paid for Tiffany six years ago. European rivals cannot afford to ignore this trend.
By Adrienne Klasa, Ivan Levingston and Thomas Hale © The Financial Times.
This article originally appeared in The Financial Times.
Source: Financial Times/bt
