How Globalized Taste and Localized Selling Shaped Today's Luxury Business

Globalized taste has long been unavoidable. But the speed at which information travels still decides things — as noted earlier, it shapes desire more forcefully than ever.

The Mini Le Chiquito was the hottest bag at this year's Paris fall/winter fashion week. At 5.2 centimeters long, it cannot hold a credit card. Many people sitting in the show only noticed what the models were carrying after scrolling through Instagram: a trapezoid bag in purple, red, and orange, small enough to close your fist around or hook one finger through its tiny handle, with the letter J stitched in the lower right corner — short for the French designer label Jacquemus.

Guessing what could fit inside became the fun of it. "What would you fit inside?" the Jacquemus account asked after the February 25 show. Tens of thousands answered: dental floss, nail tips, enzyme pills, a lock of Jude Law's hair. The bag was quickly turned into a meme — "It fits my entire budget," "This is where I keep all my patience for everyone today."

Two days later the topic "Jacquemus mini bag" showed up on Weibo, with 18.891 million views. On Taobao, copies were already on sale for a little over 100 yuan.

How many people actually buy the bag hardly matters. What matters is how fast it seized the attention of fashion lovers everywhere. It doesn't even start a trend; it ends one. Mini bags have been everywhere since Fendi's fist-sized Peekaboo was named Vogue's "it bag" of the year in 2015. Before this finger bag came along, the press could not stop talking about bags slung at chest height, and about the street-style shots of people wearing them that way.

Which bag is it? The question matters and doesn't. If you want to copy a street-style look, someone will post every label on that person's body within minutes, and tell you what each piece costs. Setting aside what you can afford, e-commerce will put the goods in front of you at top speed.

Or someone may want to adjust the look — not do the silly thing of carrying the identical bag, but simply like the loose, young style of it. They will find substitutes easily enough: a minimalist version, a utility version, a cheap version from fast fashion. The point is that, like a great many people in the world, they have accepted that wearing a bag around your neck is now a thing you can do.

The finger bag only pushes all of this to its limit. It has no shortage of imitators, and no shortage of talk.

Talk is the light of the fashion industry's life, the fire of its desire — or, plainly, its sales engine. Thanks to social networks and opinion leaders, the audience for a fashion topic today has no borders, no class, no age. What matters is style. Style decides the circle, and inside that circle, its rule is absolute.

Even if you belong to no circle and are only a bystander, you will notice that individual items going viral increasingly does the work that whole brand campaigns used to do. The American e-commerce site Lyst's 2018 Year in Fashion report offers a textbook case: Kylie Jenner — a member of the Kardashian family and, this year, the youngest person on Forbes's self-made billionaires list — wore a pink mini dress to her birthday party, and 48 hours later searches for "pink dresses" on global e-commerce platforms were up 107%.

The same report listed last year's most popular items worldwide, among them the dad shoes Balenciaga made a hit, the belt bags Gucci made a hit, and leggings printed all over with the Fendi logo.

Pushed along by items like these, the global luxury market reached 260 billion euros last year. By Bain & Company's count, Chinese shoppers supplied 33% of it. The other big spenders were the United States, Europe, and Japan, at 22%, 18%, and 10%.

Information arriving this fast shapes the desire to buy. When Rihanna posts a selfie on her Instagram account, fans immediately demand the lipstick shade. Hector Espnal, global makeup artistry director at Fenty, her own beauty brand, told the press with some confidence: "Everyone who knows Rihanna wants to know what lipstick she's wearing. That's her domain." Because of her hold on what young people wear, the 31-year-old singer is also said to be launching a personal luxury brand with LVMH.

In China, where digitization runs deeper, this immediacy — along with the sameness, the youth, and the middle-class flavor — is even more pronounced. On Weibo, WeChat, Bilibili, or Xiaohongshu, you will notice fashion bloggers who all look alike. The ideal life they stage is remarkably uniform: a degree from abroad, regular workouts, salads for weight loss, rooms decorated with plants and scented candles, a fondness for Matisse paintings or Haruki Murakami novels, days spent in cafés, museums, and shops, sometimes a boyfriend who is good with a camera, and clothes that mix fast fashion with logo-covered luxury pieces, while still taking pleasure in digging up little-known designers.

Brands growing to look more like one another is pushing this homogenized global taste into a new phase.

Last year Celine, Burberry, Balenciaga, and Calvin Klein all swapped their logos for sans-serif type that looks much the same. Each claimed the inspiration came from its own history (and the 1960s did produce a wave of minimalism), but the type designer Chris Wu told Fast Company that the change was mostly about fitting the present: a logo has to stay legible on something as small as a lipstick tube or a mini bag; it has to be readable in a video or in a GIF that lasts a few seconds; and it has to be easy for fans and haters alike to pull out and turn into a meme, which raises the volume of talk.

You may also have noticed that Gucci and Hermès have started making cosmetics, the way Chanel long has. Hermès chief executive Axel Dumas told the French paper Le Monde last year: "This keeps our brand present."

Ever since the property broker Bernard Arnault bought 64 brands over the 21 years starting in 1985, luxury has entered all sorts of middle-class homes in conglomerate, everyday, globalized form. European fashion houses such as LV and Dior, chasing profit or wanting to make more and sell more categories, either did it themselves or licensed their designs to mass-market American manufacturers.

The 1980s also produced Zara in Spain, while in Sweden Stefan Persson took over H&M from his father and added the slogan "Fashion and quality." The two of them democratized runway fashion further. A fashion pyramid took shape: the top houses made the ideas, and department stores and fast-fashion brands copied them.

These facts tell us that globalized taste has long been unavoidable. But the speed at which information travels still decides things — as noted earlier, it shapes desire more forcefully than ever. This is, of course, a trend the luxury business is happy to see.

By now luxury guards scarcity only at the level of the brand, while pushing sales as hard as it can: makeup, perfume, silk scarves, key chains, sunglasses, sneakers, pre-fall collections, resort collections, capsule collaborations. No opportunity that sounds like it might move goods is passed up.

Under trends like consumption upgrading, "be a little better to yourself," and the more cutting "premium mediocre" — a term the blogger Venkatesh Rao used in 2017 for "economic activity manufactured by marketers to give the masses the illusion that they are consuming luxury", things like craft beer for a few dozen yuan, Chanel lipstick for a few hundred, a Gucci belt for a few thousand — buying has become a goal in life. At this point the pull of globalized taste acquires an odd partner: localized selling.

There is no deep theory here. To get consumers to buy their goods faster, more easily, and with more enthusiasm, luxury companies have to dig into local buying habits and cultural traits, and build marketing that feels emotionally closer to home.

Three years running, Bain's annual luxury market report has counted localized consumption as one of four engines of spending, the other three being younger buyers, the growing middle class, and digitization.

The market that best fits that description is China.

A 2017 Deloitte report already noted that more people in emerging countries plan to spend more than in developed ones (70% against 50%). Young people in Western countries are not as rich as their parents or grandparents; on the whole they spend more quietly and more casually, and steer clear of big luxury purchases. In emerging markets the opposite is true: the young live better than their parents and grandparents did, and expect the future to be good.

Chinese luxury shoppers are younger than those in other markets, more optimistic, and keener to buy online. Their average age is only 25, some 10 to 20 years younger than luxury shoppers in mature markets. A February survey of young luxury buyers in nine countries by the consultancy OC&C also found that China's Gen Z spends the largest share of household income on luxury goods, 15%. Of the 2,000 young Chinese surveyed, 41% felt optimistic about the future, against 26% globally.

But the key thing driving luxury selling and marketing in China toward the local is the return of spending to the mainland. It has made the brands see that the low fruit has all been picked — the gray gift market that corruption fed, and the waves of daigou resellers willing to travel for a price gap.

Bain's China Luxury Market Study 2018, released March 20, shows that 27% of Chinese consumers' luxury buying happened on the mainland last year, 2 percentage points more than three years earlier. By 2025 the share is expected to reach 50%. Luxury companies including LVMH, Kering, Tapestry (Coach's parent) and Tiffany all mentioned the shift in their fiscal 2018 results. Richemont went further and said its mainland China sales grew by double digits last year.

The return of spending began back in 2015, but macro forces since 2018 have sped it up. On one side, luxury retail centers such as Paris were badly hurt by the Yellow Vest protests. On the other, although the new e-commerce law requiring individual daigou resellers to pay tax only took effect in January 2019, customs was already checking hard during the October 2018 National Day holiday. Three months before that, China cut import duties, taking the average tariff on imported clothing, footwear, headwear, and sporting goods from 15.9% to 7.1%. Louis Vuitton, Gucci, Hermès, Burberry and others then cut Chinese prices on some clothing and bags by about 3% to 5%.

By the Fortune Character Institute's count, the overall average price gap between luxury goods inside and outside China narrowed from 68% in 2011 to 16% in 2017.

Once spending came home, luxury's local selling strategies got a good deal more concrete. Mostly this shows up in digitization: seven in ten Chinese luxury consumers live in second- and third-tier cities ranked below the top 15 by GDP, cities with few luxury stores, which makes building the e-commerce side especially important.

The most direct approach is to use money to get quick access to a local company's warehousing, logistics, technical support, and traffic. Last September, L Catterton Asia — LVMH's Asian consumer private equity arm — joined JD.com in putting $175 million into the Chinese luxury e-commerce platform Secoo. Managing partner and chief executive Ravi Thakran said what drew them was the high-end Chinese consumers and the e-commerce channels behind Secoo. Last October, Richemont's e-commerce arm Yoox Net-A-Porter (YNAP) announced a joint venture with Alibaba, under which Net-A-Porter and Mr Porter would also open on Tmall's luxury platform.

Compared with 2015, when it entered China and drew local attention only by sponsoring Shanghai Fashion Week, the British luxury e-commerce site Farfetch took $400 million from JD.com two years ago. This month it merged with JD's Toplife, which also gave it an entrance inside the JD app.

Besides partnering in the local market, luxury companies are also making their supply chains quicker. "They have to adjust their supply strategy and move more of what Chinese consumers like to buy from stores abroad to stores on the Chinese mainland," Bruno Lannes, a global partner at Bain & Company, told QDaily.

Burberry said at a recent analyst call that it had built a logistics center in China to widen its e-commerce channel. Kering chief executive Jean-Marc Duplaix said at the company's fourth-quarter 2018 analyst call: "We need to allocate more product to the China region, because retail moves faster there. It is also our priority for growing our online business in China."

China-only limited editions are not new; they go back to Qixi in 2016, if not earlier. But they have never been pushed with this much noise, and Chinese New Year and Qixi are the two dates that matter most.

Walk into a high-end mall in a first-tier Chinese city around the New Year — Shanghai's iapm, say, or Beijing SKP — and you will find that nearly every luxury brand has put out a Chinese New Year product, most of them handbags, which carry higher margins: Gucci's "Three Little Pigs" collection with Disney, Dior's "Toile de Jouy" print bag, Mulberry's "Seaton" bag, and the Le Pliage bags Longchamp made with the blogger Mr. Bags. Some brands, Hugo Boss among them, printed cartoon pigs straight onto the light boxes of their storefronts.

In their daily contact with consumers, luxury brands have also begun learning to speak the local language.

The clearest case is the choice of brand ambassador. Beyond youth and personality, traffic — pulling power online — is treated as the thing to look at first. These celebrity contracts also run short, usually a year, to squeeze the most out of a star's peak fan appeal while hedging against how fast traffic stars are replaced.

This month Angelababy became the first Chinese actress on the cover of American Vogue. In the magazine's inside introductions to the seven cover stars, only hers made a point of her follower counts on Instagram and Weibo — 6.9 million and 98 million.

Kris Wu ended his Burberry contract last year and became an LV ambassador that November. Jackson Wang became a Fendi brand ambassador in early 2019; at almost the same moment Lay Zhang became Valentino's first Greater China menswear ambassador. Deng Lun recently signed with Bally, and Liu Haoran is both an LV "friend of the brand" and Tod's shoe ambassador. This Tuesday Loewe put out a photo book for Huang Zitao (Z.Tao) called Z.TAO, Me and Myself 2019, "exclusive to China, limited to 1,000 copies."

These brands have also gotten faster at reacting to each new social platform. If Chanel and LV running ads on Douyin counts as an experiment, then LVMH's Dior and Fendi opening official Douyin accounts is more of a climb down from their usual height, reaching younger and broader potential buyers who cannot afford much yet.

They have also learned to keep two different looks, one for Weibo and one for Instagram. Fendi's and Gucci's Instagram posts are full of art-world atmosphere; on Weibo they eagerly repost paparazzi shots of Chinese celebrities out on the street in their products, which makes them look no different from any ordinary fashion brand.

It is worth saying that although luxury looks to have gone from local to global and back to local, the authority over creative work has not moved.

Printing a Year of the Pig motif on a bag, or making the bag bright red, has little to do with design. This is still localization at the marketing level, and by any aesthetic measure it is fairly crude. Shandong Ruyi's purchase of the French label Lanvin, Fosun International's purchase of the Swiss label Bally, and ICICLE's purchase of the French high-end label Carven count only as investments. Their creative ability cannot be measured on a balance sheet; it still has to prove itself on an international runway.

More Chinese brands are indeed showing up at the Big Four fashion weeks — wealthy young designers just out of Central Saint Martins or Parsons, and Tmall and JD.com, which trade resources with the CFDA and the British Fashion Council for exposure and bring local brands along with them.

Back home, young designers face a long stretch of working out how to balance independent creative work against commerce, and they do it in a shifting, complicated environment where even LVMH, Kering, and Richemont sometimes compromise. As for the commercial brands, they keep putting forward ideas like "East meets West" and "the rise of guochao" (domestic-trend fashion), but in design terms their positioning makes it hard for them to try anything that would challenge the established design language. They tend instead to copy globalized taste and slip into the language that already exists.

Peacebird, for instance, brought in the artist Trouble Andrew, who created the Gucci Ghost graffiti, to design prints for the New York Fashion Week that just ended, and hired Colin Dodgson, Gucci's regular photographer, to shoot its lookbook. That is copying hot elements more than making something new; you can say they have gotten better at telling stories, but it is harder to say they have gotten better at design.

For the big luxury groups trying to go deeper into the local market, meanwhile, there is more risk of "cultural insensitivity" to handle, and more care needed around cultural taboos and national feeling.

Prada and Gucci have both learned this lesson lately; Gucci moved quickly to set up a diversity fund to show its respect for people of color. The D&G affair last October cost that brand dearly, and the aftershocks have not passed: its products are still off several major e-commerce platforms, and no Chinese media attended the D&G show at the Milan Fashion Week that just ended. Its 2018 sales fell 20%, and its two founders, poorer than before, dropped off the latest Forbes billionaires list.

Fashion has always evolved in large part by drawing on other cultures, but the digitization of information and of buying has shortened the distance to every "other," which makes the digestion, re-creation, and consumption of a culture more like fast food, and makes people's demands for cultural understanding and respect more immediate and more strict.

As the BoF columnist Liroy Choufan puts it: "On one hand, the world is more open-source than it was; on the other, a lot of things can no longer be used for free. In form, in business, in logic, and as an industry, fashion is a modern Western way of creating built on take-and-use, or take-and-abuse. Now it has to squeeze itself into a postmodern, globalized state of mind — one with far more variables, and under far stricter scrutiny."

Cover image: the Jacquemus 2019 AW show