From Overseas Press

Chinese luxury wannabes try to shake off "Made in China" image

By Melanie Lee (Agencies)
Updated: 2010-08-05 15:18

FINICKY CONSUMERS

Aspiring Chinese luxury brands may face their toughest battle on the homefront, where shoppers often prefer big international names such as France's LVMH (LVMH.PA) or Hermes (HRMS.PA) that carry more prestige and more than a century of history.

One of the few brands to gain anything approaching an international following is Shanghai Tang, a designer of brightly colored chic clothing featuring Chinese themes founded in Hong Kong and now with stores worldwide.

"They are brand conscious, it is a little bit of a show-off attitude and what we have seen is that when they have money, they tend to spend on well-known brands," said Renee Tai, an analyst with CIMB-GK Research, referring to Chinese consumers.

Chinese brands could face an even rougher road ahead as global brands, well aware of China's rapidly growing wealth, launch major expansion campaigns in the country that include opening stores in second and third-tier cities.

Louis Vuitton will open one of its largest stores in the world in Shanghai this year. In the past year, LV has opened stores in second-tier cities of Xian, Xiamen and Tianjin.

London's upscale department store Harrods is also rumored to be in talks with Shanghai's municipal government to open its first store outside the United Kingdom.

International brands are also adapting to China, with Hermes rolling out a new brand, "Shang Xia" offering luxury accessories at cheaper prices just for China.

"They face competition and I think in terms of them being able to take a dominant share of the market, that's sometime off," said Stephen Mercer a partner at KPMG Shanghai.

He said Chinese luxury brands could succeed in niche areas such as spirits and jewelry, with Moutai (600519.SS), a Chinese spirit that was served to Richard Nixon during his famous China trip during his presidency, as one such example.