The game of luxury with new lords from China

Two French families are said to own most of the luxury brands in the world; one is the Arnaults of LVMH and the other is the Pinaults of Kering Group. But the new dazzle is Chinese conglomerates are vigorously hunting and snapping up those western luxury brands which often were either cash-strapped or performance troubled. The trend actually took off in 2015 and seriously accelerated its momentum lately.

 

On second thought, it perhaps should not surprise us at all. China is the biggest luxury market, which contributes to 32% of the global luxury consumption in 2017. Local tycoons began to ponder that it might be a good idea in term of ROI by simply purchasing some luxury brands under their vast portfolio.

 

Among this cluster of luxury brands hunters, two powerful lords gradually stand out, almost acting as if the Chinese version of the Arnaults and the Pinaults, albeit in much smaller scale at the moment. One is Fosun, currently an international investment giant which could trace its humble origin in the healthcare industry. Back in 2011, ever since Fosun had a bite of 9.5% stake in Folli Follie for a strategic partnership, its appetite for buying up luxury brands has grown substantially. The other one is Shandong Ruyi, a low key but in fact one of the largest textile producers in the country. Ruyi came under the spotlight due to its recent success in a bidding war for Bally. It is said Shangdong Ruyi literally won its prey prize out of the fangs of Sept Wolves, another formidable player in the same pursuit which also happens to be a local men’s clothing brand reputable for its affordable winter jacket. Sept Wolves might also be a dark horse in this race as last year it acquired 80% stake in Karl Lagerfeld Greater China Holdings (KLGC), which owns the Karl Lagerfeld trademark in China. 

 

 

 

In many ways, China money can be beneficial, giving these troubled luxury brands breathing space to turn around. Once the new Chinese lords gain over the control of the company, they tend to grant the management autonomy and independence. In the long run, the Chinese financial DNA might play a key role in guiding them about how to cater to the unique taste and behavior of Chinese luxury consumers. However, one concern might arise as well, regarding the brand image: how would a Chinese luxury buyer perceive a high-end classy brand now tinged with the upstart Chinese money, such as Sept Wolves? The patina of the aristocratic-like luxury brand will be further polished or dimmed by the Chinese backers behind? It is actually quite intriguing to deliberate. 

 

Author: Cecilia Wu