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Chinese Windowshop at Home, Buy Luxe Goods Overseas

A Chinese Renaissance may be in the works for the luxury goods business in China.

Western luxury brands like Chanel, Louis Vuitton, Prada and Gucci may have cornered the market for copious consumption and status in China for the past decade, but a new breed of emerging homegrown luxury brands like Broadcast, Ne Tiger, Shangxia, White Color, Mary Ching and the Shanghai Tang label founded in 1994, are creating a stir for brands that embody a sense of Chinese aesthetics with a Western twist.

The move is also viewed by industry insiders as a desire by the Chinese government to create a Chinese Renaissance, a return to centuries-old quality and design detail that Chinese-made products were known for before the 70s when made-in-China goods became staples of mainstream fashion at major retailers like Macy’s and Bloomingdale’s.

While the impact of the 2012 anti-corruption campaign initiated by the Xi-Li administration in China has discouraged the practice of corporate gift-giving–especially as kick-backs to government officials–the custom of luxury gift-giving to family and friends remains alive and well in China, according to Doreen Wang, global director of the BrandZ division of global research firm Millward Brown.

The estimated $14.6 billion luxury market in China is expected to decline 3 to 4 percent by 2015 due to the heavy burden of prohibitive taxes placed on foreign luxury goods to China, which include consumption tax, VAT and import duties, according to industry estimates. The impact of such tariffs can top 50 percent and drive suggested retail prices up 20 to 30 percent at high-end boutiques in China that sell expensive heritage brands like Gucci, Hermes, Chanel and Louis Vuitton.

Wang said the demand for traditional big-name French, Italian and Swiss luxury brands continues in mainland China among older, affluent consumers despite the unforgiving taxation, but noted the “real” business is being conducted outside of China, where wealthy Chinese consumers—a growing number of whom are entrepreneurial women—often hire personal shoppers to find the best buys in Europe and the U.S.

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“The government anti-corruption movement started to make an impact the second half of last year, and it’s getting more serious [for Western brands] from the basic level to the top luxury level,” Wang explained. “People used to buy luxury goods in China for convenience, but they are now window shopping at luxury stores like Chanel and Louis Vuitton, and then traveling to Paris, Milan, London, New York or Los Angeles to buy items at a better price.”

Wang added, “Overseas travel by Chinese consumers has increased by more than one million travelers who have spent over $104 billion on luxury goods [overseas] in the past two years.” She noted that the shift in shopping patterns has created a “huge opportunity” for Western brands that offer “accessible luxury” like Coach and Ralph Lauren, but at the same time, there’s a growing demand for more homegrown Chinese brands that create a luxurious, Asian statement.

“China has a huge generation of new, younger and affluent consumers who want accessible luxury…They will also shop online to compare prices and see which price is best,” she said. “But this Chinese customer is also pursuing a certain lifestyle of luxury clothing, beauty, and home decor, and they are finding their niche in new Chinese brands that incorporate an Asian element into their designs with details like specialty embroideries and quality fabrics that Western brands do not offer.”

When asked whether Western brands are monitoring this trend towards Chinese fashion brands, Wang said, “They are actually watching very closely. We are seeing more local designer and luxury apparel and accessories brands sprouting up, even cosmetic brands are interloping with big brands like Estee Lauder.”