Courting the Asian Luxury Consumer

After years of exceptional growth, a slowdown in luxury retail spending in Asia has been reported recently, in “Rich Pickings”, a report on the Asian luxury goods market by the Economist Intelligence Unit (EIU). The report and many other media Nitin Nishnandaroutlets stated that this can be seen as a temporary trend only, and it is expected that retail spending will pick up soon, driven by the growing middle-class and high-income households in Asia.

Within the next ten years, Asia is expected to account for between 50% and 60% of luxury revenue. To understand more why Asia will become the dominant region for the consumption of luxury goods, we recently sat down with Nitin Nishandar (on the right), the TNS Head of Brand and Communication in the Asia-Pacific region.

“In Asia, there seems to be an appetite to be part of the global community of luxury, something which Asian consumers have not been for a long time”, says Nishandar.

He further states that “the appetite for luxury in Asia is really growing”, and differentiates two sets of consumers, the Aspirants and the Elites. While Aspirants are considered as new entrants experiencing “luxury for the first time”, the Elites have been into luxury traditionally.

Elites are seeking to go into higher-end luxury and “want to distance themselves from the Aspirants”. They want to be more exclusive, and go for “premium” luxury goods, and thus are willing to pay for the “signature collection”. So there is luxury, and there is “premium” luxury. The dynamics of the two groups are very different and are characterised by different emotional needs. “It is almost two parallel universes that brands have to stride between”, Nishandar comments.

Furthermore, the two driving needs for the Aspirants are status and self-confidence. “If you have that Louis Vuitton or that Gucci bag, you just feel more confident …”, says Nishandar, “it just helps you to feel more … to look at yourself as a more idealised individual.” Whereas Aspirants will look at a larger logo, Nishandar admits Elites are more fashion driven and are “looking at something which is very discerning, very discreet, and hence have a very different taste.”

When it comes to regional differences from the Western luxury market, he explains that luxury in Europe and the US is not something new. New luxury consumers often already “have a brush with luxury in their family, with their friends”, whereas in Asia, “the whole newness to the category plays a very important dynamic”. Nishandar further comments that “because the social distances existing in Asia are greater, the biases are much higher”.

He differentiates the presence of the luxury scene in the different countries in Asia such as Japan and Korea being into luxury for a long period of time, followed by Hong Kong and Singapore to a certain extent. These countries are slightly more mature luxury markets, “And you have China”, says Nishandar.

“China cannot be seen as a single entity, as you will find evolved luxury consumers as well as the Aspirants”. So it’s got a set of Elites who are very much like those in Japan, Korea, Singapore, and Hong Kong, but it also has a huge base of people who want to get into that aspiration of luxury, or who are looking at the idealised world that luxury offers. Those kinds of consumers are also present in Southeast Asia, in markets such as Indonesia and India.

With an ever increasing numbeluxury01lr of Aspirants in Asia, many brands want to get into the “aspirant mode” and have started to offer affordable luxuries. “That’s where some of the brands go wrong”, Nishandar says, as it ddontevalues the brand to a certain degree. “If a brand is suddenly associated with a cheap luxury item, then you don’t develop the kinds of story and ethos that need to be developed around luxury”, he further explains.

“Luxury is all about selling a myth, the myth of the brand, which is very important. And if you are not able to create that with what would be your biggest selling item, then you fail to build that image. It’s about exclusivity; it’s about building that myth around the brand. Brands that identify that very well and tie into the Asian consumer’s psyche of getting into status do very well,” says Nishandar.

Nishandar takes Louis Vuitton as a good example of striking a balance between affordable luxuries and premium

luxuries. The brand sells standard-line bags that are a must-have for Aspirants, but still carries the price and value of its brand alongside, and is even able to increase prices. “The brand has created a good balance between exclusivity and that myth around that brand, offering signature series, as well as haute couture,” Nishandar says.

Another driver of the luxury market in Asia is the consumer experience of buying luxury brands. Many myths and personal stories are important to tap into the consumer’s psyche, which is very different from Europe and the US. “When Asians go into a shop, the experience that is created around it is also something that they look forward to – a personal story that is created around the brand”, says Nishandar, “That is very relevant for a lot of Asians”.

Talking about the existence of Asian luxury brands, Nishandar elaborates on the flourishing of service-oriented industries such as restaurants, hotel chains, and spas, in which experience marketing is involved, and identifies Asian ethos. There is also the thriving cosmetic industry in Asia. All these are seen as promising.

However, Nishandar admits that from his experience, there are still limited Asian brands in the luxury scene today, “because there is still a lot of need for belonging to a global community, which has driven luxury in Asia… and because Asian brands have to work harder to create a myth around their existence,” he adds.

Despite this fact, Nishandar does not see it as impossible for Asian brands to emerge onto the luxury scene as long as they are able to successfully create the stories and myths around them and propagate it to their advantage.

One important factor for luxury brands to drive growth is to have a digital strategy, with most luxury brands increasing their digital spending significantly during the last year, explains Nishandar.

“A good example of how luxury actually functions online is Christie’s in China. Going to an auction house for somebody who is Chinese is daunting, but if you can just pick products through an app, that’s a different story. And that actually helped grow their business. It’s a very great insight into how some of the Western brands are going online to sell some of their luxury products, explains Nishandar.”

Also, with the technically savvy Asian population of today and the rise of the mobile community, “It means that it is natural for them to do research online, to look at what is happening, at what the buzz is around the product, and at what is happening in social media. It comes very naturally to most Asians nowadays.” Nishandar adds that because Aspirants are new to the luxury scene, they need a lot more information, which leads them to search the Web.

When asked about the trends that are expected in the future, Nishander replies, “I think experience marketing is going to be very important. So, how you sell the experience is going to be much more important than the product itself. And you’ll find more and more investment going toward the experience”, he concludes, “And the second thing is you will find Asian luxury brands emerging over a period of time. I’m sure that enough entrepreneurs are looking into it right now”.luxury02

Based on an interview with Nitin Nishandar, TNS Head of Brand and Communication in the Asia-Pacific region. First published in the Asia Research Magazine Q4, 2013.