Bling be gone and take my college graduate with you

As you sit across the table from your college graduate progeny, who has decided to grace their old room while the economy recovers, you may take some small comfort knowing that your pain is being shared by people on the other side of the globe.

Yes, even in China, the dogs of economic depression are biting at the tender heels of erstwhile fashionistas. After third quarter earnings were released showing a continued slowdown in China, now a quarter of the world’s luxury consumption, the markets reacted in shock and sent luxury shares down 3 percent and more.

Fear that the buying boom, which launched a thousand yachts, is now starting to fizzle gripped the market. The reason, earnings which were growing at 12 percent in the first quarter for such venerable companies as Richemont (Cartier, Montblanc, Piaget, Vacheron Constantin, IWC etc..), LVMH, (Louis Vuitton, Fendi, Bulgari, Moet, Dom etc.) and PPR (Gucci, Bottega Veneta, Yves Saint Laurent, Alexander McQueen etc.) are now down to 5 to 7 percent.

However, upon closer inspection things, as usual, may not be what they seem. The broad trend is that popular fashion brands, which were selling like hot cakes in department stores, are down, but high-end bespoke brands and lines are doing better than ever.

So what does this mean?

The pundits point to a number of legal and social changes: a new law which forbids the use of government funds to buy expensive gifts; a number of recent cases where expensive watch-toting officials were at a loss as to how they could afford 15 $50,000 luxury time pieces on a $10,000-a-year salary; growing consumer awareness of the difference between brand and quality; and overall an increasing desire to have the best without having to advertise it.

Out, gold Gucci belt buckles. In, Bottega Veneta briefcases. Out, branded Louis Vuitton bags. In, Fendi Orange purses. Out, oversized shirt logos. In, Sunseeker Yachts. Even Bulgari, the godfather of genuine bling has toned it down in favor of discrete elegance.

Are the Chinese spending less? No, the average Chinese consumer buys on average 500 Euros vs., their Western counterparts who buy 300. For Hermes, Chinese buyers account for 47 percent vs. 35 and 17 percent for the Europeans and Americans, respectively.

Are the Chinese buying less? No they are buying more, but the market is clearly separating into lower and upper luxury markets. For China’s 60,000 known multi-millionaires, worth more than $15 million, the new trend is to jet off to London for a fitting on Savile Row and take a flight back the next day.

The ordinary rich have to settle for a trip to Italy and/or France, where waiting in long lines with a fistful of Euros will get you your desired product at a 40 to 60 discount vs. buying in China.

Having personally witnessed these shopping frenzies in Milan’s outlet stores and Paris’ Galleries Lafayette, within a 24-hour-period, I can attest to the fact that you could not fit any more people into these stores. In fact, many stores had guards who would only let more in as others exited. The press of people left little time for personal attention and the poorly dressed clientele did not seem to care.

A far cry from the discrete boutiques in Milan’s Montenapoleon and Paris’ Avenues George V, where Chinese-speaking salespeople greet you by name. What is striking is that this division between the haves and have mores has occurred over the last two years.

But, this is not the end of the story; along with the changes in taste have come changes in proprietors. Gieves & Hawkes, an old line British tailor (Savile Row) run by Mark Henderson, was bought by Hong Kong’s Trinity Ltd earlier this year. Shanghai Tang, one of China’s emerging luxury brands is run by Frenchman Raphael Le Manse De Chermont.

Why is this important? Because if you are doing or thinking about doing business in China, you need to realize that two years equals ten years. The changes that take affect and the legal, business and social changes will have a much quicker effect on your business than in developed countries. To be successful, you will need to create new combinations of products/services and management which can respond to fast-changing markets.

What does this have to do with the college graduate who has taken up residence in your home? Not much, but they might be inspired to think that change closes some doors and opens others and go looking for the one that suits them best.

Einar Tangen, formerly from Milwaukee, now lives and works in Beijing, China. He is an adviser to Heilongjiang Province, Hebei Province QEDTZ,, China International Publishing Group, Beijing Baotong and DGI DESIGN. He is also a weekly public affairs commentator for CCTV News’ Dialogue and the author of “The Kunshan Way,” an economic development history of China’s leading county level city. While in Milwaukee, he was a partner at Jackson, Morgan and Tangen, president of E-Tech and a senior vice president at Stifel Nicolaus. He chaired various boards in Milwaukee and was a member of the Federal Home Loan Bank of Chicago. Readers who would like to submit questions or suggest areas of interest can send an e-mail to

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