Luxury for The People!
Not since Japanese consumers began buying up logo-emblazoned satchels and crocodile clutches in the 1980s has there been so much excitement over the potential of a single market. High-end brands are on the fast track, opening lavish retail outlets across the Chinese mainland
By Sarah Raper Larenaudie/Qingdao

KEVIN LEE / GETTY FOR TIME SUPERSIZE ME: Scarlett Johansson graces a billboard outside Louis Vuitton's Shanghai flagship

Spring 2005 Style & Design
NEITHER PHILADELPHIA nor Nashville rates a Louis Vuitton store yet, but the 338th boutique of the world's largest luxury brand is minutes away from opening for business in Qingdao, a Chinese sea resort whose best-known export is Tsingtao beer, the beverage of choice with Chinese takeout. As luxury events go, today's festivities are peculiar. A feng-shui master dressed in a fleece jacket and brandishing a Budweiser lighter presides over a makeshift red satin altar with 15 offering bowls of rice and vegetables in the parking lot of the 38-story Crowne Plaza Hotel, where the boutique is located. With Scarlett Johansson looking on from an advertising light box, the master waves over two of Vuitton's top Asia executives to light incense sticks. Water is sprinkled in the far corners of the boutique, and a troupe of lion dancers wearing gaudy costumes and accompanied by drums and cymbals leaps around at the entrance to the store. The papier-mâché lion's head "eats" a red envelope of "lucky money," then unfurls a banner proclaiming RICHES, HEALTH AND PROSPERITY.

After the traditional ceremony, the scene shifts dramatically to something very New China. Vuitton's local partner, Sandy Kuk, a scion of a Qingdao family with interests in shipping and transportation services, mingles with an Italian entrepreneur who is building marinas and sailing schools along the coast. (Qingdao, pop. 7 million, will play host to the sailing events of the 2008 Olympics). Editors from Chinese Marie Claire have flown in from Beijing. In walks Qingdao's vice mayor, Yu Chong, with several Communist Party officials. He is quickly introduced to the young actress Li Bingbing, who is shod in mint green feather mules. Toward the end of the glamour-filled evening, a party official comments that Vuitton brings prestige to the city. François Delage, Vuitton's Hong Kong— based executive vice president for Asia-Pacific, who has pushed for a store in Qingdao for years, is so delighted that he high-fives the startled vice mayor.

Although most fashion headlines trumpet the monumental luxury shops opening in the capital, Beijing, and in China's most glamorous metropolis, Shanghai, the real news is the brands' push into the provinces, to cities like Dalian, Chengdu, Xi'an, Hangzhou and Qingdao. Harbin, in the far north, is next. Establishing a store in a capital city can be many things besides a business venturea prestigious calling card, a listening post or sometimes a token of wishful thinking back in Paris or Milan. But rolling out products and hiring teams in secondary cities signals a company's conviction that there's serious profit potential. Are the luxury brands overdoing it by launching stores in far-flung outposts? Marie Claire's fashion director, Angela Liu, in Qingdao for the Vuitton opening, looks surprised at the question. "Oh, no," she says. "I think it's just beginning."

Experts say China is the best thing to happen to the luxury companies' bottom lines since the Japanese became addicted to logos in the 1980s. China will be the new Japan, suggests a report published in December by Goldman Sachs. Japanese consumers currently account for an estimated 41% of global luxury sales. The Chinese (including residents of Hong Kong) already account for 12% of the total, most of which is generated by travel purchases. Noting a penchant for status symbols and a rise in conspicuous consumption, Goldman Sachs analyst Jacques-Franck Dossin estimates the Chinese will account for 20% of total sales in 2008 and "become as important as the Japanese by 2015." Affluent Chinese tourists are already spending more than Japanese tourists, according to Vuitton's Delage. If the brands play it right in China, says Dossin, the valuation of some luxury stocks could increase 15% in the next few years. Most likely to benefit are Vuitton's parent, LVMH Moët Hennessy—Louis Vuitton, and the Swatch Group, which owns Omega, Longines and Rado, the watch brands with the biggest sales in China.

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