Luxury: Chase and Flight in China

After three decades of astronomical economic growth, the desire to advertise one’s success to others through the use of upscale premium products (e.g. driving a Jaguar, taking an Estee Lauder lipstick out of a Gucci purse) is well established in China. But this need to signal one’s membership among the successful elite is not as straightforward as it might appear. Given that the ranks of the successful are growing daily in China, this need to signal success exists in tension with the desire to differentiate oneself from the latest crop of nouveau riche. In many societies, we can see this tension between the need for recognition and the desire for distinction best in the relationship between the nouveau riche and the old rich (or aristocracy in some instances), where the former is always emulating the latter, causing the old rich to move on to new and different brands, tastes, and pursuits. This results in a kind of “chase and flight” model of consumer behavior. China’s rapid development along with its political history, however, have meant that there’s no established old rich to emulate and no single model for an elite lifestyle.

Furthermore, while the old nouveau riche might want to distinguish themselves from the new nouveau riche, they still constantly intersect with each other in the world of business. One of the things that surprised us in our research is the discrepancy between brands people professed to favoring in private, those they “aspired to,” and brands they felt like they had to consume for the sake of others when entertaining for business. Businessmen we interviewed described a fear of diverging from the most well-known (mingpai) brands when wining and dining unfamiliar clients and officials. One entrepreneur explained that by, say, ordering Talisker instead of Chivas Royal Salute when entertaining a client, the client might think his host was either cheap and avoiding paying for Royal Salute or mistake him for some nouveau riche who doesn’t know that Royal Salute is what all the big moneys drink. Another wealthy businessman remarked to us when he received a custom, hand-crafted wallet as a gift from an American investor, “I really like this wallet, but if I pulled it out to pay for dinner one night instead of my LV wallet, my clients would think I had lost all my money.”

Many wealthy Chinese we talked to described a pressure to make more conservative, recognizable choices when entertaining for business, but in other contexts they expressed an eagerness to break away from the established luxury repertoire. In other words, increasingly they’re less concerned with recognition and more with distinction. While it’s great for the bottom line to be the acknowledged status symbol of the moment, the challenge for brands in China is how to develop along with this chase and flight dynamism. Today’s Royal Salute drinkers might not be tomorrow’s. The terms of elite status in China are still being negotiated. The smartest brands will be there to help write the terms. China’s wealthy are eager to take flight, but to where remains to be determined.

Flamingo note: Highly successful and recognizable brands such as LV, Mercedes Benz and Rolex have all tremendously profited from being first movers and establishing themselves as status symbols for the newly wealthy class in China. However, what can they do to avoid becoming associated with a time in China where wealth was often easily and shadily attained?

Companies like Ferrari are doing interesting things by bringing in Chinese engineers to work on their cars in Italy and being very active in funding education programs with top universities. Companies and brands that are seen to give back to China rather than just take from it will surely fare better in times where business culture and views on luxury are both changing in China. For more on luxury please see our post on the Changing Face of Luxury.

A special thanks to Richard and John who have taken their time to write this interesting think piece.

Richard Morgan is founder of Equus Global Associates Limited, an International Management Consultancy focusing on Western China. He also serves on the Executive Committee of the British Chamber of Commerce for Southwest China.

Dr. John Osburg has a PhD in cultural anthropology from the University of Chicago and teaches at the College of William and Mary. He has conducted several years of ethnographic research on China’s new rich and new middle class examining their changing values, lifestyles, and consumption habits.

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This entry was posted on Friday, January 15th, 2010 at 6:51 pm. It is filed under Areas, China, Food & Beverage, Luxury and tagged with business culture, featured, luxury. You can follow any responses to this entry through the RSS 2.0 feed.