CEIBS Hosts 1st Annual Luxury Brands Forum

April 19, 2008. Shanghai campus - Three hundred international and domestic luxury brand executives, students and journalists packed the CEIBS Shanghai campus auditorium today and yesterday for the school’s 1st Annual Luxury Brand Forum. The forum, entitled "Winning Consumers with Luxury as a Value-Added Service," featured speeches from 17 top luxury industry executives, officials, or academic experts.

CEIBS Executive President Pedro Nueno opened the forum by explaining why the school -- which organizes annual fora on other industries including automobile, banking, media, and healthcare -- decided to tackle the luxury brand industry. "We must keep our feet on the ground and stay relevant," Executive President Nueno stated. "The luxury brand sector is remarkable because it is one of the most creative and innovative industries, and because it has experienced such tremendous globalization. For every Euro of sales in this business, there is much more money spent on innovation and globalization than in other industries. This makes it well worthwhile to spend a day-and-a-half studying this industry." In conclusion, he urged the audience to make the most of the forum. "Let’s network as much as possible today and tomorrow," he said.

Fondazione Italia Cina President Cesare Romiti next delivered a welcome address in which he explained that Italy’s luxury brand industry was formed through a long tradition of small-scale, limited edition production of high-end products such as wine, jewellery, and accessories. "There are many brands in Italy that are well known only in the Italian domestic market. The Fondazione is now trying to promote these Italian brands, as well as Italian lifestyle, to new markets overseas such as China," said Mr. Romiti.

"China is expected to overtake the U.S. and Japan as the world’s #1 consumer of luxury goods soon," he said. Thus China has become a key target market for his work to promote still-undiscovered Italian brands. "We hope to serve as a bridge between Italian brands and Chinese consumers," he said.

Next, Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, gave his outlook for China’s overall economic growth and his predictions for the luxury brand industry, in particular. Drawing upon the research of the Shanghai FC Economic Forecast Institute, Mr. Wang said, "Despite strict regulations and efforts to chill overheated sectors, China’s economy is still growing very fast." He predicted that China will experience four "explosions" in the coming years: in terms of economic growth-rate, wealth accumulation, finance, and capital accumulation.

Turning to the luxury brand sector specifically, Mr. Wang said he preferred to use the term "high-end" rather than "luxury." He explained that "high-end" has no negative connotations in Chinese language and also fits well with the reality of the consumer market in China. He described a transformation within the industry worldwide in which luxury brands went from being considered highly exclusive before 1980 to a more mass-market approach today. He expects this trend to continue, especially as Chinese consumers emerge as increasingly influential buyers in this sector.

Winning Chinese Consumers: Ermenegildo Zegna

As the Forum’s first featured luxury brand representative, Ermenegildo Zegna Holditalia SPA President Paolo Zegna spoke on "Winning Chinese Consumers." Mr Zegna, the grandson of the company’s founder, introduced the history of the 98-year-old firm, then outlined its current and future plans in China. Beginning with his grandfather’s dream, "to create and produce the best fabrics in the world," the company expanded during the second generation of the family business during the 1940s to 1980s to reach its current level of global recognition.

In recent years, the company’s consolidated revenue increased from Euro 634 million in 2004 to Euro 843 million in 2007. Mr. Zegna stressed that Asia, and China in particular, has become an increasingly hot market. Today, 33 percent sales revenue for Ermenegildo Zegna comes from Asia, and 12% from China. The company employs 7,500 people in six countries including China, and operates 525 sales points worldwide. He stressed that emerging markets are now the key "drivers" in the company’s growth, with 25% of global growth for the brand coming from the combined markets of China, India, Russia, Latin America, Middle East and Southeast Asia. By 2010, that percentage will reach 33%. Giving insight to the peculiarities of the Chinese market, he stressed that luxury goods consumers here tend to be far younger than their counterparts in other markets worldwide.

Cultures, Tastes and Preferences: Tous and Torres

The forum next looked at two sub-sectors of luxury brands -- jewellery and wine -- with representatives from Tous and Torres.

"Making people happy," is the secret to success for famed jewellery brand Tous. So said company co-presidents Rosa and Salvador during their talk on "Entrepreneurship in Jewellery Sector." The pair introduced the growth of the Barcelona-based company, which identifies its target consumer as confident and independent women who value quality and individual style. Since 2002, the company has aggressively expanded into international markets: Germany, Japan and the United States.

Turning to the business of high-end wine, Miguel Torres began by explaining the mission of his family-run business. Launched in 1870, the mission of Torres is: "To remain an independent, self financed family company while remaining a global player that aims to turn every customer into a friend. To be a leader in premium wine and brandy, by marketing products with clearly defined character, by constantly improving their quality and design, and by communicating the culture of wine." The company has had operations in China since 1992, and became a wholly foreign owned company in 2002. Mr. Torres discussed the challenges and opportunities of growing while also remaining committed to environmental protection.

Creativity and Luxury Brands

The Forum next featured one of China’s most famous fashion entrepreneurs, Yue-Sai Kan, Chairwoman of the House of Yue-Sai. Ms. Kan introduced her phenomenal career, which began 24 years ago, as a presenter for a CCTV programme introducing the West to Chinese audiences. She commented on how fast and how far China has come since then. "It was a very difficult time back in 1986. By comparison, today I’m really glad to talk about the luxury sector." The TV host-turned-luxury brand entrepreneur commented that part of her success in launching her cosmetics and fashion company, as well as authoring a number of popular books, has been in part due to China’s growth and development. "I don’t think of myself as a hero. I was just really lucky to be at the right place at the right time."


Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, was the Forum’s opening keynote speaker.

Dressed in her trademark bright colours - orange, pink and purple - designer Agatha Ruiz de la Prada, next spoke on "Art, Design and Fashion." She told the audience that she believes in democracy in fashion, meaning that fashion should not be priced so highly that it is only accessible to an elite few. For example, one of her favourite companies to co-brand with is Swatch, which creates watches that are affordable and fashionable for large populations of diverse consumers worldwide.

The designer expressed optimism for the future of China’s fashion industry. "I am a little bit obsessed with China," Ms. Ruiz de la Prada told the audience. "I hope there will be some China-made luxury in the future. The advantage for China is that you can learn from our mistakes in the Western world. China has great opportunities now because of the high technology available now that allows you to grow economically but balance with environmental protection. I’m looking forward to seeing Chinese style from Chinese designers in the future."

Opportunities and Challenges of Luxury Brands

China may only account for 5% of the global luxury market, but it’s not a market that can be ignored. That was the message from a presentation entitled "Opportunities and Challenges of Luxury Brands in China," made during session four of the Forum. Presenters were Professor Michel Chevalier of Paris Dauphine University, who also serves as Partner and Manager at EIM Paris and Shanghai; and Professor Pierre Lu Assistant Professor of Fudan University.

According to the professors, China - the country where the millionaires are youngest in the world and 195 million members of the upper middle class have the means to indulge in luxury brands - offers huge growth potential for high-end products. Prof. Chevalier explained that China, coupled with Japan, accounts for half the global fashion sales volume. Even more noteworthy, he says, is that because of China’s steadily increasing growth and Japan’s slowdown, China’s fashion sales volumes will surpass Japan’s by 2015 at the latest.

That growth is driven by what Prof. Lu described as four categories of Chinese consumers: the status-seeking luxury lovers (15%); those who see luxury items as a way to belong to a social group, the luxury followers (21%); the luxury intellectuals (35%) whose purchases are based on a search for knowledge, heritage, value, etc; and the luxury laggards (28%) who just go with the flow.

World Fashion Centres: Learning from Milan

"Learning from Milan as a World Fashion Capital" was the topic addressed by Mario Boselli, President of Camera Nazionale Della Moda Italiana (CNMI). The 50-year-old non-profit organization represents 200+ Italian fashion companies including such famous Italian brands as Prada, Missoni, Salvatore Ferragamo, and Versace.

Mr. Boselli explained that the success of "made in Italy" is the result of the ability to create a synergy between creativity and technology, leading to the production of elegant products that are both fashionable and wearable. He added that the success of Milan’s fashion industry is a great source of pride for the city, making it the capital of "made in Italy."

Luxury: Chinese Style

Day two of the 1st Annual Luxury Brands Forum began with a look at the niche market from a Chinese perspective. The first speaker to take the podium was LVMH Group Director Andrew Wu who spoke on the issue of "Benefiting from China’s Generational Transformation." Drawing on his long history within the luxury industry, Mr. Wu painted a picture of China’s past, present and future from the perspective of luxury items. He said, "We are benefiting from a very, very important transformation here in China unfolding in front of you. Without the China story, there would be no luxury story."


Ermenegildo Zegna Holditalia SPA President Paolo Zegna was the Forum’s first featured luxury brand representative.

He explained the changes in China’s luxury market in terms of the country’s generational changes -- from Mao Ze Dong helping the Chinese to stand up, Deng Xiaoping helping China to open up and the message of China’s increasingly global integration behind the present Olympic slogan of "One World, One Dream."

According to Mr. Wu, "the whole nation is trading up" and that is why the China market is so attractive for luxury brands and companies as a whole. The changes, he said, are reflected in the increasing shift in popular culture, with the mainland now being embraced - by its residents - as a source of fashion and celebrities. In the past, Mainland Chinese looked to Taiwan and Hong Kong, he said. The 42% of China’s population who are under 30 is a large source of the changing landscape, he explained. Mr. Wu urged, "That generation is already showing its impact on consumption, influencing the luxury goods market a bit. The challenge for marketers, industries and the government is how to ride this generational change." He added: "It’s a fascinating time; we are in an era where China is being changed by, and is changing, the world."

Constant Change

That internal change can also be seen from the experiences of China’s independent brands, such as EVE Enterprises Group. In her address on "The Development Road of Independent Brands in China" company president Ms. Xia Hua shared with the audience her company’s various stages of transformation during the last 14 years. In the early days, EVE faced the uncertainty of how to effectively position itself in the market. The company began as Beijing Eve Fashion & Company Limited, and then evolved into the corporate brand, Eve. In 1999, the company established a special team to "produce dedicated small accessories for clients", Ms. Xia explained, adding that the organization eventually moved into a mature phase in which it built its name as a value brand.



President of Shanshan Group Mr. Zheng Yonggang then offered his insights into the luxury industry from the perspective of "A Multi-brand Chinese Company." People, he said, are willing to spend a lot of money on luxury items - whose cost is sometimes only 10 percent of the sale price - because these purchases add prestige to their lives. "China is a huge market, that is why so many international luxury brands are focused on Chinese markets," he said. Mr. Zheng posited that the newly-emerging Chinese luxury band market has a bright future, due in large part to the Chinese work ethic. "I believe our culture is our key to success," he said.

The penultimate session then examined the role that management and communication plays within the luxury brand industry with input from representatives from Publicis China, a global leader in communications and marketing solutions. The company’s Chief Strategy Officer George Singleton urged the audience, comprised of representatives of some of the luxury industry’s big names, to understand the global changes taking place and how these changes will impact the way they interact with consumers. With a dramatic increase in Asia’s middle class population, and their inclination to spend money on luxurious good and experiences, producers and marketers of luxury goods must keep abreast of all the changes, he said. According to Mr. Singleton, even the mere definition of luxury is evolving. "It’s less about what you carry in your hand and more about what you carry in your head. It’s no longer about showing people you can afford something, it’s the knowledge about the product, why it is good, its origin, what makes it different from others," he said.

Changes, Mr. Singleton said, have also extended to the consumer/supplier relationship. Gone are the days, he said, when fashion houses dictated what is hot and what is not. Today’s more confident consumers make their own choices, and some luxury brand producers have moved to embrace that change. The smart luxury brand producer or marketer takes advantage of consumer created buzz, the Publicis executive said. "Advertising is still important, but its role is changing. It’s not just about telling people about things, it’s about fanning the flames, creating contagious ideas. People are already talking about your brand (on blogs for example); we want to inject ourselves into that conversation to create a more positive image." In the past, the strategist added, it was about who could shout loudest. Today, it is about getting other people to shout for you.

In response to a question from the audience, Publicis CEO Sheen Jeng spoke of the future changes in China’s high-end health care market. While pharmaceutical companies now contribute 15 percent of China’s advertising revenue, she said, the premium health care industry - such as spas and cosmetic surgery - still has some growing to do. "We don’t have a successful premium health care market, but it’s developing," she said.

Culture, Values and Luxury

Session eight, the forum’s last, explored luxury brands from an architectural view point. Under the broad heading of “Trends from Architecture” CEO of Gregotti Associati International Mr. Augusto Cagnardi spoke on the topic of “Culture, Values and Luxury.” A clear understanding of the unbreakable linkages between luxury, culture and values was vital when the company helped design Shanghai Pujiang Park (near to the Expo Park); the Band Park in the north of the city; and sections of the financial district Lujiazui. As Cagnardi explained, “A luxury brand is decided by the clients themselves, so we have to pay more attention to the cultural differences. It is hard to convey a unique culture -- culture can only be shown, but can not be bought.”

The 1st Annual Luxury Brand Forum then came to an end with a closing address by CEIBS Executive President Pedro Nueno, who summed up the two days of discourse. The forum, he said, had offered much food for thought and laid the groundwork for future discussions on the topic. “I think these two days have given us an in-depth perspective; but there are still questions left unanswered. We will continue to host this forum in the future; thank you for coming and sharing your ideas,” he said.