by Susan Fenton
HONG KONG (Reuters) - European and American fashion designers feeling the pinch from the credit crisis can look to the growing ranks of China's nouveau riche to boost sales.
China's millionaires' club is expanding rapidly and many new members are women who don't even blink when asked to pay a cool $10,000 (5,000 pounds) for a cocktail dress from a top international designer.
Models display items from Cartier High Jewellery during a private gala
dinner in Shanghai in this January 26, 2007 file photo.
"The Chinese are the newcomers to the global market," said Sebastian Suhl, Asia-Pacific chief executive of Italian fashion house Prada, which has nine stores in China.
"They're very hungry to learn about fashion. Fashion represents obviously status, but luxury is also a kind of bridge to the modern world for them."
As the Chinese economy surged more than 10 percent annually over the past five years, the country boasted 345,000 U.S.dollar millionaires by the end of 2006, a third of whom were women, according to a report by Merrill Lynch and consultancyCapgemini.
Some 5,000 mainland Chinese had assets exceeding $30million, accounting for a third of Asia-Pacific's super-rich.
Even affluent Chinese women, without millions in the bank, are willing to spend their savings on designer fashions, seen as the ultimate status symbol in a communist country that is increasingly becoming preoccupied with the trappings of wealth.
Elegantly dressed Chinese manager Zhang Ning, 30, has neverbeen to France but she likes to wear Hermes which she says is the epitome of style.
"I like its simplicity, it makes me feel elegant," said Zhang, who works as a manager at an electric power company inthe southern Chinese city of Guangzhou.
"France for me is elegance: good fashion and wines."
While luxury goods makers such as Louis Vuitton have benefited from booming demand from Chinese keen to show off their newfound wealth by wearing clothes and accessories emblazoned with prestigious logos, Western couture houses such Hermes are now tapping into the more discreet tastes of thesuper-rich.
"The mainland Chinese market is still very accessories oriented but we believe that will change," said Alex Bolen,chief executive of New York-based couture house Oscar de la Renta, whose sleek cocktail dresses retail for up to $10,000, while its evening gowns approach double that.
"There's definitely a market for the cocktail dress. But what has surprised us, pleasantly, is how rapidly the customer has also adopted our day wear."
Leading the charge is upmarket Hong Kong department store Lane Crawford which is bringing designers to China who are seen as being on the cutting edge in the West but are not well-knownin China.
The opening of Lane Crawford's first store in Beijing last October has expanded the China presence of British designers such as Alexander McQueen and Stella McCartney and heralded the arrival of more niche designers including Dries Van Noten, Hussein Chalayan and Rick Owens.
Buyers from Lane Crawford now take prized front-row seat sat fashion shows in Paris and Milan, alongside buyers from high-end U.S. retailers Saks and Nieman Marcus.
Meanwhile, Chinese fashion editors, headed by Vogue China, have become an influential presence on the European fashionscene.
China's ongoing transition to a more market-oriented economy after decades of strict communist rule is producing a constant stream of newly rich.
Their purchasing power and the growing sophistication of amore established wealthy clientele is creating a very diverse market for fashion, says Angelica Cheung, editor of Vogue China. The magazine was launched in 2005 and it has 320,000readers.
"It's very different from the West, there are a lot of entrepreneurial opportunities and there are wealthy people emerging all the time," said Cheung.
"A young woman who might now be on a monthly salary of 5,000 yuan (362 pounds) could next year be running her own business. So it's a very aspirational market. Her first luxury product might be a Louis Vuitton bag but within a few years she might move on to something more niche such as Marni."
Chanel is the most preferred high-end fashion brand for affluent Chinese followed by Giorgio Armani, according to a report by MasterCard.
Oscar de la Renta says China is central to a strategy for Asia which it hopes will account for 20 percent of its sales within five years, up from 5 percent at present, helped by its burgeoning accessories' business.
Luxury brands can easily sell their perfume and cosmetics in local department stores. But when it comes to ready-to-wear fashion, they are all competing for space and customers in a handful of luxury malls such as Plaza 66 in Shanghai and LaneCrawford in Beijing where rents are sky high.
"They're overpaying (on rent) but they're looking at Chinaas an investment," said Marcel Braun, Hong Kong-based executive vice-president of Swiss company DKSH, which advises luxury firms on market expansion.
"Fifteen years ago brands came and left. Now they can't do that anymore, China's too important."
Rampant copying of accessories brands remains a problem for luxury goods firms in China, but it is much less evident among high-end apparel.
Yet nevertheless high-quality copies of designer handbagscan be purchased across Beijing and Shanghai for just a pittance of the retail price of the originals.
FINDING THE RIGHT MODEL
China's luxury market is still in its infancy and luxuryretailers are experimenting to find the right model and get thesales strategy right, analysts say.
Lane Crawford has pieces of modern art on display in its spacious Beijing store, aiming to offer a new concept in shopping. It sells more than 600 high-end fashion brands, but visitors to the store say shoppers are often scarce.
Lane Crawford says its Beijing store is the first stage ina long-term plan for China and other stores will be rolled outin the future.
Retail analysts say that having a flagship store rather than being among dozens of brands carried in a high-class department store is the best way to achieve brand recognition and exclusivity in China.
However, it is difficult and expensive to find good sites for boutiques in China due to exorbitant rentals in high-end areas.
Reaching out beyond Beijing and Shanghai is the next step.The southern boom city of Shenzhen replaced Chengdu in 2007 as the city with the highest average spending on luxury goods, according to Credit Suisse, while the size of the luxury markets in Shenzhen and Wuhan doubled.
Braun says fast-growing northeastern cities such as Dalianoffer better opportunities for expansion than southern cities.
Zhang Ning from Guangzhou heads to Hong Kong to shop at Hermes because there is no sales tax and luxury items are 30 percent cheaper than on the mainland.
A long-established market for luxury goods, Hong Kong alsooffers a much wider choice of designers.
Neighbouring Macau, a former Portuguese enclave, is also becoming a shopping hub for affluent mainland Chinese following the arrival of U.S. casino operators in the past few years.
Prada's edgier offshoot Miu Miu earlier this year stage dits first fashion show in Asia in Macau, flying in the Crazy Horse cabaret revue from Paris to perform in front of local glitterati at the ritzy Wynn Macau casino resort, which houses Prada and Chanel boutiques in its ground-floor lobby.
"I believe Macau will be comparable to Hong Kong in termsof sales in the next few years," said Prada's Suhl.
Miu Miu, which sells at Lane Crawford in Beijing, plans toopen its first independent mainland China store in Shenzhen this year. Meanwhile, Hermes is preparing for the opening of a 500-square-metre store in Beijing before the Olympic Games in August.
China sales will help offset a long-term decline in business in Japan, aggravated by its rapidly aging population, it says.
(Editing by Megan Goldin)
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