THE AFFORDABLE LUXURY OPPORTUNITY IN CHINA

  • As China’s middle class expands, so does the market opportunity for a relatively new product niche – affordable luxury. Also known as “mass” or “accessible” luxury, affordable luxury brands occupy the middle of the price spectrum between generic brands and high-end luxury brands, such as Louis Vuitton, Chanel, and Gucci.

These brands offer consumers with well-known brand names and promising qualities without burning holes in their pockets. Their prices vary depending on the brand and the product category. But in general, jewelries cost 800 – 8000RMB ($127 – $1270) a piece, and hand bags are anywhere between 1500 – 8000RMB ($240 – $1270) each.

Affordable luxury brands mainly appeal to the young and the middle class. Wang Qian, a 27-year-old fresh graduate says that Folli Follie is her favorite brand. “The price is just right, the designs are trendy and the quality is good,” explains Wang. This is the exact image affordable luxury brands try to achieve.

Angelito Tan, founding partner of luxury consultancy Robert, Tan & Gao, further clarifies that “this does not necessarily mean having products that use cheaper materials. More often than not, it’s simply having more products that are less expensive to make (such as accessories), providing consumers with a ‘glimpse’ of the luxury lifestyle experience at a price point that is not necessarily prohibitive.”

Like Folli Follie, many brands establish themselves exclusively within the affordable niche. A few examples include Coach, Longchamp, Agnes B, and Tory Burch. On the other hand, many high-end luxury brands have accessible sub-brands catered to the same target market, such as Miu Miu by Prada, Armani Exchange by Giorgio Armani, and D&G by Dolce & Gabbana.

Leo Wang, an analyst at China Market Research Group, uses Coach as an example to sum up the affordable luxury strategy, “[Coach] avoids competing head-to-head with true luxury brands. They don’t set up stores near LV or Gucci. Coach stores are located in less upscale shopping centers, but the key is that they are usually the most visible tenant in those malls, so they get a lot more attention than they would if they were near a higher-end brand.”

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