TIGERS,FLIES,ANDLONGINES:THECHINESECORRUPTIONCRACKDOWNANDITSEFFECTONCONSPICUOUSCONSUMPTION
©2016ByKaylaM.Smith
AthesispresentedinpartialfulfillmentoftherequirementsforcompletionOftheBachelorofArtsdegreeinInternationalStudies
CroftInstituteforInternationalStudiesSallyMcDonnellBarksdaleHonorsCollege
TheUniversityofMississippi
University,MississippiMay2016
Approved:
_____________________________Advisor:Dr.JoshuaHoward
_________________________________Reader:Dr.WilliamSchenck
__________________________________
Reader:Dr.GangGuo
08Fall
2
Abstract:ThroughtheanalysisofElleChinamagazinearticlesandannualfinancial
reports,theresearchersoughttofindifthe2012XiJinpingcampaignagainst
corruption,extravaganceandgrafthadaneffectonluxurysales.Theresearcherhas
foundthatthecampaignhaslittletonoeffectontheluxuryconsumption
preferencesoftheupperandmiddleclassinChina,onlyeffectingofficialsand
luxurypurchasesmadeforgifting.Tooffsetlosesfromthecrackdownongifting,
luxurybrandshavebegunsellingmoreaffordablehigh-endliquorsandwatches.
3
Introduction 4
Chapter1:LuxuryGoodsConsumptioninChina 9Whoisconsumingluxurygoods? 9DefiningLuxuryGoods 16Whatluxurygoodsarebeingconsumed? 18Howareluxurygoodsbeingconsumed? 24Summary 26
Chapter2:TheCrackdown 28AHistoryofAnti-CorruptionCampaignsinModernChina 28PresidentXi’sCampaign 29TheCampaign’sEffectonLuxuryConsumption 33EffectonGift-Giving 35EffectonLuxuryGoods 36Summary 37
Ch.3:TheGovernmentCrackdownanditsEffectontheMarketingofLuxuryGoods 39AdvertisingofLuxuryGoodsinChina 40The2013LuxuryAdvertisingBan 43ChineseLuxuryAdCampaigns:ElleChinaCaseStudy 45Summary 56
Chapter4:MarketLosses 57LuxuryRetailers 57LuxuryGoodsParentCompaniesandSubsidiaries 58
LuxuryAutomotiveIndustry 62Summary 63
Conclusion 65Limitationandfutureresearch 66
AppendixA 67
AppendixB:ElleChinaYearlyStatistics 70Bibliography 74
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IntroductionIn2016,ChinasurpassedtheUnitedStatestobethecountrywiththelargest
numberofbillionairesintheworld.1Thisgrowthinthenumberofbillionairesin
ChinesesocietypointstoageneralizedgrowthinwealthaccumulationinChina,
whichcanbeseenintheconsumptionofluxurygoods.Fromhandbagtocarsto
watches,Chinaconsumesluxurygoodsinbulk.Over170millionpeopleinChinacan
affordtopurchaseluxurygoods,andthepercentageofChinesepeoplewiththe
abilitytopurchaseluxurygoodsgrowsby12percentayear.2
WhilelivinginChinalastspring,Icameuponaninterestingphenomenon
concerningChinesepeopleandtheconsumptionofluxurygoods.OneofmyChinese
teacherswouldtellusofhowherfriendswouldlineupforhoursjusttogetacouple
thousand(CNY1000=US$154.27)offaLouisVuittonbagthatwassellingforover
sixteenthousandRMB(US$2468.74).ThelongerIstayedinChina,themoreI
becameintriguedbytheprevalenceofluxurygoodsinthecountry.Luxury
handbags,anautomaticdistinguisherofelevatedstatus,couldnotonlybefoundina
communistcountry,butseemedtobefoundeverywhere.Flagshipstoresforallthe
majorluxurybrandscouldbefoundineverycity,and,inmajorcitieslikeBeijingor
Shanghai,youcanfindmanystoresofthesamebrand.
TheideaofluxuryconsumptioninChinafascinatedmewellpastmyreturn
totheUnitedStates,butthenatureofmyquestiontookaninterestingtwistwhenI
1“HurunGlobalRichList2016,"HurunInstitute,February24,2016.Http://www.hurun.net/en/ArticleShow.aspx?nid=15703. 2KarlGerth,"LifestylesoftheRichandInfamous:TheCreationandImplicationsofChina'sNewAristocracy."ComparativeSociology10,no.4(November2011):490-491.
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onceagainhadunlimitedaccesstoknowledge.DespiteallthatIhadseeninChinain
regardstomassluxuryconsumption,Chinawascurrentlyinananti-corruption
campaignthat,inpart,targetedluxuryconsumption.SinceXiJinpingtookover
leadershipoftheCCPinlate2012,414,000officialshavebeen‘disciplined’bythe
partyforcorruption,andthenumbercontinuestogrowasthecampaigndigs
deeperintothevastcorruptioninChinesesocietyandpolitics.3Numerous
newspaperheadlinetoutedthatthisluxurybrandorthatluxurybrandhad
experiencelargedecreasesinsale.
Uponlearningthis,Ibegantowonderwhyluxuryconsumptionseemedtobe
soimportanttoChinesepeople,andwhethertheaveragepersonwasreallyaffected
bythecrackdownonextravaganceasthenewsproposed.WhywereChinesepeople
stillwillingtobuylargeamountsofluxurygoods,despitethewide-scaleand
extensivegovernmentcrackdownonitsconsumption?
Theanswertothesecondinquirywasuncoveredearlyinmyresearch.
Chinesepeopleengageinconspicuousconsumptionoutofatypeofnecessity.4
SocialclassesarestillmoderatelyfluidinChina,comparedtotheWestwheresocial
classesareentrenchedoverhundredofyearsofwealthaccumulationandloss.Asa3BarbaraDemick,“Chinatryingtopullbackongift-giving,”LosAngelesTimes,October6,2013.4ThestudyofthepracticeofconspicuousconsumptionintheWestbeganwithTheTheoryoftheLeisureClass:AnEconomicStudyofInstitutions(1899),byThorsteinVeblen.Veblensuggestedthataseconomiesgrowandasmorepeoplehaveextramoneytodevotetoleisureactivities,theywillstrivetoincreasetheirsocialstatus.Veblendescribesthisdeep-seatedmotivetoincreaseone’sstatusandmoveupthesocialhierarchyasemulation.Statuswasnotobtainedbyputtingone’swealthondisplaybutthrougheasilyrecognizabledisplaysofwealthandstatus.Conspicuousconsumption,atermcreatedbyVeblen,istheuseofeasilyrecognizablegoodspurchasedtodisplayone’sstatus.Recognitionofsomeone’sstatuswillhelptheindividualmoveupthesocialhierarchy.
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result,Chineseconsumers,onaverage,buyluxuriesfortwoprimaryreasons—
giftingandassertionofclassstatus.Chinesemetropolitanareasaresomeofthe
largestintheworld,creatingasocietythatisextremelyfluidintermsofsocial
interactionthatcrossclasslines.Asaresult,someupperclassChineseconsumers
feeltheneedtohaveaneasilyrecognizableindicatortostrangersoftheirstatus,
mostcommonlyaluxurybag,watch,orcar.Scholarsarguethatthoseinemerging
economiesare,insomeways,forcedtoengageinconspicuousconsumptionbecause
“theyfeeltheymustinordertomaintainstatureinthecommunity.”5Chinese
consumersarewillingtospend“largeproportionsofmonthlyincomeonapparel
itemsthatareroutinepurchasesinotherareasoftheworld.”6Chineseconsumers
donotviewthisexpenditureonluxuryaswasteful,butratheraqualityinvestment
intotheirsocialandbusinesssuccess.7Theresearcherseekstoprovethat,despite
thecrackdownoncorruption,Chineseconsumersarestillwillingtopurchaseluxury
goods;theonlydifferencenowisthatsignificantlylessisinvestedinluxurygoods
forgiftingasaresultoftherecentgovernmentcampaignoncorruption,
extravagance,andgraft.
Chinaisananomalyintheluxurymarketinthat,beforethecrackdown,it
hadalargerpercentofmaleluxuryconsumersthannationsinthewest.Primarily
5JeffreyS.Podoshen,LuLi,andJunfengZhang,“MaterialismandconspicuousconsumptioninChina:across-culturalexamination,”InternationalJournalofConsumerStudies35(2011):23.6EugeneH.Fram,LuLe,andDavidM.Reid,“”UnderstandingthebehaviorofupscaleChineseconsumers,”AsiaPacificJournalofEconomicsandBusiness6.2,December2002,44.7LingjingZhan,andYanqunHe,“UnderstandingluxuryconsumptioninChina,Consumerperceptionsofbest-knownbrands,”JournalofBusinessResearch65(2012):1458.
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purchasingluxurywatches,car,andspirits,Chinesemenalsobecamethemajor
industrymoverintheirconsumptionofluxuryskincareproducts.Withthe
restrictionsongifting,theindustryexpectedtoseedecreasedreturnsinsalesacross
theboard,butactuallyonlyexperiencedmajordecreasesinthesaleofcognacand
watches.Overthecourseofthispaper,theresearcherseekstoshowthatthe
decreaseinsalesforproductsprimarilyconsumedbymenforgiftingwasoffsetby
theemergenceofnewconsumersinthegrowingmiddleclass,ascanbeseenin
luxurybrandssellingmoremiddlerangeluxurygoods.
SurveydatainChinaisdifficulttocomeby,so,throughtheuseofprimary
sourcesthatincludeannualfinancialreports,andthecarefulevaluationoffashion
advertisements,IsoughttointerpretthecurrentluxurymarketinChina.Financial
reportsaretakenfrom2010to2015,butinsomecasesinformationonannualsales
for2015hadnotbeenreleasedyet.Inthecaseofluxuryfashion,dataforChina
individuallywasnotavailable,sodataistakenfromtheAsia-Pacificregion
(excludingJapan),asawhole.Theresearcheracknowledgesthiscouldcreatean
inaccuraterepresentationofChineseconsumption,butarguesthat,asChinaisthe
largestconsumerintheregion,andheavilyengagesinluxurypurchasesabroad,this
actuallycontributestotheaccuracyoftheresearch.
Previousresearchintothegovernmentcrackdownandluxuryconsumption
hasnarrowlyfocusedoneitherthegovernmentcrackdownorluxuryconsumption
individually,andhasnotfocusedonhowbothareinterrelated.Inaddition,itis
difficulttoprovea1to1correlationbetweentheanti-corruptioncampaignand
luxurysales,becausemacroeconomictrendsandotherfactorsmayhavedampened
8
thesalesfiguresataroundthesametimeasthecampaignbegan.8Throughthe
courseofthispaper,theresearcherseekstoshowhowthetwoareinterrelated,and
that,thoughthecampaignhashadanegativeeffectongiftingandtheluxury
purchasinghabitsofofficials,overallthemarkethasseennonegativeeffectsfrom
thegovernmentcrackdownalone.9
8NancyQianandJayaWenarguein“TheImpactofXiJinping'sAnti-CorruptionCampaignonLuxuryImportsinChina(2015)”arguethatmacroeconomictrendsdidnotaffectthesaleofluxurygoodfrom2012topresentbylookingatimportdata.Theyfoundthatluxuryimportswerenotallsimilarlyexperienceadecreaseinsales,aswouldbethecaseifthesaleswereeffectedbythelargereconomicdownturn.9Forfurtherreadingontheanti-corruptioncampaignsee:Chen,Gang,"The“Tigers”inXiJinping'sAnti-corruptionCampaign,"EastAsianPolicy6,no.03(2014):30-40.Seealso,Yuen,Samson,"DiscipliningtheParty:XiJinping'santi-corruptioncampaignanditslimits,"ChinaPerspectives3(2014):41.
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Chapter1:LuxuryGoodsConsumptioninChinaThischapterexaminesluxuryconsumptioninChinasinceDengXiaoping
initiatedmarketreformsintheearly1980s.TheluxurymarketinChinahasseen
exponentialgrowthinthelasttenyears.In2000,luxurygoodssalesinChinawere
almostnon-existent.
Beforetheanti-corruptioncampaignin2012,theluxuryphenomenonin
Chinaappearedtohaveendlessgrowthforinvestors.China’sgrowingeconomy
ensuredthattherewouldbemoreconsumerswithaccesstocapitalandthedesire
toconsumeluxurygoods,andthepracticeofgiftingensuredthatluxurygoods
wouldmaintainanimportantroleinbusinessandpoliticalpractices.Distinctive
characteristicsofChineseluxuryconsumption,likehowthemarketismale-driven
andwestern-focused,alongwiththepracticeofgift-giving,resultedinluxurybrands
likeLouisVuitton,Gucci,andHermesestablishinghundredsofflagshipstoresall
overChina.
ThischaptertoseekstofullydescribetheChineseluxurymarketintermsof
whoisconsumingluxurygoods,whatluxurygoodsare,andhowluxurygoodsare
beingconsumed,toprovideinformationessentialtounderstandingtheeffectofthe
anti-corruptioncampaignonluxuryconsumption.
Whoisconsumingluxurygoods?China’seconomicsuccesssincethelate1970’shasprovidedacontinuously
growingmarketforluxurybrands.Highincomeisthemostimportantcharacteristic
ofluxurygoodconsumers,andthegrowthoftheChineseeconomyhascreated
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classesofindividualswhocannowaffordluxurygoods.10Marketreformsallowed
Chinesecitizenstoaccumulatewealthforthefirsttimein30years,atfirstcreating
anupperclass,andthenlatercontributingtothegrowthofthemiddleclassin
China.11Bothconspicuousconsumptionandwealthaccumulationaresignificant
factorsinthesuccessoftheluxurymarketinurbanChina.
Themassconsumptionofluxurygoodsinthelasttenyearscanbeattributed
tothecreationofthe“newaristocracy,”or“newrich,”inChinesesociety.12The
ReformEraandtheopeningofthemarketin1978byDengXiaopingledtothe
expansionoftheurbanprivatesector.13ChinacreatedSpecialEconomicZones(SEZ)
andbeganprivatizingstateownedindustries.Thecreationofthe“newrich”and
theirwealthaccumulationcanbeattributedtotheirconnectionstogovernment
officials,usuallytheirparents.14Thisconnectionaffordedtheseindividuals
significantleadsintakingadvantageoftheprivatizationofstate-ownedenterprises
andallowedthemtoaccumulatewealthbeforeanyoneelse,thuscreatinganupper
classforthefirsttimeincommunistChina.
Throughin-depthpersonalinterviews,PierreXiaoLuwasabletodivide
China’seliteintofourcategoriesinreferencetotheirconsumptionofluxurygoods.
Hisstudywasconductedin2008fromasampledataof315peopleinBeijing,10BernardDubois,GillesLaurent,andSandorCzellar,“Consumerrapporttoluxury:Analyzingcomplexandambivalentattitudes”2001.LesCahiersdeRecherche736,HECParis. 11Thereismassdiscrepancyaboutthepercentageofthepopulationinthemiddleclass,asdiscussedbyDavidS.G.Goodman,ClassinContemporaryChina,(JohnWiley&Sons,2014),102.Estimatesrangefrom5%to68%,dependingonone’sdefinitionofwhatistakestobeinthemiddleclass.12Gerth,“LifestylesoftheRichandInfamous.”13Ibid.14Ibid.
11
Shanghai,Guangdong,andChengdu.15Thefirstgroup,“luxurylovers,”areknownfor
theiranalyticalpurchaseofconspicuousgoodsandareslightlycollectivist,meaning
theytaketheirstyletastesfromthosearoundthem.Thisgroupofluxuryconsumers
makeup15.2percentofallluxuryconsumers,60percentarewomenaged28-55in
Guangzhou,Beijing,ShanghaiandChengdu.16Aluxuryloverwillpurchasealuxury
itemafterseeinganotherpersonwiththesameitem,butwillalmostneverpurchase
aluxuryitemonimpulse.Brandsareencouragedtomarkettothisdemographic
throughthecreationofdesignandbrandstories,orthestoryofhowtheproduct
wasmadeandthehistoryandprestigeofthebranditself.
“Luxuryfollowers”arehighlycollectivist,andareknownforimpulsive
purchasesofluxurygoods.Thisdemographicmakesup21.9percentofluxury
consumers,and,similartoluxurylovers,thegroupispredominantlywomen,at72
percent,inthesamecities,Chengdu,Guangzhou,BeijingandShanghai.17
“Luxurylaggards,”27.6percentofallluxuryconsumersinChina,areknown
fortheirimpulsivepurchasesofconspicuousgoods.18Thegroupisdominatedby
womenat84percent,mostlyinChengdu,butalsofoundinotherTier1cities.
Consumersinthisgrouplargelyfocusonfunctionoverbrandoraesthetic,whichis
importantinunderstandingthatmarketinglargelyhasnoeffectontheirpurchase.
156oftherespondents,just1.9%ofthosesurveyedwerefromHongKong,Macao,Taiwan,orOverseasChina.Answersmaydisproportionatelyrepresentwomenduetotheluxurygoodssurveyed.16PierreXiaoLu,EliteChina:LuxuryConsumerBehaviorinChina,(Singapore:JohnWiley&Sons(Asia)Pte.Ltd.,2008):91-2.17Ibid.,92-3.18Ibid.,94.
12
Lastly,“luxuryintellectuals”areconsumerswithavastknowledgeofluxury
goods,andareknownfortheirpurchaseofinconspicuousgoods.Thegroupisonly
55percentwomen,themostequalgenderdispersionofallfourcategories,andis
largelycenteredinBeijing.19Aconsumer’swillingnesstopayforaluxurygoodis
basedupontheperceivedsocial,economical,andutilitarianvalueofagood,butas
theirknowledgeofbrandsincreases,theconsumerpurchasesgoodsthatare
inconspicuousandmoreindividualistic.20Theseindividualsseekoutnewbrands
andputthoughtandresearchintotheirdecisions,andareresponsibleforbringing
newbrandsintoChina.
Degenclaimsthatmembersofthe“newrich”arenotaffordedtheirstatus
throughtheirwealthalone,butthroughthepurchaseofhigh-endluxurygoodsina
practicecalled“conspicuousconsumption.”21Consumersbuycertaingoodsinorder
toelevatetheirsocialstatus.22Thoseintheemergingmiddleclassattempttouse
conspicuousconsumptiontomoveupthesocialhierarchy.Whenasocietyis
extremelyfluid,likeinChinawherepeoplearemeetingnewpeopleeverydaydueto
denselypopulatedurbancenters,peoplebegintoasserttheirclassstatusand
positionthroughobjects,soothersthattheydonotknowaregivenanindicatorof
wheretheystandinrelationtoanotherpersoninthesocialhierarchy.Some
19Ibid.,93.20PierreXiaoLu,andBernardPras."ProfilingMassAffluentLuxuryGoodsConsumersInChina:APsychographicApproach."ThunderbirdInternationalBusinessReview53,no.4(2011):435-455.21RonaldJeanDegen,“OpportunityforluxurybrandsinChina,”JournalofBrandManagement6,no.3(September2009):75.22AndrewB.Trigg,“Veblen,Bourdieu,andConspicuousConsumption,”JournalofEconomicIssues35,no.1(March,2001):99-115.
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researchersarguethatanaudience’sreactiontoaproductprovidesmore
satisfactioninconspicuousconsumptionthantheactualuseofaproduct.23
YuvalAtsmon,DianeDucarme,MaxMagni,andCathyWu,“China’sNewClassofShoppersTakeontheWorld,”(survey,McKinseyandCompany,December2012).
Ascanbeseeninthechartabove,theChinesemiddleclassisasignificant
factorinthefutureofluxurygoodsinChina.In2011,theChinesemiddleclasswas
16%oftheworkforce,averaginganincomeofUS$7,264andUS$60,532annually.24
Today,theChinesemiddleclasshasabout146millionpeople,comparedto111
23PierreXiaoLu,EliteChina,14-15.AaronC.AhuviaandNancyY.Wong,“PersonalTasteandFamilyFace:LuxuryconsumptioninConfucianandWesternSocieties,”PsychologyandMarketing,15(5),1998,423-441.24PatrickBoehler,“TheChineseDreaminSurveys:AHappyMiddleClass,”SouthChinaMorningPost,December18,2013.
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millionpeoplein2011.25Themiddleclassispredictedtoexpand,astheChinese
governmenthassetatargettodoubletherealincomeofChinesecitizensby2020.
“Inthecomingyears,“JoshuaLureports,“we[will]seethatrisingincomewillbring
acouplehundredmillionpeopleintotheconsumerclass.”26Thereisnoconsensus
amongscholarsastothemakeupoftheChinesemiddleclass,butitisunderstoodby
scholarsthatthereis,atthemostbasiclevel,anuppermiddleclass,andalower
middleclass.27
Shoppingpreferencesofthemiddleclassdependuponwhichsubsectiona
personisin.Thoseinthelowermiddleclasslargelyfocusonamenities,without
muchregardtonamebrandproducts.Preferencesbegintochangeasonegains
moreincome.28Aconsumerstartstofocusmoreonnamebrandgoodsandbeginsto
buynon-essentialgoods.Onceaperson’sincomegrowslargeenoughtoattain
uppermiddleclassstatus,heorshestartstoconsumeluxurygoods.Theseluxury
goodsincludeanygoodthatisatthetopofitsfield,likepurchasingcoffeefrom
Starbucksasopposedtoalocalcoffeeshop.29Themoreexperiencetheconsumer
hasasabuyerofluxurygoods,themoresophisticatedtheirluxurygoods
preferencesbecome.SilversteinandFiskediscusstherecenttrendofmiddleclass
25Gerth,“LifestylesoftheRichandInfamous,”2011.26JoshuaLu,Goldman-Sachs,“RiseoftheChineseConsumerClass”,video,3:44,September2015,http://www.goldmansachs.com/our-thinking/pages/chinas-new-consumer-class.html. 27DavidS.G.Goodman,ClassinContemporaryChina,(JohnWiley&Sons,2014).28PierreandPras."ProfilingMassAffluentLuxuryGoodsConsumersInChina,"435-455.29MichaelJ.SilversteinandNeilFiske,TradingUp:TheNewAmericanLuxury(NewYork:PortfolioPenguinGroup,2003):1.
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consumerstoaspiretopurchasegoodsthatarejustoutofreachoftheircurrent
income.30
AccordingtosurveydatafromthemarketingresearchcompanySimon-
Kucherin2013,“menarethefuturegrowthdriversofluxuryinChina.”31 GengSong
andTracyK.Leeattributethisdifference,inparttothedifferentperceptionsof
masculinityinChina,particularly,theimportanceoftheconceptofpinwei,“good
taste,”tomiddleclassChinesementhatmen’slifestylemagazineshavecultivatedin
Chinasince1999.32
ChinesemenconsumealargeramountofluxurygoodsthaninWestern
nations.LosAngelesTimesquotedthepresidentofCoachRetailInternationalin
ShanghaiassayingthatChinesemenconsume45percentofallhandbagsinChina,
comparedtojustsevenpercentintheUnitedStates.33L’Orealnowsellsmore
productsformeninChinathaninWesternEurope.Throughthismarketingstrategy,
in2010L’Orealexperiencedtheir10thconsecutiveyearofdouble-digitgains.34In
2010,Chinesemenspentover7billionRMB(overUS$1billion)onluxuryclothing,
comparedtothe2.8billionRMB(overUS$432million)spentbyChinesewomen.35
30Ibid.31CrépyandOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013,”17.32GengSongandTracyK.Lee,“Consumption,ClassFormationandSexuality:ReadingMen’sLifestyleMagazinesinChina,”TheChinaJournal,no.64,July2010:163.33NeerjaPawhaJetley,“Men,NotWomen,DriveLuxuryGoodsSalesinChina,”CNBC,November29,2011,http://www.cnbc.com/id/45472638.34“NewcustomersmakeupL'OrealsalesinChina,”ChinaDaily,March8,2011,http://www.china.org.cn/business/2011-03/08/content_22082657.htm.35NeerjaPawhaJetley,“Men,NotWomen,DriveLuxuryGoodsSalesinChina,”CNBC,November29,2011,http://www.cnbc.com/id/45472638.
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MarketingstudiesinChinahasshownthatChinesemenarelikelytospendupwards
of61percentmoreonfragrancesthantheirfemalecounterparts.36
DefiningLuxuryGoodsNumerousscholarshaveattemptedtodefineluxurygoods,andeach
definitionlendsgreaterinsightintowhatluxurygoodsare,howtheyareconsumed,
andthemotivationsfortheirconsumption.Simplyput,aluxurygoodisagood
whosedemandincreasesmorethanitssupply,raisingpricesdisproportionateto
thecostofmakingtheproduct.Luxurybrandsare“timeless…fastgrowing,and
highlyprofitable.”37Additionalaspectsofaluxurygoodmayincludeexclusivity,
brandidentity,brandawareness,andquality.Allaspectstogetherallowluxury
brandstomaintaintheirhighsaleslevelsandcustomerloyalty.38Qualityand
designareveryimportantfeaturesinthedesirabilityofluxurybrands.39
AccordingtoBernardDubois,GillesLaurent,andSandorCzellar,luxury
goodsmusthavethefollowingattributes:excellentquality,averyhighprice,
scarcityanduniqueness,aestheticsandsensuality,ancestralheritageandpersonal
history,andsuperfluousness.40Forpremiumquality,thecustomer’s“perceptionof
36Ibid.37Frynas,JedrzejGeorge,andKamelMellahi,GlobalStrategicManagement(OxfordUniversityPress,2015):31. 38IanPhauandGerardPrendergast,“ConsumingLuxuryBrands:TheRelevanceofthe‘RarityPrinciple,’”JournalofBrandManagement7no.5(2000):370.39GerardPrendergastandClaireWong,"Parentalinfluenceonthepurchaseofluxurybrandsofinfantapparel:anexploratorystudyinHongKong,"JournalofConsumerMarketing20,no.2(2003):16540BernardDubois,GillesLaurent,andSandorCzellar,“Consumerrapporttoluxury:Analyzingcomplexandambivalentattitudes,”LesCahiersdeRecherche(2001):736.Seealso,PierreXiaoLu,EliteChina:LuxuryConsumerBehaviorinChina,(Singapore:JohnWiley&Sons(Asia)Pte.Ltd.,2008):21-25.
17
quality[is]moreimportantthantheactualquality.”41Aslongasthecustomer
believesthattheproductisofthehighestcaliberintermsofquality,theactual
qualitystandardoftheproductdoesnotmatter.Theaspectofscarcitynotonly
referstospecialmaterialsusedorthecomplexskillsrequiredtomakealuxury
good,butalsothelimitedavailabilityandaccesstoaproduct.Whenluxurybrands
maketheirproducttooeasilyavailable,thedesirabilityoftheirproductdecreases,
ascanbeseenwithsuchlinesasCoach,TommyHilfiger,andcurrentlyMichaelKors.
Theaspectofaestheticsandsensualityreferstotheaestheticaspectsoftheproduct,
whichareviewedbymanyasthemostimportantaspectofaluxurygood.According
toDubois,Laurent,andCzellar,aestheticsimpartakindof“sensualpleasure”toa
product.42Heritageandhistoryrefertotheimportanceintheconsumer’smindof
thelonghistory,elaborateprocesses,ortraditionofaluxurybrand.Lastly,the
scholarsdefine“superfluousness”asreferringtothelackoffunctionalvalueofa
luxuryproduct.
Luxurybrandsareinauniquepositioninthattheycanchargea“premium
pricefortheperceivedhighstatusoftheir[product]provides.”43Anexampleofthis
canbeseeninabagsoldbyLouisVuitton,calledtheCapucinesMM.Thepurseis
madeofcrocodileandgoatskin,andsellsforUS$60,000.Neitherthepurse’s
materials,northecraftsmanshiprequiredtomakeit,warrantitssellingprice.The
41Ibid.42Ibid.43ChristopherM.MooreandGreteBirtwistle,"TheBurberrybusinessmodel:creatinganinternationalluxuryfashionbrand,"InternationalJournalofRetail&DistributionManagement32,no.8(2004):412-422
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purse’sconnectionstotheLouisVuittonnameanditslimitedavailability,increase
thepricedramatically.
Whatluxurygoodsarebeingconsumed? Chinaisuniqueinthetypeofluxurygoodsbeingconsumed.Accordingto
BainandCompany,in2012accessorieswerethemostpurchasedluxuryitemat28
percentofallglobalsalesrevenue,followedbyclothingat26percent.Beauty
products(skincareandmakeupproducts)onlymadeup20percentofallglobal
salesrevenue.44InChina,however,perfumesandcosmeticsaremoresoughtafter
thanhandbags,andfinewinesandspiritsaremoredesirablethanjewelry.45
Consumersaremoreinclinedtopurchaseluxurywatchesandcosmeticsorskincare
productsthanclothing.46
Source:MartinCrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013”(survey,Simon-KucherandPartners,2013),200respondents.
44“BainSurvey2013LuxuryGoodsWorldwideMarketStudy,”(survey,BainandCompany,October2013),23.45MartinCrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013”(survey,Simon-KucherandPartners,2013),200respondents.46Ibid.,17.
19
TheChinesemarketisseeingasignificantshiftrecentlyawayfromovertly
conspicuousluxurygoods.Preferenceforlargelogoshasfallendrasticallyinrecent
years,withrespondentsrankingvisiblelogosataneightoutofteninimportant
criteriaforpurchasingaluxurygood.47Ina2012survey,two-thirdsofrespondents
statedtheypreferredproductsthatwere“low-keyandunderstated.”48Comparedto
2010,whenonly37percentofrespondentsrespondedthatlargelogoswereinbad
taste,51percentofrespondentsstatedthatlargelogoswereinbadtastein2012.49
Thistrendcouldbeanindicationoftheincreasingsophisticationoftheluxury
consumerinChinainrecentyears,ormerelyaresponsetotheHarmoniousSociety
Campaign,thelargegovernmentcampaignpriortothatofXiJinping’santi-
corruptioncampaign,whichfocusedonaddressinginequalityinChinesesociety.
Intermsofluxurycosmetics,skincareandperfumesales,Chinaisthesecond
largestmarketinAsiaafterJapan,andtheeighthlargestmarketintheworld.50
Luxurycosmetics,skincareandperfumesareconsideredluxuryitemswhentheir
priceisexponentiallyhigherthantheaveragedrugstorepriceforthesameproduct.
Chinesemenandwomenareequallyinterestedinpurchasingnewproductsin
luxurycosmeticsandperfumes.51Theluxurycosmeticandskincareindustryis
dominatedbyafewbrands;EsteeLauderandShiseidocombinedhaveover80%of
47Ibid.,5.48MartinCrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013”(survey,Simon-KucherandPartners,2013),17.49YuvalAtsmon,DianeDucarme,MaxMagni,andCathyWu,“China’sNewClassofShoppersTakeontheWorld,”(survey,McKinseyandCompany,December2012),24.50“Cosmetics,”ChinaDaily,accessedDecember20,2015,http://topic.chinadaily.com.cn/index/special/sid/143?offset=2.51CrépyandOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013,”17.
20
themarketshareinChina.52Inthefirst10monthsof2012,cosmeticssalesinChina
garneredUS$17.3billion.53By2014,men’sskincareproductinChinagarnered
US$1.14billioninsalesrevenue,andispredictedtoreachUS$1.85billionin2020.54
ThegrowingsaleofcosmeticsandperfumesinChinaisattributedtothegrowing
“metrosexualphenomenon,”whichoriginatedinKoreaandJapan.55Forexample,
eightypercentofmeninChinabelieveskincareisimportantandspend,onaverage,
25minutesadayusingskincareproducts.56
TheliquorindustryinChinawasworthaboutUS$63.5billionin2011,before
thegovernmentcrackdownthatbeganinlate2012.Beforethecrackdownon
corruptionandindulgence,high-endspiritsandwineswerepopularitemstogift
officialsandserveatextravagantparties.57ThepriceofChinesespiritshasrisenby
anaverageof5to7percentannuallysince1999.OnebrandofChineseluxury
liquor,calledMoutai(orMaotai),hasasellingpriceof2,000RMB(US$307.46)per
bottle.58
LuxurywatcheswerethehottestcommoditiesintheChineseluxurymarket
beforethegovernmentcrackdown,astheywerecommonlygiftedtoChinese
officialstoincurfavors.Withluxurywatches,Chineseconsumersarelookingfor
superiorcraftsmanship,internationallywell-knownbrands,andinnovative52Ibid.53Ibid.54EmmaGonzales,“ChineseMetrosexualsspawna241billioncosmeticsmarket,”ChinaDaily,January1,2016.55Metrosexualinthissensereferstoamanwhoputseffortintohisappearancetoremainfashionableandwellkept,inregardstohaircutsorskincare.56Gonzales,“ChineseMetrosexualsspawna241billioncosmeticsmarket.”57Explainedinfurtherdetailinchapter2.58“Liquor,”ChinaDaily,accessedDecember20,2015,http://topic.chinadaily.com.cn/index/special/sid/179.
21
designs.59InChinathereisa“near-monopolyoftheluxurywatchmarketbySwiss
Brands.”60From2005to2012,thevalueofexportsfromSwitzerlandtoChinagrew
from1.6billionSwissfrancs(US$16billion)to51.6billionSwissfrancs(US$52.9
billion).61
In2013,Chinawasthethirdlargestmarketforjewelryalone,withover
US$10billioninsales.62McKinseyandCompanyreportsthatjewelryisoneofthe
mostimportantsectorsfordomesticconsumptionamongtheuppermiddleclassin
China.Chineseconsumersarethefourthlargestconsumersofgoldjewelryandthe
largestconsumersofplatinumjewelry.63Theluxuryjewelrymarkethasgrownfrom
2billionRMB(US$308million)in1990,89billionRMB(US$13.7billion)in2000,to
454billionRMB(US$70billion)in2012.64Chinaisuniqueinthatthelargestmarket
shareofjewelryisfinegoldjewelry,comparedtodiamondjewelryintheUnited
States.Morethan75%ofwomeninurbancentersownanoteworthypieceofgold
jewelry.AccordingtoGeoffreyYork,in2005,Chinaconsumedover250tonsof
gold.65
59YuvalAtsmon,VinayDixit,andCathyWu,“TappingChina’sLuxuryGoodsMarket,”McKinseyandCompany,April2011.60ChrisHorton,“China’sTurmoilmaystallreboundinwatchsales”NewYorkTimes,September7,2015.61Ibid. 62Gerth,“LifestylesoftheRichandInfamous,”492.63Ibid,.492. 64TaoHsu,AndrewLucas,ZhiliQiu,MuLi,andQingyuanYu,“ExploringtheChineseGemandJewelryIndustry”Gems&Gemology50,no.1(Spring2014).65GeoffreyYork,“GolfRushGripsChineseConsumers,”BellGlobalMedia,January1,2006.
22
Source:MartinCrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013”(survey,Simon-KucherandPartners,2013),200respondents.
In2010,thedesignerhandbagmarketinChinagarneredaprofitofabout14
billionRMB(US$2.16million).66Anexampleofconspicuousconsumption,owninga
designerhandbaginChinacreatestheimageofhighstatus,makingtheir
consumptionvitalforthosewhoseekupwardsocialmobility.Accordingtoa2013
surveybySimon-Kucher,themostpreferredbrandsintheChineseluxurymarket
wereLouisVuitton(24.3percent),Hermès(21.3percent),andGucci(11.8
percent).67AccordingtoasurveybyMcKinseyMarketingSolutions,luxury
consumerslargelypreferWesternproducts.Onlytwentypercentstronglyprefer
Chineseproducts.68
66“Handbags,”ChinaDaily,accessedDecember20,2015,http://topic.chinadaily.com.cn/index/special/sid/150.67MartinCrépyandFanOswald-Chen,“China’sLuxuryGoodsMarket:ChangingConsumerProfileOpensNewPotential,”Simon-KucherandPartners,2013.68YuvalAtsmon,DianeDucarme,MaxMagni,andCathyWu,“China’sNewClassofShoppersTakeontheWorld,”(survey,McKinseyandCompany,December2012),23.
23
Chinaisthesecondlargestconsumerofluxurycars.69TheChinesemarketis
thebiggestoverseasmarketforbrandslikeRollsRoyce,Audi,BMW,Bentley,and
Lamborghini.AccordingtoChinaDaily,Chinaisamongthetopthreemarketsfor
Porsche,Mercedes-Benz,andFerrari.TheChinesemarketforluxurycarsis
expanding.In2011,Chinapurchased980,000unitsandispredictedtopurchase2.7
millionunitsofluxurycarsin2020.70TheChineseluxurycarmarketisexpectedto
surpasstheUnitedStatesby2020.71
69Gerth,“LifestylesoftheRichandInfamous,”490.70“LuxuryCars,”ChinaDaily,accessedDecember20,2015.http://topic.chinadaily.com.cn/index/special/sid/166.71YuvalAtsmon,DianeDucarme,MaxMagni,andCathyWu,“China’sNewClassofShoppersTakeontheWorld,”(survey,McKinseyandCompany,December2012),23.
24
Howareluxurygoodsbeingconsumed?TrendsinChineseluxurygoodconsumptionpointtotwoconsumption
practicesthatareunique:thelargeamountsspentonluxurygoodsabroad
comparedtoothernationalitiesandthetraditionof“gifting.”72
Chineseconsumersoftenpurchaseluxurygoodsabroad,atrendthatappears
tobeunaffectedbythecrackdown.Forexample,sixtypercentofwatchespurchased
byrespondentsinatwo-yearperiodbefore2013werepurchasedabroad.In2011,
Chinesetouristsspentover52billionRMB(overUS$8million)outsideChinaon
luxurygoods.73In2014,117millionChinesepeopletraveledinternationally.74That
sameyear,HongKong,Macao,andTaiwansawa5percentincreaseinluxury
purchasesbyChinesemainlanders,from27percentin2014to31.8percentin
2015.75
Oneofthemajorfactorstobuyluxurygoodsabroadisalowerprice,dueto
lowertaxesandtariffs,orlackoftaxesandtariffsinforeignmarkets.Theaverage
priceabroadforwatchesis1.5timeslowerthanthosesoldinChina.76Aluxurybag
inBeijingisfortypercentmoreexpensivethantheexactsamemodelinParis,dueto
72Forcomparisontoothernationssee:ClaudiaD’Arpizio,FedericaLevato,DanieleZitoandJoelledeMontgolfier,"LuxuryGoodsWorldwideMarketStudyFall-Winter2014:Theriseoftheborderlessconsumer,"BainandCompanyDecember31,2014,accessedApril21,2016.http://www.bain.com/offices/tokyo/ja/publications/periodicals/Luxury-goods-worldwide-market-study-2014-tokyo.aspx.73“BainSurveyofLuxuryGoodsConsumersinMainlandChina2011,”(survey,BainandCompany,December2011),4.74Cong,"中国奢侈品市场走向成熟:挖掘长线潜能,"FortuneChinaNetwork,June9,2015,accessedApril15,2016,http://app.fortunechina.com/mobile/article/241442.htm.75Asopposedtothe4percentdecreaseinluxurygoodspurchasedonthemainland.Cong,"中国奢侈品市场走向成熟,”2015.76CrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013,”10.
25
taxesandtariffs,soChinesetouristsplurgewhentheyareabroad.77The
phenomenonofChineseconsumersmakingtheirpurchasesabroadhasledtoluxury
brandsreducingpricesinChinaandslightlyraisingpricesinEuropeanstorein
2015toequalizepricesandincentivizemoreChineseconsumerstopurchase
domestically.78Itshouldbenoted,however,thatChineseconsumersspentanequal
amountabroadanddomesticallyonshoesandsmallleathergoods.79
Otherfactorscontributingtothelargeamountofluxurygoodspurchased
abroadareconcernsaboutcounterfeits,poorservicequality,accesstomorebrands,
andthelackofavailabilityofnewerproductsupontheirreleasecomparedto
foreignmarkets.80
ThepracticeofgiftingisveryimportantintheChineseluxurygoodsmarket.
Acommonpracticeinbusinessventures,businessmenwillpresentagifttoan
officialinordertogainfavor,connectionsorguanxi.Guanxiisaseriesof
“relationshipsthatarebasedimplicitlyonmutualinterestandbenefit”inChinese
society.81Thepracticeisespeciallyimportantinbusinessdealsthatrequirelarge
amountsofgovernmentoversight,suchastherezoningofland.Watchesand
expensiveliquorswerethemostcommongifts,thoughexpensivehandbagswould
sometimesbegiftedtothewivesofofficials.Someestimatethatbeforethemost
77YuvalAtsmon,DianeDucarme,MaxMagni,andCathyWu,“China’sNewClassofShoppersTakeontheWorld,”(survey,McKinseyandCompany,December2012),22.78Cong,"中国奢侈品市场走向成熟,”2015.79CrépyandFanOswald-Chen,“ChineseLuxuryGoodsBuyersSurvey2013.”80Ibid.,13.81MayfairYang,Gifts,Favors,andBanquets:TheArtofSocialRelationships(Ithaca,NewYork:CornellUniversityPress,1994),1-2.
26
recentanti-corruptioncampaign,giftgivingaccountedfor50percentofallluxury
sales,and75percentofluxurywatchsales.82
SummaryThemarketreformsofthe1978ledtotheabilityofChinesecitizensto
accumulatewealth,leadingtothecreationoftheUpperandMiddleClassinChinese
society.DuetothefluidstateofChinesesocietyandthelargepopulationsofcities,
Chinesecitizensoftenasserttheirsocialpositionthroughtheuseofconspicuous
consumption,usingrecognizablegoodstostressone’ssocialpositionaboveanother
person.Thisneedforamediumtoexpressone’sstatusledtoanexplosivedemand
forluxurygoods,predominantlyWesternsgoods,astheycarryanimageofquality
andprestigeinChina.
ChinadiffersfromWesternnationsinluxurygoodsconsumptionin
numerousways.Duetohighdomestictaxrates,largeportionsofluxurygoods
purchasedbyChineseconsumersaremadeabroad.Menhavehistoricallymadethe
majorityofluxurypurchases,butthisischangingasmorewomenenterthemiddle
classandbegintoshopforluxurygoods.83Lastly,theChinesecustomofgiftingto
incurfavorfromgovernmentofficialshascreatedademandforluxurygoodslike
watchesandhigh-endcognacs.
Risingdemandforluxurygoodshascausedluxurysalestoincrease
exponentially,leadingmanytobelieveChinawillsoonbecometheworld’slargest
singleconsumerofluxurygoods.Thismakesunderstandingthecurrentmarketin82RadhaChadhaandPaulHusband,TheCultoftheLuxuryBrand:InsideAsia’sLoveAffairwithLuxury(NicholasBrealeyInternational,2006),174.83ErwanRambourg,TheBlingDynasty:WhytheReignofChineseLuxuryShoppershasonlyjustBegun(Singapore:JohnWileyandSonsPte.Ltd.,2014),27.
27
China,whoispurchasing,howtheyarepurchasing,andhowthegovernmentis
involvedinthesepurchasesvitallyimportantinunderstandingamarketthat
employsthousandsandgeneratesbillionofdollarsinrevenue.
28
Chapter2:TheCrackdownThischapterexaminesthedifferentaspectsofanti-corruptioncampaignsin
thePeople’sRepublicofChina,withspecificattentionpaidtothatofthemostrecent
anti-corruptioncampaign.Inlate2012,ChinesePresidentXiJinpingimplementeda
governmentcrackdownoncorruptionandextravagance.Xivowedto“bringdown
both‘fliesandtigers’–corruptcadresatalllevels,”believingbothposeathreatto
thesurvivalofChinaandtheCommunistparty.84Inadditiontoin-depth
investigationsintopersonalandbusinesslivesofgovernmentofficials,thecampaign
includesrestrictionsonwhatcarsofficialscandriveorown,andwhatofficialscan
eat.Thispaperseekstoshowthatthesemeasureshaveledtoadecreaseingifting
andconspicuousconsumptionamongofficials,bothofwhichcontributetolarge
portionsofluxurysalesinChinaandabroad.
AHistoryofAnti-CorruptionCampaignsinModernChinaSinceDengXiaopingimplementedeconomicreformstoopenupthemarket
in1978,thefighttostemcorruptionhasbeenanearconstantbattle.Chinahas
experiencedfivemajoranti-corruptioncampaigns,thefirststartingjustafewyears
afterthereform,beginningin1982.Thefiveanti-corruptioncampaignshavelargely
occurredbacktoback,andhavehadvaryinglevelsofeffectivenessduringtheir
duration.
Theanti-corruptioncampaignshave,withtheexceptionofthemostrecent
campaign,focusedondifferenttypesofcorruption.The1982anti-corruption
campaignfocusedoneconomiccrimes.Of136,024cases,44,000people
84TaniaBranigan,“Politburo,army,casino:China’scorruptioncrackdownspreads.”TheGuardian,February14,2015.
29
surrenderedthemselvestothepoliceand26,000peoplewereconvicted.In
contrast,theanti-corruptioncampaignthatfollowed,from1983to1987,focusedon
“consolidatingpartyorganization.”85Thecampaignfocusedonfindingparty
memberswhohadviolatedpartydisciplineorengagedincorruptactivities.The
numberofseniorofficialsatthecountylevelorabovewhowerepunishedduring
thecampaignwasabove35,000.Theanti-corruptioncampaignfrom1988to1989
focusedongraftandbribery,resultinginthearrestof20,794individualsandthe
recoveryof482.86millionRMB(US$74.23million).Thelastlargeanti-corruption
campaignlastedfrom1993tolate2012,endingwiththemostrecentanti-
corruptioncampaign.Thecampaignsoughtto“forcefully[curb]unhealthy
tendencieswithingovernmentdepartments,”throughthe“selfregulationofsenior
officials”withintheChineseCommunistParty,aswellasthestrengtheningof“the
investigationandpersecutionoflarge-scalecorruptioncases.”86
PresidentXi’sCampaignThemostrecentanti-corruptioncampaignbeganinlate2012.AtaPolitburo
meetingonDecember5th,2012,newlyelectedPresidentXiJinpingintroducedthe
planforawide-scalecrackdownoncorruption.87Xihasbeenquotedassayingthat
hebelievescorruptionposesan“existentialthreat”toChinathat,ifunaddressed,85ChangzhengDai,"CorruptionandAnti-CorruptioninChina:ChallengesandCountermeasures,"JournalOfInternationalBusinessEthics3,no.2(July2010):66.86Forfurtherinformationontheintricaciesofthecampaignsee:Dai,“CorruptionandAnti-CorruptioninChina,”67.87TheNationalPeople’sCongress,2987members,electsmemberstoaCentralCommittee,madeof205fullmembersand171part-timemembers.TheCentralCommitteeinturnselects25memberstocreatethePolitburoattheirfirstmeeting,calledthefirstplenum.OfthePolitburo,7elitesmembersareelectedtothePolitburoStandingCommittee,whichinturnelectsthePartySecretary,currentlyXiJinping.
30
willleadto“thecollapseoftheCCPandthedownfallofthestate.”88An“assumption
hasbeenthateradicatingcorruptioncanonlymeanaswiftimprovementinthe
[Chinese]system.”89Thecampaignisquitedifferentfromthoseinthepast,asXi
declared,“thatnocorruptofficialwillbespared.”90Previousanti-corruption
campaignshavesolelyfocusedontheconvictionoflowtomid-levelofficials.Xi,
however,hasaddressedcorruptionatalllevelsofthegovernment.AsofFebruary
14,2015,about100,000officialshadbeenpunishedforcorruption.91Officialsare
detained,arrested,andinsomeextremecases,executed,intherecentcrackdownon
corruption.
Thenumberofhigh-rankingofficialsthathavebeeninvestigatedor
convictedunderthenewanti-corruptioncampaignisconstantlygrowing.LiuHan,a
Chineseminingbillionaire,wasconvictedofmultipleaccountsofhomicide.92Xu
Caihou,theformervice-chairoftheCentralMilitaryCommissionandPolitburo
member,wasconvictedofacceptingbribesinexchangeforpromotionswithinthe
military.93ZhouYongkang,former“securitytsar,”wassentencedtolifeinprisonfor
“abuseofpower,acceptingbribesandrevealingstatesecrets.”94
88HannahBeech,"China’sCampaignAgainstCorruptionIsHuge.WillItDoAnyGood?"TimeMagazine,July15,2014.JamesLeung,"Xi’sCorruptionCrackdown,"ForeignAffairs94,no.3(May2015):32-38.89Branigan,“Politburo,army,casinos”(2015).90Leung,"Xi’sCorruptionCrackdown"(2015).91Branigan,“Politburo,army,casinos”(2015).92Ibid.93Ibid.94MichaelForsythe,“ZhouYongkang,formersecuritychiefinChina,getslifesentenceforcorruption.”NewYorkTimes,June12,2015.
31
Thecurrentanti-corruptioncampaignisthemosthighlypublicizedanti-
corruptioncampaigninrecentChinesehistory.NewssourcesinChinahavebeen
followingthecampaignveryclosely,andthecasesofhigh-rankingofficialslikeBo
XilaiandZhouYongkanggarneredsignificantmediaattentioninChina.The
campaignhasbeenenormouslypopularandhascreateda“populistedgetoXi’s
image,”evencontributingtoagrowingcultofpersonalityaroundthepresident.
PresidentXiJinping’sworriesthatcorruptionwilldestabilizethepartyare
notunfounded.TheGINIcoefficientforChina,ameasurementofinequality,has
“increasedmorethan50percentinthelasttwodecades.”95Infact,urbandwellers
earnoverfourtimesmorethantheincomeoftheirruralcounterparts.MostChinese
assumetheincredibly“wealthyamassedtheirwealththroughcorruption,”taking
advantageoflandspeculationandprivatizationofStateOwnedEnterprise(SOE)
throughtheirconnectionstoofficials.96SomeexpertsarguethattheTiananmen
Protestsof1989wereprimarilytoprotestofficialprofiteering.Therefore,an
addressofthecorruptioninChinabyXiJinpingis,insomeways,essentialto
keepingtheChineseCommunistpartyinpowerandquellingcivilunrest.
Widespreadcorruptionistheresultoftwomajorfactors:thenation’sone
partysystemandthestatecontroloftheeconomy.China’sonepartysystemhasled
toanextreme“lackoffirmchecksandbalances.”Thisabsenceofregulationhasled
towidespreadissueswithgraftandbribery.Someclaim,“noChineseinstitutionis
95KarlGerth,"LifestylesoftheRichandInfamous:TheCreationandImplicationsofChina'sNewAristocracy,"ComparativeSociology10,no.4(November2011):497.96Ibid.,500.
32
freeofthem.”97AccordingtoA.K.Jain,bureaucraticdiscretionarypower,andthe
associationofthispowerwitheconomicrents,aretwoofthethreeprerequisitesfor
corruption,bothofwhichChina’sone-partysystemhelpsfacilitate.98Accordingto
some,Xiis“bettingthatchangingthemoralcharacterofofficialswillallowhimto
leaveintacttheone-partystate.”99
Statecontroloftheeconomyreferstostatecontrolofresources,businesses,
andevenland.Becausethegovernmenthassuchvastcontroloverallareasofthe
economy,officialsusetheirregulatorypowertoexactlargeamountsofcontrolover
businesses.Forexample,ZhengXiaoyuacceptedoverUS$850,000inbribesfrom
pharmaceuticalcompanieswhenhewasheadoftheStateFoodandDrug
Administration,resultinginthedeathofover100peopleinPanamadueto
contaminatedcoughsyrup.100Thisisjustoneextremeexampleoftheinfluence
officialsholdoverprivatebusiness.Prohibitingbusinessesfromstartingor
continuingventureswithoutofficialpermissionallowsofficialstolinetheirown
pockets.
Therehasbeennosignificantmovetoaddresscorruptioninthemilitary,
largelyinpartbecausePresidentXihasnotcompletelystrengthenedhisposition
withintheChinesemilitary.ThemilitaryequivalentoftheCCDI,theCommissionfor
DisciplineInspectionoftheCentralMilitaryCommission,hasnotexperiencedany
changesinstafforleadershipthatwouldallowXiJinpingtoextendhisreformsinto
97Leung,"Xi’sCorruptionCrackdown"(2015).98A.K.Jian,“Corruption:Areview.”JournalofEconomicSurveys,no.15(2001):71-121. 99BarbaraDemick,“Chinatryingtopullbackongift-giving.”100Leung,"Xi’sCorruptionCrackdown."
33
themilitary.101Itiswellknownthatcorruptionisprevalentinthemilitary,asjunior
militaryofficerswilloftenbribehigher-rankingofficialsinordertobeawarded
promotions.AfterthearrestofXuCaihou,officialsfoundnumerousluxuryitemsin
hishouse,likegold,cash,andjewels,whichwere,purportedlygiventohimfrom
juniormilitaryofficersinexchangeforpromotions.102
TheCampaign’sEffectonLuxuryConsumptionPresidentXi’santi-corruptioncampaignismultifaceted,focusingon
corruption,likegraftandbribery,aswellasextravaganceamonghigh-ranking
officials.TheChineseCommunistPartyPolitburomeetingonDecember5th,2012,
“unveiled”alistof“do’sanddon’t”fortopofficialsinanattempttowin“the
confidenceandsupportofthepeople.”103Somearguethecampaign’srestrictions
areinplacetomakethewealthgaplessvisible,whileothersarguethepurposeof
thelistwastoimprovetheimageoftheparty.104Overthecourseofthenextyear,
thelistwasexpandedupontoincluderestrictionsforautomobileuse,banquets,and
workdinners.
ByDecember2013,sharkfinsoup,bird’snestsoup,andwildanimal
productswerebannedfromofficialdinners.105Restrictionshavebeenplacedon
officialbanquets,limitingofficialstojustfourcoursesandasoup.106These
101Ibid.102Ibid.103TimDonovan,"China'sCrackdownonCorruptionandGovernmentSpending:ATimeline."ChinaBusinessReview(January2014):5. 104ErwanRambourg,TheBlingDynasty:WhytheReignofChineseLuxuryShoppershasOnlyJustBegun(Singapore:JohnWileyandSonsPte.Ltd,2014),21.105Donovan,“China’sCrackdownonCorruptionandGovernmentSpending.”106LijiaShang,WillyLamandBenjaminLim,interviewedbyKristieLuStout, OnChina:Beijing’scrackdownoncorruption,CNN,October15,2013.
34
restrictionshavenegativelyaffectedtheChineseluxurycateringindustry,nearly
destroyingawholeindustryasofficialssoughttoavoidanypracticesthatwouldput
themunderscrutiny.107
Fromthebeginning,thecampaignincludedregulationsontheuseofluxury
vehiclesbyofficials,expandingovertimetoberestrictive.OnMarch31st,2013,the
governmentimplementednewregulationsthatrevokedtheeligibilityofforeign
luxurycarbrands,likeBMWandBentley,toqualifyformilitaryorarmedpolice
plates.108ByNovember,2013,China’sStateCouncil“releasedregulations”banning
provincialofficialsfrom“usinggovernmentcarsforgeneraluse.”109Thisregulation
wasexpandeduponlessthanthreemonthslater,whentheStateCouncilbanned
“theChinesemilitaryfrompurchasinganyforeignmadecars.”110
Earlymorningraidsofforeignluxuryfirms,havebecomecommonplacein
China.111DavidBlumenthal,ananalystforForeignPolicy,makestheargumentthatif
Chinacanincreasetheoddsthatitsownbusinessmenwillsucceedintheglobal
market,itcan“centralizepoliticalandeconomicpowerandmakeitmoredifficult
forforeignbusinessmentocompete”intheChinesemarket.112
107BenMoshinsky,“ThisonechartshowshowChina’scorruptioncrackdownputanendtoextravagantparties.”BusinessInsider,August6,2015.108Donovan,“China’sCrackdownonCorruptionandGovernmentSpending.”109Ibid.110Ibid.111NatashaBertrand,“WhyChinaisraidingforeigncompaniesatdawn.”BusinessInsider,January16,2015.112DavidBlumenthal,“WhyChinaisshootingitselfinthefootbycrackingdownonforeigncompanies.”ForeignPolicy,September20,2014.
35
EffectonGift-GivingThispaperseekstodisplaythatthegovernment’scrackdownonthepractice
ofgiftingwasacontributingfactortothemarketlossofmanyluxurybrandsin
China.Luxurycognacsalesfell11%in2013,comparedtoagrowthof16%justthe
yearbefore.SharesinKweichouMoutai,aluxurybrandthatsellswhitespirits,saw
a27%dropinsharesoverjust6months.113Sincethecrackdown,liquorbrandsare
pushingmoremid-pricedproducts.Forexample,Martellisnowsellingaproduct
calledMartellNobligefor$75,comparedtoatypicalbottleofthebrand’sXO
cognac.114
Watches,amajoraspectofgifting,experiencedadecreaseinsalesduetothe
campaign.Duetothecampaign,luxurywatchsalesfell9%in2013,comparedto
their6%riseinsalesin2012.115Watchesworthover$10,000wereprimarily
targetedinthecampaign.116Asaresult,themarketnowfavorswatchesinthe
mediumpricerange,the$1,600to$4,000range.117Luxurywatchdealersbelieve
thedownturninsaleswillnotbepermanent,asthegrowingmiddle–classinChina
isexpectedtoabsorbtherevenueslostfromsalesofhigh-endwatches.
113KateHoliday,“Gift-givingcrackdownhitsChinaluxuryretailer,”CNBCAsia,February8,2013.114JasonChowandLaurieBurkitt,“SalesofLuxuryAlcoholRisingAgaininChina”WallStreetJournal,October16,2015.115FflurRoberts,“WhatisreallyhappeninginChina’sluxurymarket?”LuxurySociety(2014).116JamesShotter,“Chinacallstimeonexpensivewatchesinfaceofcrackdown,”FinancialTimes,May3,2013.117ChrisHorton,“Chinaturmoilmaystallreboundinwatchsales,”TheNewYorkTimes,September7,2015.
36
EffectonLuxuryGoodsOnlytheluxuryhandbagbrandsPradaandBurberryhavementionedany
connectionbetweenadecreaseinsalesandgiftgivinginChina.118AsofJuly15th,
2015,BurberrysalesinHongKong,acommondestinationforChineseluxury
buyerstomakepurchases,weredown12.7%fromtheyearbefore.119Theluxury
brandPradahasexperiencedevengreaterlosses.Prada,inthefinalquarterof2015,
experiencedabouta38%decreaseinsales,comparedtotheyearbefore.120
Chinaconsumesmassivequantitiesofgoldjewelry,butrecentlyjewelry
makershavebeenworkingtocreateamarketdemandinChinafordiamonds.
JewelrymakersinChinahaveconvincedconsumersthatdiamondsareanecessity,
ratherthanaluxury,toavoidsituationsthatwouldputtheirbuyersindifficult
situationswiththelaw.121Asluxuryhasbeenoutafavorquiteregularlyinthepast
decade,withtheHarmoniousSocietycampaignandthecurrentanti-corruption
campaign,turningdiamondjewelryintoatypeofnecessity,likeintheUnitedStates
withdiamondengagementrings,preservesthemarketdemandforsomethingthat
otherwisewouldoftenbebannedorrestrictedbythegovernment.Asaresult,eight
outofevery10couplessurveyedinfirst-tiercitiesinChinawerewillingtopurchase
diamondweddingrings,and50%werewillingtospend15,000RMBto20,000RMB
118LianaBrinded,“PradasaleshurtbycrackdowninChinaongiftsforcorruptofficials,”BusinessInsider,February23,2015.119SeanFarrell,“BurberrysharesdropassalesinHongKongcontinuetofall,”TheGuardian,July15,2015.120"ChinaweaknessdrivesPradaquarterlyprofitdown38%"CNBC,December16,2015.121TimTreadwell,“AmidChineseCrackdown,MerchantsTrytoconvincebuyersDiamondsaren’tLuxury,”Forbes,February5,2014.
37
ontheirweddingjewelry.122Whenputintoperspectiveoftheaveragepercapita
incomeinChina,between16,885RMBto32,154RMB,thepurchaseofdiamond
engagementringsissizeablepurchase.123
Thecampaignhasfocusedonconspicuousluxurygoods,socosmetics,
skincare,andperfumeshavelargelybeenunaffectedbythecrackdownitself.
Watches,liquor,andluxuryautomobilearethemosteasilytargeted,andhave
experiencedthegreatestlossesinrevenues.Inaddition,thereisnoevidencethat
thegovernmentprefersdomesticluxurygoodstoforeign,wantinginsteadto
addressluxuryconsumptionregardlessoforigin.Thislackofbiascanbeseeninthe
ratherlargedecreaseinsalesthatChowTaiFook,aHongKong-basedjeweler
experiencedin2013,beforerecuperatinglossesin2014.
Summary
TheeffortsofXiJinpingtoaddresscorruptionamongofficialsintheChinese
government,fromthelowestofficialstothehighest,beganinlate2012andhashad
manyhardreachingeffects,chiefamongthemareductiononluxuryitemsales.
Conspicuousconsumptionbyofficialsisoneofthemajortargetsofthecampaign.
Thisfocushasledtorestrictionsonluxurycaruseandpurchasesbyofficials,
limitationsondiningextravagance,andboundariesontheacceptanceofhigh-end
gifts,likeliquororwatches,toofficials.AstheChinesemarketisamongthegreatest
consumersofhigh-endliquorandluxurywatches,therespectivemarketsforthese
productshaveseenalargedeclineinsales.
122Tao,“ExploringtheChineseGemandJewelryIndustry,”(2014). 123DavidS.G.Goodman,ClassinContemporaryChina,45.
38
39
Ch.3:TheGovernmentCrackdownanditsEffectontheMarketingofLuxuryGoods
Thegovernmentcrackdownoncorruptionandextravagancehasmany
implicationsforluxuryadvertisinginChina.InFebruary2013,theCCPannounceda
banonTVandradioadvertisementsforluxurygoods.Accordingtooneofficialfrom
theStateAdministrationofRadio,Film,andTelevision(SARFT),luxury
advertisements“publicizedincorrectvaluesandhelpedcreateabadsocialethos
[withinChina],”astatementwhichmay,inpart,relatetothegovernment’seffortsto
counterdissatisfactionwithChina’sgrowinginequality.124Followingthe
announcement,Burberry,LVMH,RichemontandChowTaiFookstocksfell.Looking
back,thebanisviewedasoneofthefirstattemptsbyXiJinpingto“dousegrowing
frustrationinthewealthgapbetweenthecountry’srichandpoor—andtostop
corruptionconductedthroughluxurygift-giving.”125
Thecrackdown,whichledtoabanonadvertisementsofluxuryitemsin
publicplaces,continuedtheluxuryadbanthathadoccurredin2011,focusedon
increasingsocialharmonyanddecreasingawarenessofthegrowinginequalityin
Chinesesociety.Forcingluxurybrandstobecomecreativewiththeirstrategiesin
howtoreachviewersandincreasebrandawarenesscausedbrandstofocuson
advertisementsthroughe-commerce,magazines,andproductplacementinChinese
film,apublicavenuethathasnotyetbeenrestrictedfrommarketingluxury
124RamyInocencio,“ChinaBansTelevisionAdsforBling,”CNN,February8,2013.125Ibid.
40
brands.126Thebanhasseenaninterestingshiftinthecontentofadvertisementsas
well,onethatcanbeseengloballyasmostluxurybrandsusethesamemarketing
campaignonaninternationalscale.Understandingtheeffectofthecrackdownon
advertisementsinChinaisimportantbecauseadvertisementsareanindicatorof
whatluxuryloversandluxuryfollowerswillpurchase,astheadvertisementsarea
primarysourceofinformationforthetwogroups.
AdvertisingofLuxuryGoodsinChinaInastudybyZhouNanandRussellW.Belk,theresearchersfocusedonthe
effectofglobalandforeignappealsinadvertisingonChineseluxuryconsumers.The
studyfoundChineseconsumersheldtwoopposingpreferencesasaresultof
advertising.TheypreferredgoodswithanationalisticChineseelementorgoodsof
highvalue.ThenationalistpreferenceinvokesChinesevaluesthatareseenaslocal
inorigin,whilethesecondappealstoaconsumer’sdesirefor“global
cosmopolitanismandstatusgoods.”127Thisstudyisimportantinunderstanding
thatChineseconsumersdonothaveaone-sidedfascinationwithforeigngoods,but
alsoembraceChinesegoods.Equallyimportantistheimplicationthatproductsthat
displayglobalcosmopolitanismareseentoconveystatustotheiruser,a
straightforwardexampleofconspicuousconsumption.
Chineseconsumersholdahighdegreeofskepticismtowardstheadvertising
mediumsoftelevision,radio,newspaper,magazine,andtheInternet,alloutlets
luxurybrandsusetomarkettheirgoodsinChina.Therecentadbanhasprohibited126“China’sLatestAdBanaBlessinginDisguiseforLuxuryBrands?”JingDaily,February15,2013.127HongCheng,AdvertisingandChineseSociety:ImpactsandIssues(CopenhagenBusinessSchoolPressDK:2009):115.
41
advertisingluxurygoodsinpublicspace,limitingluxurybrandadvertisingto
magazinesandtheInternet.OnestudyhasshownthatChineseconsumersleast
trustcosmetics,pharmaceuticalsandrealestate,probablyduetomisleadingand
deceptiveadvertisingthatoverstatethebenefitsofproductssoldbythose
industries.ThisstatistichassignificantimplicationsforluxurysalesinChina,as
luxurygoodsforcosmeticsandskincaremakeupthelargestpercentageofallluxury
goodspurchased.ThestudyalsofoundthatChineseweremoreskepticalofprint
mediathantelevision.128Thisfindingisimportantinunderstandingluxury
advertising,becausewhenthebrandswereforcedtostartfocusingheavilyone-
commerceandadvertising,theybeganstreamingmoremini-commercialson
Chineseweb-siteslikeYoukuthataremoreeffectivethanprintadvertisementsin
directlytargetingyoungeraudiences.
Oneofthemostimportantcharacteristicsofluxurygoodsisthatluxury
goodsandbrandsareexclusive,butthischaracteristicalsocreatesaninteresting
paradoxsurroundingtheluxurygoodmarket.Toincreaserevenues,companies
oftentrytoincreasesales,butluxurybrandscandonosuchthing.Ifsalesoftheir
productsincrease,theexclusivityofthebrandisharmed,hurtingthebrand’sluxury
image.StrachandEverettresearchedthediminishingrarityvalueofluxurygoodsin
relationtotheirprice.Theyfoundthatasaproductbecomesmoreaffordableandis
purchasedatahighervolume,theproductlosesitsuniquenessandthevalueofthe
128SongTian,andYorgoPasadeos,"ChineseConsumers'SkepticismTowardAdvertising,"ChinaMediaResearch8,no.1(January2012):64-75.
42
productisdiluted.129Inordertoprotecttheirbrand,luxurycompaniesrestrictthe
availabilityoftheirproductsthroughselectivedistribution,andinsomecases,like
thatofLouisVuitton,assuringthatexcessmerchandisecannotbesoldatdiscount
pricesbyburninganythingnotsoldattheendoftheseason.Luxurybrandskeep
demandupbytheregularseasonalreleaseofnewproducts,causingluxurybrand
consciousconsumerstocontinuetopurchasenewluxurygoods.
Theneedforexclusionhasadverseeffectsonitsmagazinereadership.In
2014,Jiang,Gao,Huang,DeWall,andZhoufoundthatluxuryadvertisementscreate
negativementalrepresentations,similartothoseofsocialexclusioninChinese
viewers.Givennumerousadvertisementstolookat,ofluxuryandnon-luxury
brands,participantsinthestudyweremorelikelytofeel“rejectedbymodelsinthe
luxuryadvertisementsthanmodelsinthenon-luxuryadvertisements,”becausethe
luxuryadvertisementsappearunattainabletotheaverageviewer.130Inanother
studyofmagazinesinChina,researchersfoundthatChinesemodelswereonly
presentin26.5percentofadvertisementsaimedattheirownethnicity,showing
thatpartofthisfeelingofrejectioncouldbeattributedtothelackofethnic
representationinmagazineadvertisements.131Lookingatluxurybrand
advertisementsresultsindecreasedlifesatisfactionandincreasedtheviewer’s
expectationsofbeingrejected,whichcouldhaveimplicationsforsocialinstability129P.StrachandA.M.Everett,“Brandcorrosion:mass-marketing’sthreattoluxuryautomobilebrandsaftermergerandacquisition,”JournalofProduct&BrandManagement15,no.2(2006):106-120.130MingJiang,Ding-GuoGao,RenHuang,C.NathanDeWall,andXinyueZhou,"TheDevilWearsPrada:Advertisementsofluxurybrandsevokefeelingsofsocialexclusion,"AsianJournalOfSocialPsychology17,no.4(December2014):245.131Theother59.2%ofadvertisementsstudiedeitherfeaturedmodelsofanotherethnicity,orfeaturednomodelatall.
43
duetoeconomicinequality.Asdiscussedinchapter2,thegrowinginequalityisa
majorproblemfortheChineseCommunistParty.
In2013,somearguedthattheadvertisementbanwouldbegoodforluxury
brands,ifitaffectedthematall.Chineseluxuryadvertisementshadpreviouslybeen
restrictedin2011throughabantopromotesocietalharmony,sotheindustry
alreadyknewhowtoworkwithabanonluxurygoodadsby2013.Thebanonly
addressedluxuryadvertisementsinpublicareas,soluxurybrandswentonlineto
advertiseandcreategreaterbrandawareness.China’sluxuryecommercemarketis
worthover$3billion,andisusedbyretailersforbothadvertisementandsales.132
BrandslikeLouisVuitton,Burberry,andChanelallhaveactiveWeChataccounts
withextensivemobilecontenttoengageconsumers.133Advertisementsthatwould
oncehaveplayedonpublicradioortelevisionturnedtositeslikeYoukutoairtheir
ads.Themovetodigitalallowsluxurybrandstoreachtheirtargetaudience,young,
middleclassChinesewiththepurchasingpowersupportofboththeirparentsand
grandparents,easilyandefficientlywithoutupsettingindividualswhowould
otherwiseviewtheadvertisementsasdetrimentaltothestabilityofChinesesociety.
134
The2013LuxuryAdvertisingBanSincethegovernmentcrackdownbeganinlate2012,marketinginChinahas
seenasubtle,yetsignificantchange:theuseofChinesemodelsininternational132“China’sLatestAdBanaBlessinginDisguiseforLuxuryBrands?”JingDaily,February15,2013.133"WeChatFashionandLuxuryCampaigns:10CaseStudies."WalktheChat,August15,2015.134"Chineseluxuryshoppersflockingonline:survey,"CCTVEnglish,February26,2014.
44
luxurymarketingcampaigns.ThroughmyresearchIhavediscoveredthatthe
numberofChinesemodelshasdecreasedsincethecrackdown.
Thegovernmentcrackdownoncorruptionhashadaneffectonthe
percentageofnon-westernmodelspresentinadvertisementsinElleChina.The
percentageofnon-westernmodelsdecreasedoverthecourseof5years,ascanbe
seeninthechartbelow.In2010,thepercentageofnon-westernmodelsinElle
Chinawas21percent,comparedto12percentin2015.Thehighestpercentofnon-
westernmodelsoccurredin2011with25percentofadvertisementsfeaturingAsian
models.
Previously,advertisementsmarketedtotheChineseaudiencewouldonly,
withsomeexceptions,135featureWesternmodelsoractressesandactors.Luxury
brandshavenowbeguntoincludeChinesemodelsinadvertisementsalongside
Westernmodels,andsomemodelshaveevenheldcampaignsforluxurybrandsby
135Skincareadvertisementsarethenotableexception,whichusuallyfeaturedanAsianmodelbeforethecrackdown.From2012topresent,theresearcherfoundthatthepresenceofwesternmodelsinChineseprintadvertisementincreased.
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014 2015
PercentageofM
odelsPer
JanuaryIssue
AdvertisementsFeaturingWesternorAsianModelsintheJanuaryIssue(s)ofElleChina(n=449)
Western
Asian
45
themselves.ThistrendoffewerAsianmodelsinadvertisementsreflectsthesmall
numberofChinesemodelsinthefashionindustry.Whilethenumberisgrowing,it
isstillextremelysmallincomparisontothenumberofWesternmodelspresent.Fei
Fei,MingXi,LiuWen,andSuiHearethemostusedfemaleChinesemodelsforad
campaignsoverthelast5years,showingthattheincreasingdiversityinglobal
advertisementsisnotasacceptingofnewtalentforChinesewomenasitisfor
Westernmodels.
ThefollowingisadissectionofluxuryadvertisementsfeaturingChinese
modelsthathavebeenreleasedsincethecrackdownbegan.
ChineseLuxuryAdCampaigns:ElleChinaCaseStudyElleChinaisaninternationalfashionmagazinefirstintroducedinChinain
1988.136EachissueofElleChinaaveragesaround280to400pages.137In2007,Elle
Chinahad4.81percentoftotaladvertisementexpenditureforthetop10magazines
inChina,secondonlytoCosmopolitanChina.138Today,ElleChinareaches6million
readerseverymonth,withitsaverageviewershiparound16to24yearsold,
predominantlyfemale.139ThetargetaudienceofElleChinaistheuppermiddleclass
andabovewithitsluxuryarticlesandadvertisements.
136“ElleChinaLaunchesSemi-MonthlyEditionStartingFebruary2012,“HearstCompany,lastmodifiedFebruary2,2012,http://www.hearst.com/newsroom/elle-china-launches-semi-monthly-edition-starting-february-2012.137Ibid. 138YangFeng,andKatherineFrith,“TheGrowthofInternationalWomen’sMagazinesinChinaandtheRoleofTransnationalAdvertising,”JournalofMagazineandNewMediaResearch10,No.1(2008):6.139ZhouYu,LengShujia,ZhangGe,ZouWei,"AnalysisandMarketingStrategyofElleMagazineinChina,"(mastersproject,HongKongBaptistUniversitySchoolofCommunicationandSchoolofBusiness,May2012):42,
46
Theresearchersetouttodeterminewhetherthegovernmentcrackdownon
corruptioninfluencedhowadvertisementswerepresentedinluxurylifestyle
magazines.TodosotheresearcheranalyzedtheJanuaryissue(s)ofElleChina
Magazinefrom2010to2015.140
Theresearchersoughttoanalyzethemagazineissuesinregardstopresence
ofmodelsintheadvertisements,thepresenceofnon-westernmodelsin
advertisements,andnumberofadvertisementsperissueadvertisingacertaintype.
Theresearcherfocusedonthepresenceofmodels,asopposedalackofmodelsin
advertising.Thepresenceofmodelsinanadvertisementinanactivechoice,anda
moreexpensiveone,pointingtoabeliefbyadvertiserthatthepresenceofamodel
inwarrantedorrequiredtoadvertisetheirgood.141Inadditiontostatistical
analysis,theresearchercomparedadvertisementsofskincareandmakeup,watches,
jewelry,fragrances,technology,automobiles,andclothing,aswellastheindividual
advertisementsofRolex,Dior,Gucci,andLouisVuittonoverthecourseoffiveyears
todetermineifmarketingstrategieswerechangedtoaddresschangesinthe
corruptioncampaign.
http://comd.hkbu.edu.hk/mm/mmgtproject/image/projects/2012_project/12_group5.pdf. 140Forthemostpart,luxurybrandsreleasethesameadcampaigninternationally,withtheexceptionofRado,aSwisswatchmaker,whichreleasesadvertisementsforitsChineseaudience.141Astudyby###foundthatwesternmodelsweremorecommonlyusedforadvertisementsthatfocusontheirbody,andChinesemodelsweremorecommonlyusedinadvertisementsfocusedonfacialbeauty.ThisledtheresearcherstoconcludethatthepresenceofwesternmodelsinChineseadvertisementswasatypeofracialsexualobjectification.KatherineTolandFrith,HongCheng,andPingShaw,"RaceandBeauty:AComparisonofAsianandWesternModelsinWomen’sMagazineAdvertisements,"SexRoles50,no.1(January,2004):50.
47
Theresearcheranalyzedthepresenceofmodelsinadvertisementsin
JanuaryissueofElleChinaoverthecourseof5years.Intheprocess,Ifoundthatthe
percentageofadvertisementsperissuefeaturingmodelshitalowin2013,before
reboundingthefollowingyear.In2010,55percentofadvertisements[N=449]used
models,comparedto60percent[N=449]in2015.Thelowestpercentwasin2013,
withonly49percentofalladvertisementsintheissuefeaturingamodel.
Watches Ofthe451advertisementsfeaturedinElleChinafrom2010to2015,only47
wereforluxurywatches,onlyabout10percentofalltheadvertisementswerefor
watches.ThemostprominentbrandsforluxurywatchesfeaturedinElleChinawere
Rolex,with6advertisements,Chopard,Jaeger-Coultre,andRadowith5
advertisementseach,andChanelwith4advertisements.
0%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014 2015
PercentageofAdvertisements
PerIssue
ElleChinaAdvertisementPerIssueFeaturingModels(n=449)
DoesnotfeatureamodelFeaturesamodel
48
Rolex,aluxurywatchmanufacturer,hadan
advertisementinatleastoneJanuaryissueofElle
Chinafrom2010to2015,withtheexceptionof2012.
Chronologically,Rolexhasgonefromovertly
grandioseadvertisementsin2010and2011tomore
streamlinedadvertisements2013to2015.Boththe
2010and2011advertisementsthewesternmodelis
thefocalpoint,withthe
renderingofthewatchplacedin
thefarbottomleftcorner.Inthe
2013and2015advertisements,
thewatchisthefocalpoint.No
modelispresent,andthemuted
whiteandoff-whitebackgroundplaceextra
emphasisonthewatchbeingadvertised.The
2014advertisementfeaturesfemaleathletes
CarolineWozniack,AnaIvanovicandLindsey
VonnalongwithmusiciansYujiaWang
andAnoushkaShankar.142Theadvertisement
carriestheaestheticofthe2013withthe
greenlinecuttingthroughthecenterofthepage.143
142Rolex,Advertisement,January2014,ElleChinano.2,150-1.143Rolex,Advertisement,January2013,ElleChinano.2,2-7.
49
Throughtheanalysisofthewatchadvertisementovertheperiodof2010-
2015,theresearcherfoundnoevidenceofashiftinadvertisementsofwatchesto
suggestaconnectionbetweenthecrackdownandstyleofadvertisement.Watch
advertisementsfeaturedsimilarnumbersofnon-westernmodelsperissue,one,
overtheperiodoftime,withtheexceptionoftwoadvertisementsfeaturedinthe
2014Januaryissues.Onaverage,56percentofallwatchadvertisementsfeaturedno
model.Thepresenceofopulentbackgrounds,featuringabedofrubies,diamonds,or
feathersaddstotheextravaganceofthewatchbeingpresented,thoughby2014
watchadvertisementswithoutamodelbecamemorestreamlined.
50
Handbags From2010to2015,35ofthe451,or8percent,ofalladvertisementsinElle
Chinawereforhandbags.Ofthose35advertisements,only2didnotfeaturea
model.Only4ofthe35advertisementsfeaturedanon-westernmodel,oneforeach
Januaryissuefor2013and2014.
Asforthegeneralaestheticoftheadvertisementandifanychangewasseen
overtime,theresearcheranalyzedtheadvertisementsofthebrandGucci,which
hadanadvertisementeveryyearexcluding2011.EveryyearGuccihadan
advertisementfortheirhandbagsfeaturedinElleChina,theadvertisementfeatured
awesternmodelholdingaGuccihandbag,intheformofasatchel,totes,andcross
body.Theadvertisementsfor2010and2013areinquiteopulentsettings,western
settings.Thesettingfor2010isclearlyatahigh-classswimmingpooland2013ata
gardenorbeachparty.144Theadvertisementsfor2014and2015supportthe
researchersclaimthatadvertisementswereeffectedbythecorruptioncampaignin
144Gucci,Advertisement,January2010,ElleChinano.1,10-11.Gucci,Advertisement,January2013,ElleChinano.1,2-3.
51
China,asthereislittletonosettingasidefrom
thenon-descriptchairstherespectivemodels
siton,holdingtheirGuccihandbags.145
145Gucci,Advertisement,January2014,ElleChinano.1,2-3.Gucci,Advertisement,January2015,ElleChinano.1,8-9.
52
LouisVuittonhadan
advertisementinElleChinaeveryyear
startingin2011.Alladvertisements
featuredawesternmodelmodeling
bothLouisVuittonhandbagsand
clothing.Forthepurposeofthis
analysis,theresearcher
focusedsolelyonthose
picturesinthespreadsthat
featureaLouisVuittonbag.
Theadvertisementfor2011
and2012aresetonabeach,
asthemodelinonepictureis
surroundedbypalmtreesandinanotherthe
modelisplacedbeforeanoceanforboth
spreads.146Theadvertisementfor2013and2014
prominentlydisplaysthemodelinahotair
balloon,thoughtheadvertisementfor2014places
themodelinaEuropeansetting,perchedfromthe
sideoftheballoon’sbasketinfrontofSt.Mark’s
SquareinVenice.147Anotheradvertisementfrom
146LouisVuitton,Advertisement,January2011,ElleChinano.2,1.LouisVuitton,Advertisement,January2012,ElleChinano.2,1.147LouisVuitton,Advertisement,January2013,ElleChinano.2,1.
53
2014featuresamodelleaningoffabalconyinwhatappearstobeatraditional
Europeanoperasetting.148The2015advertisementstandsout,asitismerelya
modelsurroundedbyLouisVuittonmerchandiseinawhitebackground.149The
researcherdoesnotthinkthisisanyindicationofashiftamongluxury
advertisementstrategiestoavoidgovernmentcensorship,butratherastylisticshift
inpresentation.
LastlyDior,whichhadadvertisementsfortheir
leathergoodsinElleChinaeveryyearfrom2011to
2015,showsashiftin2013and2014.Everyyear
from2011to2015,DiorfeaturedtheFrenchactress
MarionCotillardinitshandbagadvertisementsfor
ElleChina.Theactresswasplacedinvarioussetting,
besideapoolinHollywood,onabeach,inawhite
LouisVuitton,Advertisement,January2014,ElleChinano.2,1.BibbySowray,"DavidBowieStarsinLouisVuittonAdvert,"TheTelegraph,November8,2013.148LouisVuitton,Advertisement,January2014,ElleChinano.1,31.149LouisVuitton,Advertisement,January2015,ElleChinano.1,29.
54
room,atnightinanurbancenter,orontheLondonEyeFerrisWheel.150For2013
and2014especially,thesettingofthephotographislargelyambiguous,asimple
whiteroomwithbluepaintdripsandtheurbancentersettingofthe2014adis
largelyblack,withlinesoflightfromleavingalongexposureonthecamera.151The
advertisementfor2015wassetatthetopoftheLondonEyeFerrisWheel
overlookingtheHousesofParliamentinLondon.152Thechangeinsettingfor2013
and2014couldbeareactiontotheanti-corruptioncampaigninChina,orastylistic
choice.Withoutdirectinputontheshiftfromthoseinvolvedinthevariousphoto
shoots,onecannotsaydefinitelyiftheshiftisinanywayrelatedtothesituationin
China.
Withoutdirectinsightintothecreativeprocessesinvolvedinthecreationof
variousadvertisements,theresearchercannotdefinitivelystatewhetherornot
luxuryadvertisementsofhandbagswasaffectedbythesituationinChina.That
beingsaid,thereisaclearshiftinadvertisingaestheticsaroundthetimetheanti-
150Dior,Advertisement,January2011,ElleChinano.2,2-3.Dior,Advertisement,January2012,ElleChinano.1,BackCover.151Dior,Advertisement,January2013,ElleChinano.1,BackCover.Dior,Advertisement,January2014,ElleChinano.2,2-3.152Dior,Advertisement,January2015,ElleChinano.2,2-3.
55
corruptioncampaigninChinawasgainingmomentum.Thechangeinsettingfrom
clearlyidentifiablesettingstonondescript,almostmonochromatic,backgroundsfor
2013and2014forDiorcouldbeareactiontotheanti-corruptioncampaignin
China,orastylisticchoice.Inasimilarmanner,thelackofasettinginGucci
advertisementsfor2014and2015,couldbeasimilarreactionbyaluxurycompany
tocreateaninternationaladvertisingcampaignthatcouldbeusedinChina.Interms
ofmodels,whethertheyarepresentinanadvertisement,orwhetherthemodelin
westernornot,theresearcherfoundnosignificantlastingchangeoverthecourseof
fiveyears.TheJanuaryissuesof2013and2014didseeanincreaseofone
advertisementperrelease,fourintotal,butthisshiftdidnotcarryonto2015.
Inluxurycaradvertising,printadvertisementsdidnotchangeintheir
aestheticfrom2012-2015.Forexample,theprovidedimagesareforthe2012Audi
advertisementcampaignandthatofthe2015advertisementcampaign.The
presenceofanactualsettinginthe2015advertisementisallthatreallysetsthetwo
apart.Inbothimages,thecaristhecentralfocus,notamodeloractor-
spokesperson,asiscommoninAmericanautomobileadvertisements.Overthe
courseofthefiveyearsstudied,ElleChinahadaroundfiveautomobile
advertisementsperJanuaryissue.Ofthe23advertisementsforautomobiles
56
featuredoverthefive-yearperiod,only3hadmodelsinthem,2beforethe
crackdownbyAudiandLexus,and1afterbyVolkswagen.Thismeansthat83%of
alltheadvertisementshadnomodel,andonly13%featuredamodelatall.Allthree
advertisementswithamodelfeaturedanAsianmodel.
Summary
Theadcampaignstartedinearly2013causedsomeinterestingreactions
amongluxurybrandsastheyadaptedtothenewrestrictions.Luxurybrandsbegan
usingsiteslikeYoukuandWeibo,andappslikeWeChattoreachyoungeraudiences
toincreasebrandawareness,tocircumventthebanonluxuryadvertisementsin
publicplaces.TheuseoftheInternettoreachnewconsumershasremained
constant.
ThroughtheanalysisoftheJanuaryIssuesoftheElleChinamagazinefrom
2010to2015,theresearchersawashiftinhandbagadvertisementsin2013and
2014,butnotinaestheticsorpresentationofluxurywatchadvertisementsforthe
sameperiod.Overall,theresearchersawadecreaseinAsianmodelspresentin
luxuryadvertisementsinElleChina.Theresearcheracknowledgesthatshiftsin
aestheticscouldmerelybeachangeinartisticpreferenceofthoseinvolvedinthe
variousphotoshootstocreatetheadvertisements.Withoutinputfromthose
involvedinthecreativeteamsthatcreatedtheadvertisements,anyconnection
betweentheshiftinaestheticsandtheanti-corruptioncampaignisspeculative.No
shiftinaestheticsorpresentationcanbefoundinluxurywatchadvertisementsfor
thesameperiod.
57
Chapter4:MarketLosses TheluxurymarketinChinahasregularlybeenreportedashavingtakena
serioushitinsalesduetotherecentgovernmentcrackdown.Restrictionsongifting,
banquetingandluxurycarusehavebeensaidtohavenegativelyaffectedtheluxury
market’ssuccessinallareas.Therestrictions,however,areonlytargetedatofficials,
andhavenobearingovertheshoppingpracticesofeverydayChinesecitizens,
despitewhatinternationalmediaisreportingaboutChina’seffectontheluxury
market.
Overthecourseofthispaper,Ihavesoughttoanswerthequestionof
whetherthegovernmentcrackdownoncorruptionandextravagancehadaffected
theconsumerpreferencesofChinaasawhole.Thebestindicatorofashiftin
marketingpreferencesamongChineseconsumersishowtheseconsumersusetheir
money;aretheystillpurchasingluxurygoods?Hasthemarketstayedatalevelof
salesatoraroundthatofthosepre-crackdown,orhastherebeenanincreasein
luxurysales,indicatingnotonlyresilienceinluxuryconsumption,butanincreaseof
newconsumerspurchasingluxurygoods?
LuxuryRetailersTheorganizationoftheinternationalluxurymarketmakesfindingannual
revenueforasinglebrandextremelydifficult.Themarketisorganizedinto
conglomerates,thelargestbeingLVMH,followedbyKeringandRichemont.Other
luxurysubsidiariesfallundermorespecializedcompanieslikeSwatch,whichowns
numerouswatchbrands,EstéeLauder,whichownsthemajorityofluxury
cosmetics,andPrada,whichownasmallnumberofshoesandclothingbrands.For
58
thesakeofcomparison,IhaveincludedthedomesticChinesejewelrymaker,Chow
TaiFook.Boldedlabelsarethoseconsideredtobetopluxurybrandsworldwide.
LuxuryGoodsParentCompaniesandSubsidiariesParentCompany SubsidieriesLVMH Wines/Spirits:Ardbeg,Belvedere,BodegaNumanthia,CapeMentelle,
Chandon,ChandonArgentina,ChandonAustralia,ChandonCalifornia,ChandonChina,ChandondoBrasil,ChâteauChevalBlanc,Châteaud'Yquem,ChevaldesAndes,CloudyBay,DomPérignon,Glenmorangie,Hennessy,Krug,Mercier,Moët&Chandon,NewtonVineyard,Ruinart,TerrazasdelosAndes,VeuveClicquot,andWenjunJewelry/Watches:Bvlgari,Chaumet,DeBeersDiamondJewellers,Fred,Hublot,TAGHeuer,andZenith.Fashion/LeatherGoods:Berluti,Céline,ChristianDior,DonnaKaran,EdunEmilioPucci,Fendi,Givenchy,Kenzo,Loewe,LoroPiana,LouisVuitton,MarcJacobs,NicholasKirkwood,andThomasPink.Perfumes/Cosmetics:AcquadiParma,BenefitCosmetics,Fresh,GivenchyParfums,Guerlain,KenzoParfums,MakeUpForEver,Nude,ParfumsChristianDior,andPerfumesLoeweOther:Sephora
Kering Gucci,BottegaVeneta,SaintLaurent,AlexanderMcQueen,Balenciaga,Brioni,ChristopherKane,McQ,StellaMcCartney,Boucheron,Dodo,Girard-Perregaux,Jeanrichard,Pomellato,Qeelin,andUlysseNardin
Richemont Cartier,VanCleefandArpels,A.LangeandSöhne,BaumeandMercier,IWFSchaffhuasen,Jaeger-LeCoutre,OfficinePanerai,Paiget,RalphLauren,RogerDubuis,VacheroonConstantin,Mont-Blanc,Dunhill,Alaïa,Chloé,Lancel,PeterMillar,Purdey,ShangaiTang,andCiampieroBodine
EstéeLauder Aerin,Aramis,Aveda,BobbiBrown,BumbleandBumble,Clinique,Darphin,DonnaKaranNewYork,EditionsDeParfumsFrédéricMalle,ErmenegildoZegna,EstéeLauder,Glamglow,GoodskinLabs,JoMaloneLondon,Kiton,LaMer,LabSeries,LeLabo,M•A•C,Marni,MichaelKors,Ojon,Origins,Osiao,Prescriptives,RodinOlioLusso,Smashbox,TomFord,TommyHilfiger,andToryBurch
PUIG Prada,Valentino,CommeDesGarçons,NinaRicci,CarolinaHerrera,PacoRabanne,JeanPaulGaultier,Penhaligon's,andL'ArtisanParfumeur
Swatch Breguet,HarryWinston,Blancpain,GlashütteOriginal,JaquetDroz,LéonHatot,Omega,Longines,Rado,UnionGlashütte,Tissot,Balmain,Certina,Mido,andHamilton
Prada Prada,MiuMiu,Church's,andCarShoe153
153ItshouldbenotedthatPradaalsoownsMarchesi1824,aluxurycaféinMilan,butitisnotrelevanttothecurrentstudyandwasthereforeexcluded.
59
LuxuryconglomeratesdonotproviderevenueinformationforChina
individually,likeautomobilecompaniesdo,butratherfortheAsia-Pacificregion
(excludingJapan).ThefollowingchartdisplaystherevenueinthousandsofEuros
forLVMH,Richemont,Kering,Prada,ChowTaiFook,andEstéeLauder.Itshouldbe
notedthatrevenuesforChowTaiFookandEstéeLauderhavebeenconvertedto
eurosusingendofyearconversionratesfortheHongKongDollarandUnitedStates
Dollar,respectively.
Source:SeeAppendixA
Asonecanseefromthechartabove,theluxuryconglomeratewiththemost
diversifiedportfolio,LVMH,hadrevenuesalmostdoubletheirclosestcompetitorin
2013,andstillheld€2million(US$2.2million)moreinrevenuesthanChowTai
Fookin2015.LVMH’sdiversifiedportfolio,withwines,spirits,cosmetics,jewelry,
watches,clothing,andleathergoods,allowedthecompanytosuccessfullynavigate
theAsian-Pacificmarket,despiterestrictionswithinChinaduetothegovernment
€-
€2,000,000.00
€4,000,000.00
€6,000,000.00
€8,000,000.00
€10,000,000.00
€12,000,000.00
2010 2011 2012 2013 2014 2015
Revenue(inthousandsofeuros)
LuxuryGoodSalesinAsia-PacikicRegion
LVMH
Richemont
Kering
Prada
EsteeLauder
ChowTaiFook
60
crackdown.ParentcompanieslikePradaandEstéeLauder,whichhavetheleast
diversifiedportfolios,focusingallofitssubsidiariesononlyaspecificcategory,like
leathergoodsandclothingforPradaandcosmeticsandfragrancesforEstéeLauder.
PradastartedwitharoundthesameannualrevenuesasLVMHin2010,buttheir
lackofbranddiversitypreventedlargeincreasesinannualgrowth.
Source:SeeAppendixA
Theabovechartshowsthat,overthecourseoffiveyears,thestagnationof
RichemontannualrevenueswasnotrestrictedtotheAsia-Pacificmarketalone.
Mostinterestingisthedecreaseinrevenuesfrom2014to2015inEurope.The
chartalsoshowstherapidgrowthluxurybrandsexperiencedinAsia-pacificregion.
ItshouldbenotedthatthedecreaseinsalesrevenueforEuropecanbeattributedto
theadditionoftheMiddleEastandAfricaRegiontothe2015AnnualReport.
ForPrada,thedecreaseindemandforconspicuousconsumption,like
productswithlargebrandlogos,hurtthebrand’sannualsalesdrasticallybecause
050010001500200025003000350040004500
2010 2011 2012 2013 2014 2015
Inmillionofeuros
CrossRegionalComparisonofRichemontAnnualRevenues
Europe
Asia-Paci�ic
Americas
Japan
61
thebrandhadnotexpandedintoothermarkets.154After2012,whenthecrackdown
began,Prada’ssalesdecreased,despitegrowth,nomatterhowlargeorsmall,byall
theotherluxuryconglomerates.Thisdecreaseinsalescouldbeanindicatorofa
markettrendinChinathatPradahasnotyetgrasped.AsdiscussedinChapter2,
somebrandsareprovidingmoreproductsinanaffordablepricerange,inorderto
offsetthedecreaseofsalesexperiencesineliteluxurysales.Thebestexampleofthis
isinthesaleofluxurywatchbrandsprovidingwatchesintheUS$1,600toUS$4,000
range,tooffsetdecreasesinsalesofhigh-endwatches.155
AninterestingfindwithinmyresearchisthesuccessofChowTaiFook,a
HongKongownedjewelrymaker,consideredthelargestintheworld.Thebrandis
notdiversifiedinitsproducts,sellingonlyjewelryandwatches.Thesuccessof
ChowTaiFookcanbeattributedtomultiplefactors,itsabilitytosuccessfully
markettoChineseconsumers,itsappealamongyoungerChineseconsumers,andits
abilitytoavoidtariffsasadomesticcompany.Anexampleofthebrand’sabilityto
attractyoungconsumersisthecompany’srecentStarWarscampaign,inwhichitis
sellinggoldbeadsfeaturingStarWarscharacterslikeBB8orC3POforitspendant
bracelets.
154Pradasellsshoes,clothing,handbags,andfragrances,andhasnotyetdiversifieditsportfolioamannersimilartoLVMH.155ChrisHorton,“China’sTurmoilmaystallreboundinwatchsales”NewYorkTimes,September7,2015.
62
LuxuryAutomotiveIndustry
TheChinesecarindustryisrapidlyexpandingduetoincreasingnumbersof
Chinesecitizenswhopossessadriver’slicense.Thisincreasehadcauseda
proportionalincreaseinthenumberofcardeliveriesandregistrations.Intheluxury
carmarket,saleshavealmostdoubledforallbrands.Thetopluxurycarssalesin
ChinaareattributedtoAudi,BMW,MercedesBenzandPorsche.MercedezBenzand
PorschedonotprovidesalesreportsforChinaalone,unlikeAudi,BMW,and
Jaguar/LandRover.Asaconsequence,thefollowingresearchonlyfeaturesan
analysisofunitsalesforAudi,BMW,andJaguar/RangeRover.Inaddition,itshould
benotedthatautomobilecompanieshavenotreleasedtheirannualreportfor2015,
andtheprovidedanalysisofluxuryautomobilesalesisjustoverafour-yearperiod
from2010to2014.
Asshowninthechartabove,luxurycarmanufacturersinChinahave
experiencedunexpectedlyhighsalesreturns,andhavebeenunaffectedbythe
0
100000
200000
300000
400000
500000
600000
700000
2010 2011 2012 2013 2014
UnitsSold
LuxuryCarSalesinChina
Audi
BMW
Jaguar/LandRover
Source:SeeAppendixA
63
measureinthecrackdownregardingluxuryvehicles.Audihasdoubleditsunitsales
since2010,from227,938unitsin2010to578,931unitsin2014.156Inasimilar
manner,BMWalsoexperiencedanover31percentincreaseinunitsalesfrom2010
to2014,from183328to456732.157Lastly,Jaguar/LandRoverisincludedtoshow
thattheincreaseinsalesisacrosstheboard,eveneffectingsmallerluxury
automobilecompanies.Jaguar/LandRoversalesincreasedover60percentfrom
2010to2015,from17,004unitsto103,077units.158
SummaryUsingsalesasanindicatorofconsumerpreference,thedatashowsthat
Chineseaffluentconsumersstillprefertospendtheirmoneyonhigh-end,luxury
products.Inthecaseofluxuryretail,morediversifiedbrandshadgreatermarket
gainsfrom2010-2015thanbrandsthatfocusesonaparticularfield.Theincreaseof
156AudiAG,2010AudiAnnualFinancialReport,Dec.31,2010,p.151,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2010_audi_annual_financial_report.pdf.AudiAG,2014AudiAnnualFinancialReport,Dec.31,2014,p.168,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2014_audi_annual_report_financial.pdf.157BMW,2010BMWAnnualFinancialReport,Dec.31,2010,p.18,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2010/BMW_Group_AR2010.pdf.BMWGroup,2014BMWAnnualReport,Dec.31,2014,p.29,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2014/12507_GB_2014_en_Finanzbericht_Online.pdf.158JaguarLandRoverplc.,2010JaguarLandRoverAnnualReport,Dec.31,2010,p.11,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/2737/2010-2011_annual_report.pdf.JaguarLandRoverPLC,2014JaguarLandRoverAnnualReport,July28,2014,p.69,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/75843/jaguar-land-rover-annual-report-2014-15-web_final.pdf.
64
revenuesbyLVMHandChowTaiFook,especially,showthatChineseconsumersare
stillwillingtopurchaseluxuryproducts,andthegrowingmiddleclassis
responsibleforthelargeannualpercentincreaseinrevenuesforluxurycompanies.
FortheluxuryautomobileindustryinChina,luxurycarsaleshavenotonly
increasedoverthepastfouryears,buthavemorethandoubledinmostcases.This
increaseinsalesisaresultofincreasingcarregistrationandincreasingpreference
forhigher-qualityautomobilesinChina.
65
Conclusion TheluxurymarkethassufferedinChinasince2012asaresultofthe
governmentcrackdownoncorruption.Acrosstheboard,luxurybrandsand
conglomerateshaveexperiencedlowpercentincreasesinsales,ifnotareductionin
sales.Despitethisslowingofgrowth,internationalluxurybrandscontinuetogarner
billionsofdollarsoreurosinprofitfromtheChinesemarket,andfromChinese
consumerspurchasingabroad.
Tocombatthelossoftheirsalestogovernmentofficialsthroughpractices
suchasgiftgiving,theluxurymarketisusingnewstrategiestoreachnew
customers.LuxurybrandsareexpandingtothemiddleclassinChina.Intermsof
marketing,luxurybrandsareincreasinglyrelyingonInternetadvertisementand
customerengagementthroughsitesandapps,likeWeibo,WeChat,andYouku.
Thesenewbrandstrategieswillassistluxurybrandsinincreasingtheirsalesto
womenandyoungadults.
Therecentcrackdownoncorruption,extravaganceandgraftinitiallycaused
shocksintheluxurymarket,butovertimethemarketrecoveredtoitspre-2012
demand.Brandsthataremorediversifiedweatheredtheinitialshockbetterthan
thosethatarespecialized,butallhaveexperiencedthebenefitoftheChinese
consumers’loveofluxury.Thecrackdownhasseentohavenoeffectoverthe
averageluxuryconsumer’sperceptionofpurchasingorowningluxurygoods,ascan
beseenintheincreasingsalesacrosstheboardforluxuryproductsinChina.There
isalsonoevidenceofanynationalisticshiftofconsumerstodomesticgoods;
66
AmericanandEuropeangoodsarestillpurchasedathigherpricesforwhatChinese
consumersperceivedtobesuperiorqualityitems.
Limitationandfutureresearch FindingsarelimitedbythelackofdataavailableinregardstoChinese
consumerpreferences,andarefurtherlimitedtothemostwell-knownbrandsin
China.Theresearchseekstoexpandthecurrentresearchpresentedinthispaper
throughthecreationofaconsumersurveyinthefutureandamoreexpansivestudy
ofluxuryadvertisementsinChinesemagazinesthroughtheanalysisofmore
magazinetypes,venturingintotechnologyandmen’slifestylemagazines.
Thispaperbroadensthetheoreticalresearchpertainingtoconspicuous
consumptioninChinaproposedbyplacingthephenomenoninthecontextof
Chinesepolitics.Fromapracticalperspective,thepaper’sfindingsprovide
suggestionsforfurtherstatisticalresearchintoconspicuousconsumptioninChina.
GainingabetterunderstandingofthebehaviorofChineseconsumersofluxury
brandsshouldbenefittheluxuryindustrybyincreasinginformationinclientelein
potentiallythelargestconsumermarket.
67
AppendixAReferenceTableforChart4.1
2010 2011 2012 2013 2014
Audi 227,938159 313,036160 405,838161 491,989162 578,932163
BMW 183,328164 233,630165 327,341166 391,713167 456,732168
Jaguar/LandRover 28,893169 50,994170 77,075171 103,077172 115,969173
Numbersrepresentunitssoldineachfiscalyear.
159AudiAG,2010AudiAnnualFinancialReport,Dec.31,2010,p.151,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2010_audi_annual_financial_report.pdf.160AudiAG,2011AudiAnnualFinancialReport,Dec.31,2011,p.154,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2011_audi_annual_financial_report.pdf.161AudiAG,2012AudiAnnualFinancialReport,Dec.31,2012,p.166,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2012_audi_annual_financial_report.pdf.162AudiAG,2013AudiAnnualFinancialReport,Dec.31,2013,p.168,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2013_audi_annual_financial_report.pdf.163AudiAG,2014AudiAnnualFinancialReport,Dec.31,2014,p.168,fromAudiinvestorrelationswebsite,http://www.audi.com/content/dam/com/EN/investor-relations/financial_reports/annual-reports/2014_audi_annual_report_financial.pdf.164BMW,2010BMWAnnualFinancialReport,Dec.31,2010,p.18,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2010/BMW_Group_AR2010.pdf.165BMWGroup,2011BMWAnnualReport,Dec.31,2011,p.24,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2011/report2011.pdf.166BMWGroup,2012BMWAnnualReport,Dec.31,2012,p.24,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2012/report2012.pdf.167BMWGroup,2013BMWAnnualReport,Dec.31,2013,p.29,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2013/report2013.pdf.168BMWGroup,2014BMWAnnualReport,Dec.31,2014,p.29,fromBMWinvestorrelationswebsite,https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2014/12507_GB_2014_en_Finanzbericht_Online.pdf.169JaguarLandRoverplc.,2010JaguarLandRoverAnnualReport,Dec.31,2010,p.11,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/2737/2010-2011_annual_report.pdf.170JaguarLandRoverPLC,2011JaguarLandRoverAnnualReport,Mar31,2012,p.6,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/2741/fy2011-12annualreport.pdf171JaguarLandRoverPLC,2011-2012JaguarLandRoverAnnualReport,Dec.31,2013,p.88,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/14149/jaguar_land_rover_automotive_plc_annual_report_2012-2013.pdf172JaguarLandRoverPLC,2014JaguarLandRoverAnnualReport,July28,2014,p.75,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/23108/annual-report-2014.pdf.173JaguarLandRoverPLC,2014JaguarLandRoverAnnualReport,July28,2014,p.69,fromJaguarLandRoverinvestorrelationswebsite,http://www.jaguarlandrover.com/media/75843/jaguar-land-rover-annual-report-2014-15-web_final.pdf.
68
ReferenceTableforChart4.2
2010 2011 2012 2013 2014 2015
LVMH €499,100.00174 €6,430,000.00175 €7,895,000.00176 €8,669,000.00177 €8,740,000.00178 €9,636,000.00179
Richemont €1,740,000.00180 €2,569,000.00181 €3,684,000.00182 €4,162,000.00183 €4,235,000.00184 €4,100,000.00185
Kering €1,541,900.00186 €1,962,000.00187 €2,439,700.00188 €2,469,800.00189 €2,582,800.00190 €2,956,200.00191
Prada €645,680.00192 €872,992.00193 €1,160,166.00194 €1,292,753.00195 €1,252,675.00196 €1,252,675.00197
174LVMH,2010ReferenceDocument,April2011,p.164,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2014/10/lvmh-2010-reference-document.pdf.175LVMH,2011ReferenceDocument,April2012,p.156,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2014/10/reference_document_2011_lvmh.pdf.176LVMH,2012ReferenceDocument,April2013,p.160,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2014/10/document_de_reference_2012_va.pdf.177LVMH,2013ReferenceDocument,April2014,p.170,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2014/10/document_de_reference_2013_va.pdf.178LVMH,2014ReferenceDocument,April2015,p.166,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2015/02/lvmh-2014-reference-document.pdf.179LVMH,2015ConsolidatedFinancialStatements,February2016,p.47,fromLVMHinvestorrelationswebsite,https://r.lvmh-static.com/uploads/2014/10/lvmh-2010-reference-document.pdf.180Richemont,2010AnnualReport,February2011,p.33,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2010/richemont_ar2010.pdf.181Richemont,2011AnnualReport,February2012,p.31,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2011/ar_fy2011_re64f5rd9.pdf.182Richemont,2012AnnualReport,February2013,p.30,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2012/ar_fy2012_f8s6jhd843e.pdf.183Richemont,2013AnnualReport,February2014,p.36,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2013/ar_fy2013_d83fg7s.pdf.184Richemont,2014AnnualReport,February2015,p.34,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2014/ar_fy2014_s92mf72js8.pdf185Richemont,2015AnnualReport,February2016,p.33,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2015/ar_fy2015_h68qw95aw9b.pdf.186Kering,2010ReferenceDocument,March22,2011,p.137,fromKeringinvestorrelationswebsite,http://www.kering.com/sites/default/files/sites/default/files/publications/PPR2010DRFENBD.pdf.187Kering,2011ReferenceDocument,April16,2012,p.139,fromKeringinvestorrelationswebsite,http://www.kering.com/sites/default/files/sites/default/files/publications/PPR_2011DDR_EN_0.pdf.188Kering,2012ReferenceDocument,April19,2013,p.132,fromKeringinvestorrelationswebsite,http://www.kering.com/sites/default/files/document/ppr_ddr_2012_va.pdf.189Kering,2013ReferenceDocument,April14,2014,p.160,fromKeringinvestorrelationswebsite,http://www.kering.com/sites/default/files/document/kering_ddr_va_2013.pdf.190Kering,2014ReferenceDocument,April2,2015,p.171,fromKeringinvestorrelationswebsite,http://www.kering.com/sites/default/files/document/kering_ddr_2014_va.pdf.191Kering,2015FinancialDocument,February19,2015,p.61,fromKeringinvestorrelationswebsitehttp://www.kering.com/sites/default/files/document/kering_2015_financial_document.pdf.192PradaGroup,2010AnnualReport,February2011,p.64,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/documents/reports/2010%20Annual%20Report_PRADA%20spa%20Group_ENG.pdf.193PradaGroup,2011AnnualReport,February2012,p.32,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/documents/201201/E-Annual-Report.pdf.194PradaGroup,2012AnnualReport,February2013,p.36,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/documents/announcement/E-Annual-Report-2012.pdf.195PradaGroup,2013AnnualReport,February2014,p.37,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/system/pdf_ens/152/original/e-Annual%20Report%202013.pdf.196PradaGroup,2014AnnualReport,February2015,p.41,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/uploads/prada/document/document/44/e-Annual_Report_2014.pdf.197PradaGroup,2015InterimFinancialReport,February2016,p.12,fromPradaGroupinvestorrelationswebsite,http://www.pradagroup.com/system/pdf_ens/211/original/e-Interim%20Financial%20Report%202015.pdf.
69
EsteeLauder €1,127,671.34198 €1,357,259.08199 €1,525,493.11200 €1,539,770.56201 €1,845,102.77202 €2,007,532.10203
ChowTaiFook €2,203,093.54204 €3,478,007.30205 €5,535,584.34206 €5,375,820.88207 €8,250,269.06208 €7,636,812.43209
Numbersrepresentrevenueineurosforeachfiscalyear. 2010210 2011211 2012212 2013i213 2014214 2015215
Europe 2099 2588 3097 3611 3919 3067
Asia-Pacific 1740 2569 3684 4162 4235 4100
Americas 712 998 1253 1473 1603 1588
Japan 625 737 833 904 892 814
198EsteeLauder,2010AnnualReport,June30,2011,p.87,fromEsteeLauderinvestorrelationswebsite,http://investors.elcompanies.com/phoenix.zhtml?c=109458&p=irol-reportsannual.199EsteeLauder,2011AnnualReport,June30,2012,p.97,fromEsteeLauderinvestorrelationswebsite,http://investors.elcompanies.com/phoenix.zhtml?c=109458&p=irol-reportsannual.200EsteeLauder,2012AnnualReport,June30,2013,p.105,fromEsteeLauderinvestorrelationswebsite,http://corporate.chowtaifook.com/en/ir/reports/ar2012.pdf201EsteeLauder,2013AnnualReport,June30,2014,p.119,fromEsteeLauderinvestorrelationswebsite,http://investors.elcompanies.com/phoenix.zhtml?c=109458&p=irol-reportsannual.202EsteeLauder,2014AnnualReport,September24,2015,p.51,fromEsteeLauderinvestorrelationswebsite,http://investors.elcompanies.com/phoenix.zhtml?c=109458&p=irol-reportsannual.203EsteeLauder,2015AnnualReport,September24,2016,p.62,fromEsteeLauderinvestorrelationswebsite,http://investors.elcompanies.com/phoenix.zhtml?c=109458&p=irol-reportsannual.204ChowTaiFook,2012AnnualReport,July2012,p.2,fromChowTaiFookinvestorrelationswebsite,http://corporate.chowtaifook.com/en/ir/reports/ar2012.pdf.205Ibid.206Ibid.207ChowTaiFook,2013AnnualReport,December15,2013,p.2,fromChowTaiFookinvestorrelationswebsite,http://corporate.chowtaifook.com/en/ir/reports/ar2013.pdf.208ChowTaiFook,2014AnnualReport,June17,2014,p.2,fromChowTaiFookinvestorrelationswebsite,http://corporate.chowtaifook.com/en/ir/reports/ar2014.pdf.209ChowTaiFook,2015AnnualReport,July5,2015,p.16,fromChowTaiFookinvestorrelationswebsite,http://corporate.chowtaifook.com/en/ir/reports/ar2015.pdf.210Richemont,2010AnnualReport,February2011,p.33,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2010/richemont_ar2010.pdf.211Richemont,2011AnnualReport,February2012,p.31,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2011/ar_fy2011_re64f5rd9.pdf212Richemont,2012AnnualReport,February2013,p.30,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2012/ar_fy2012_f8s6jhd843e.pdf213Richemont,2013AnnualReport,February2014,p.36,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2013/ar_fy2013_d83fg7s.pdf.214Richemont,2014AnnualReport,February2015,p.34,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2014/ar_fy2014_s92mf72js8.pdf215Richemont,2015AnnualReport,February2016,p.33,fromRichemontinvestorrelationswebsite,https://www.richemont.com/images/investor_relations/reports/annual_report/2015/ar_fy2015_h68qw95aw9b.pdf.
70
AppendixB:ElleChinaYearlyStatistics
2010Statistics(n=67)
Model? NoModel 30 No 45%ContainsModel 37 Yes 55%WesternorAsian: Western 20 Western 30%Asian 14 Non-western 21%Type: Watch 5 Watch 7%Skincare 39 Skincare 58%Handbags 2 Handbags 3%Fragrance 7 Fragrance 10%Jewelry 6 Jewelry 9%Automobiles 5 Automobiles 7%Technology 2 Technology 3%Clothing 1 Clothing 1% Numberofarticles 67
2011Statistics(n=82)
Model? NoModel 39 No 48%ContainsModel 43 Yes 52%WesternorAsian: Western 21 Western 26%Asian 21 Non-western 26%Type: Watch 6 Watch 7%Skincare 52 Skincare 63%Handbags 6 Handbags 7%Fragrance 3 Fragrance 4%Jewelry 7 Jewelry 9%Automobiles 4 Automobiles 5%Technology 1 Technology 1%Clothing 3 Clothing 4%
71
Numberofarticles 82
2012Statistics(n=83)
Model? NoModel 37 No 45%ContainsModel 46 Yes 55%WesternorAsian: Western 32 Western 39%Asian 13 Non-western 16%Type: Watch 11 Watch 13%Skincare 38 Skincare 46%Handbags 5 Handbags 6%Fragrance 7 Fragrance 8%Jewelry 10 Jewelry 12%Automobiles 2 Automobiles 2%Technology 2 Technology 2%Clothing 7 Clothing 8% Numberofarticles 83
2013Statistics(n=83)
Model? NoModel 41 No 49%ContainsModel 42 Yes 51%WesternorAsian: Western 31 Western 37%Asian 8 Non-western 10%Type: Watch 10 Watch 12%Skincare 37 Skincare 45%Handbags 7 Handbags 8%Fragrance 7 Fragrance 8%Jewelry 9 Jewelry 11%Automobiles 6 Automobiles 7%Technology 0 Technology 0%Clothing 5 Clothing 6% Numberofarticles 83
72
2014Statistics(n=76)
Model? NoModel 34 No 45%ContainsModel 42 Yes 55%WesternorAsian: Western 31 Western 41%Asian 11 Non-western 14%Type: Watch 8 Watch 11%Skincare 29 Skincare 38%Handbags 7 Handbags 9%Fragrance 4 Fragrance 5%Jewelry 13 Jewelry 17%Automobiles 3 Automobiles 4%Technology 2 Technology 3%Clothing 3 Clothing 4% Numberofarticles 76
2015Statistics(n=58)
Model? NoModel 23 No 40%ContainsModel 35 Yes 60%WesternorAsian: Western 28 Western 48%Asian 7 Non-western 12%Type: Watch 5 Watch 9%Skincare 24 Skincare 41%Handbags 8 Handbags 14%Fragrance 5 Fragrance 9%Jewelry 7 Jewelry 12%Automobiles 3 Automobiles 5%Technology 0 Technology 0%Clothing 5 Clothing 9% Numberofarticles 58
OverallStatistics(n=449)
NoModel 204 NoModel 45%
73
ContainsModel 245 ContainsModel 54%WesternorAsian: Western 163 Western 36%Asian 74 Asian 16%Type: Watch 45 Watch 10%Skincare 219 Skincare 49%Handbags 35 Handbags 8%Fragrance 33 Fragrance 7%Jewelry 52 Jewelry 12%Automobiles 23 Automobiles 5%Technology 7 Technology 2%Clothing 24 Clothing 5%
Comparisonsregardingmodels 2010 2011 2012 2013 2014 2015Western 30% 27% 39% 37% 41% 48%Asian 21% 25% 16% 10% 14% 12%Doesnotfeatureamodel 45% 47% 45% 51% 45% 40%Featuresamodel 55% 53% 55% 49% 55% 60%
74
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