Lorre White, The Guru of Luxury

The Current Marketing Trinity Frugality, Authenticity...and LUXURY

"understanding the anatomy of communications"

Fear and savings are up.  Consumer confidence teeters.  We turn on the TV and hear media talk of the shame of the luxury goods buyer hiding newly purchased high-end extravagances in discount store shopping bags.

If marketers looked closer and listened harder, they would realize that something else is afoot: Frugality is not antithetical with Luxury.  Let me explain.

Marketing strategists ultimately define a luxury by its price tag.  As a cognitive anthropologist, I've been out and about in this downturned economy talking with people about "What's life like, nowadays?"  I don't ask what they buy or don't buy.  When you give people the time and leeway - and respect- to talk about their lives, not as a consumer but as a person, you hear the mundane eloquence and simple complexity of real life as it is lived by real human beings.

In this context, two types of narrative are encountered:

1. More Meaning-Seeking
"I must be more selective in what I buy and what I buy into.  I want things now that will show me my heart."

2. More Authenticity
"I've wanted to buy a great fountain pen for as long as I can remember, but I never have, until now.  Despite the economy, or maybe because of it, I thought I should buy one now.  I did and I'm so happy.  It feels so sensual, so luxurious in my hand.  I think better writing with it.
It helps me get down to my deepest thoughts and feelings.  I find 'me'
with this pen in my hand."

That's the real experience of luxury, no matter what a product costs.  A luxury experience takes you beyond yourself.  It makes you feel more of you.  It provides a venue for to recognize or elaborate something latent in you that has not yet been made manifest.

A luxury experience makes your familiar, novel.  It's a paradox that provides a surprise and it "fits" you.  That's the best experience of all!

In today's culture, time is speeded up, unpredictability has ascended, competition for scarce resources is the name of the game.  Life is hard.  We are aging more rapidly, even as our life span is increasing.

America finds itself between mythologies.  We are not what we once were.  We do not yet know what we will become.  In this transitional phase, the American ethic of self-expansion and self-expression. is still strong, but in some way "having" is being replaced by "being."
Accumulation is being over-ridden by authenticity and the quest for meaning.  The quest for more of "me,"  that is a necessary luxury.

Dr. Bob Deustch
Brain Sells
www.Brain-Sells.com

Private Jets

1. Private Jet Movements Climb Back to 2008 Levels....

According to ARG/US TRAQPak which follows aircraft arrival and departure information on all IFR flights in the US (including Alaska and Hawaii), August business aircraft activity tracks very closely with July levels.  Compared to August of the previous year activity is off a modest -5.7% with Part 91 (owned) large cabin aircraft (think moguls) actually up 3.5%.

The positive data is a good sign that consumers at the very top end of the market - consumers who own and fly their own very large private jets - are feeling better, and spending more.  Looking ahead to the holiday season, the data suggests luxury marketers should focus on extremely wealthy consumers as the general population of Mass Affluent Consumers (Household Income $100,000 to $400,000) continue to re-assess the role of luxury in their lives.

A cell phone that will last.......

Tough Phone

Sonim's New Indestructible Cellphone

In Brief Sonin Tech, official site XP3.20 Quest, $599 Insider Tip Save $150 by getting your Sonim here.

Anyone who understands the appeal of vehicles like the Land Rover (forgetting about actual off-road use for a moment) or computers like Panasonic's Toughbook (forgetting about your actual need for a laptop that's fit for combat duty) will get Sonim's new XP3.20 Quest phone in a second. While any chump can show off his iPhone 3GS and its thousands of applications, it's the real man who owns a phone capable of being hurled at a cement wall, submerged underwater for a half hour, dragged behind a moving car on a rope, and frozen inside an ice block—all without losing a dial tone. As to the cell's functionality beyond its mere instinct for survival, there's an FM radio and MP3 player, a 2-megapixel camera, GPS, and email, but no text-messaging—either an oversight, or a suggestion-by-exclusion that texting is for sissies—all tucked neatly inside a form factor that's rugged without being ostentatious about it. Indeed: Land Rover has commissioned Sonim to manufacture a couple of models (to be dubbed the S1 and S2) under its well-heeled brand. So let your friend with the iPhone show you the Level app he uses to hang pictures straight. You can use your Sonim to pound the nail in for him. www. MartiniLife.com

http://magazine.wsj.com/features/the-state-of-luxury/champagne/3/  Cont.

From WSJ:   

What Moët Hennessy is really looking to do is to get into the conscious dreams of those living in regions that they’d never given much thought to. Mark Bodi, chairman of New Hampshire’s liquor commission, was delighted when Moët suggested it sponsor stores within state wine stores, based on the dutyfree-shop concept. To kick off the partnership, an increased order of 2,000 cases of the company’s champagnes were shipped north to sit on fancy backlit shelving. In politics, the nation follows New Hampshire— could this be a bellwether for champagne? Their sales are up in the pilot store in Hampton, N.H., by 30 percent.

This is, of course, not the death of the top of the line. Novelty bottles like the 007 Bollinger—a cross-promotion with the James Bond movie “Quantum of Solace” consisting of a bottle of Bollinger Grande Année 1999 that comes in a bulletshaped case with its own lock and key for $5,675—are aimed at wealthy collectors and they will always have their value as buzz-makers. And the making of vintage champagne will continue to be revered by connoisseurs as an art form. But Mark Cornell, the 41-year-old head of Moët Hennessy USA, is focusing less on extravagantly wooing the press—domaine-hopping helicopter junkets and truffle and caviar dinners had become de rigueur—and more on courting the middle-class consumer. If you bring a heartthrob tabloid headliner like Prince Harry to the people, the thinking goes, they will drink Clicquot, and that is what happened at the Veuve Clicquot Manhattan Polo Classic this May on Governors Island, when more than 5,000 people turned out for the charity event. The reformed bad boy Royal was a ballsy choice, but perfectly on message for the Yellow Label brand, and the event’s caterers sold an astounding amount of champagne by the glass that afternoon. More of that, the company says, is in store.

Cornell is not shy of grass-roots action. He’s going to talk to his customer every chance he gets. While investigating one of the snazzy New Hampshire package store outlets, he saw a one-on-one opportunity to recalibrate a consumer’s fixation with saving champagne for rare milestone moments. Cornell recalls:

“A woman had a cart filled with vodka and beer.
‘What are you going to do with all of that?’ I asked.
‘Have a party,’ she said.
‘Where is the champagne? You can’t have a party without champagne,’ I asked her. She asked where I was from and I said England.
‘If you’re from England, you’d drink champagne at a party,’ she said. ‘This is America.’ ”

Champagne as an industry has an unusual nature—especially considering it has become dominated by a commercial giant in the form of LVMH: Everyone in the region is aware that the fates of all involved are inextricably linked. The backbone is the growers, who own 90 percent of the land, and the CIVC, which works hard at keeping its system honest. For Henriot, therein lies resilience. “The Champenois have always found a way to push the general interests of the appellation of Champagne higher than their personal interest,” he says. Right now so much depends on LVMH’s massive ad spend. It’s so big it has become a de facto campaign for the act of drinking champagne itself.

Meanwhile, even as the big brands insist they will not degrade their products through cost-cutting, prices for vintage champagnes are beginning to sink. Roberta Morrell has just dropped Cristal under $200 a bottle, but says, “The trouble with dropping prices is how will they raise them?” If history repeats itself, those with the most to move will rage a slash-and-burn price war in November and December—when practically 50 percent of the year’s bottles are usually sold. At least one high-level distributor drew up plans in July to reduce the price on its unsold champagne by 25 percent in 90 days and to cut another 25 percent if it still doesn’t sell by the 180-day mark. It’s the bubbly equivalent of Filene’s Basement. The houses won’t see a profit, but they’ll tread water and it may be the surest way to change American perceptions. If the experiment fails and the expensive bottles languish unsold—well, it’s not the end of the world: Most of this high-end wine that’s causing all the anguish will only improve with age, doing more to raise its value and restore its reputation than any marketing campaign could.

Alice Feiring is a wine writer who has written for Food & Wine, among other publications. She is also the author of “The Battle for Wine and Love.” Visit her Web site at alicefeiring.com.

Champagne In The Down Turned Economy

From The Wall Street Journal  
http://magazine.wsj.com/features/the-state-of-luxury/champagne/print/

Bubbles Take a Bath

Photographs by Toby Mcfarlan Pond, Styling by Noemi Bonazzi

In the 17th century, the people of the Champagne region of France took one of the most god-awful climates for ripening grapes and some of the most diffi cult soil and turned its fruit into a complex brew, a luxurious and optimistic elixir, with the serendipitous discovery of bubbles. It’s as if the region invented the cliché “When life hands you lemons, make lemonade.” And the current lemon is a beaut. Two years ago the Champenois were crowing about a world-wide shortage—there wasn’t enough to sate the thirst of the booming markets in Russia and Asia. Now with millions of cases withering in warehouses, the big houses are embracing change like never before in an effort to get the stuff flowing into consumers’ glasses again.

Stanislas Henriot, president of his family’s esteemed champagne house, Henriot, says the appellation will survive, but also admits, “It’s been brutal.” According to one of the biggest distributors in the United States, sales are off 50 percent for the basic stuff , and down 85 percent for the fancy. You know things are bad when distributors to cork-popping stalwarts like strip clubs and hip-hop joints are happy with a 15 percent chop in consumption. And it’s everywhere around the globe, according to Henriot: “We have seen the drop in all markets.” Soldiering on, Champagne Krug’s newly installed, charismatic leader, Margareth Henríquez, wants to make new friends. “In times like these we can get into accounts that we couldn’t get into before,” she says. The whole industry is getting serious about luring the new middle-class drinkers it needs to shed its position as a blast reserved for special occasions, and about recasting the wine as an everyday bottle, a steady morale booster. They couldn’t have come up with a better message for 2009.

The Changed State of Luxury

• [1] Cars: Driven to Extremes
• [2] Accessories After the Fact
• [3] Real Estate: Faulty Towers
• [4] Diamonds: A Rock in a Hard Place

Henríquez is both sanguine and strategic. She acknowledges trouble with bubbles but pooh-poohs the idea of a crisis: “This is nothing. Try heading up Seagram’s during Venezuela’s revolution or leading Chandon in Buenos Aires in the 2002 devaluation of the peso. Every crisis is the same. Even the jokes are the same.” Krug is the jewel in LVMH Moët Hennessy Louis Vuitton’s collection of champagnes (six brands spread out over an attributed output of 50 million bottles a year). The house has not lacked for four-star restaurant accounts. But in an eff ort to expand their reach beyond the usual velvet ropes and fancy crystal, they’re cruising new neighborhoods—off ering fi re-salestyle prices to a selection of hot-spot restaurants. If you’ve wondered whether exalted Krug was worth the bucks, this is the time to sample. Over at DBGB, Daniel Boulud’s new Bowery burger joint in New York City, half bottles of Krug Grande Cuvée are going for $60 and the same deal has been showing up at some wine shops. (On a wine list, a demi usually goes for $120 or more.) LVMH is also playing the promotional game with another champagne, the esteemed Dom Pérignon. At Manhattan’s Standard Hotel in the Meatpacking District, a glass of DP and a half-dozen oysters are yours for $40.

Some industry buyers are unimpressed by the potential discounts. Juliette Pope, beverage director of New York’s Gramercy Tavern , is one. Her near-perfect wine list is peppered with exquisite champagnes. “Deals are coming up,” she says, “but I am not even giving them a chance to tell me because it doesn’t matter if I put on a $500 wine at $300 or pour a glass for $50 instead of $100. They are not moving at the high end. The middle range, under $100, is OK—like Vilmart, Egly-Ouriet and Billecart-Salmon—but still slow.”

Business is even slower in stores. Roberta Morrell, who over the years has sold Olympic amounts of Veuve Clicquot’s Grande Dame, Dom Pérignon and Louis Roederer’s Cristal at Morrell & Company, her store in Manhattan, says sales are dismal. Vintage champagne, that age-worthy wine where the grapes come from a single year, isn’t moving at all. Nonvintage champagne, in which the grapes from several seasons are blended, still sells now and then, but nothing over $45. “Lily Bollinger had a great line,” Morrell says. “‘I drink it when I’m happy and when I’m sad.’ People in America don’t get the sad part. Now, if I run out of a brand, instead of rushing to stock it, I say, ‘Big deal.’” But, she adds, “there’s a bright side. People are buying prosecco.” Up 40 percent in the first half of this year, Mionetto—the leading Italian sparkling winemaker, whose prices range from just $9 to $16—never had it so good.

Kurt Wilberding/The Wall Street Journal

At the peak in 2007, bottles at the top end were like the Fifth Avenue classic six apartment—not nearly enough of them around. Champagne was giddy with what Daniel Lorson, communications director of the trade organization Comité Interprofessionnel du Vin de Champagne (CIVC), called the “Crisis of Success.” The makers were blessed with a market that was expanding at double-digit rates in a region with strict rules and limited farmable land (champagne is one commodity whose production can never be shipped to Asia). At the time Lorson said the region could sustain growth of only 2 percent a year max.

One man enjoying the affliction was Emmanuel Frossard, then Veuve Clicquot’s director of brand marketing. With Clicquot’s mansion headquarters in Reims as backdrop, he discussed the coming champagne drought. What were the new markets of Russia, China and India to do? All those drinkers with empty glasses. Zut alors! To meet the thirst in the new global markets, Frossard suggested his countrymen should hold back with a Kennedy-like sacrifice. “The French drinker can discover the other wonderful sparkling wines in this country. They are not champagne but still quite good.” Years back he might have been guillotined for heresy.

Elsewhere champagne was becoming its own overblown bubble, full of flash and sometimes trash. Silliness reigned. When Cristal lost the club vote back in 2006 due to a statement by Louis Roederer director Frédéric Rouzaud that was perceived as racist, rapper Jay-Z publicly transferred his loyalty to a similarly priced ($400 to $600) champagne made by Armand de Brignac called Ace of Spaces. In its gilded jacket, it is a lot gaudier, and its gold-plated bottle with a pewter playing card label was designed by the fashion house Courrèges. Perrier-Jouët’s By and For line released a $70,000-a-case champagne they referred to as bespoke, and Veuve Clicquot teamed up with Porsche Design to make Vertical Limit, a $70,000 cellar that looked like a high-tech iron maiden and held 12 magnums of vintage champagne, going back to 1955.

‘Lily Bollinger had a great line:
“I drink it when I’m happy and when I’m sad.”
People in America don’t get the sad part’

Krug came a little late to the party with the most expensive on-release bottle of champagne ever, the limited-edition , single-vineyard Clos d’Ambonnay. The wine may be great, but at $3,000 a 750-milliliter bottle retail, few out there have tasted it. Rajat Parr, who directs wine at all of Michael Mina’s restaurants, has it at Miami’s Bourbon Steak and hasn’t sold a single bottle—and it’s easy to purchase in multiples on wine-searcher.com. With this most important category so hard hit, the champagne houses are forced to reconsider what they want to say to drinkers, much like Detroit rethinking its message to drivers. Speaking from France, Lorson tries to show the region’s new path: “The bling-bling side, the artifi cial luxury side of champagne, is dead,” he says. “It’s now about authenticity.” Jérôme Philipon, Champagne Bollinger’s president, told me at a recent Paris wine tasting that he was grateful they never went ostentatious (his brand satisfi es both the high-end and high-taste impulses and has the vote of the wine geek). “We’re more linked to James Bond and wine lovers than to supermodels,” he said.

The big houses also desperately need to reclaim the drinkers’ respect. It could take years to win back drinkers who’ve downsized, but there’s still the chance to draw in newcomers and keep brand loyalists from discovering the competition, the true artisans of the appellation—and darlings of the wine press—the so-called grower champagnes. They make their own wine from their own grapes and, with the region’s land prices hovering at $1 million per acre, they’re destined to stay small. But they are surviving just fi ne, thank you very much. The wine is sold to folks who buy on taste and eccentricity and not on label. The majority are in the $35 to $50 category, and sales of the best, which include Guy Charlemagne, Larmandier-Bernier, Raymond Boulard and Drappier, are holding steady.

So how does LVMH go from Moët Chandon’s Be Fabulous campaign starring supermodel Petra Nemcova in the high-fl ying year of 2007, to something that could play to the Banana Republic wearer? With fi ngers pointing to champagne as the big reason their wine and spirits business is millions of dollars in the hole by way of sales loss, it’s time for a major image tweak. In 2009, Nemcova is out and the actress Scarlett Johansson is the centerpiece of a new international advertising campaign. Johansson might not be everyone’s idea of the girl next door, but the marketers believe she’s more appealing to consumers at this time than a glossy mannequin. She’s a subtle twist on what Frossard had once told me: “Selling champagne is a little product and a lot of dream.”

What Moët Hennessy is really looking to do is to get into the conscious dreams of those living in regions that they’d never given much thought to. Mark Bodi, chairman of New Hampshire’s liquor commission, was delighted when Moët suggested it sponsor stores within state wine stores, based on the dutyfree-shop concept. To kick off the partnership, an increased order of 2,000 cases of the company’s champagnes were shipped north to sit on fancy backlit shelving. In politics, the nation follows New Hampshire— could this be a bellwether for champagne? Their sales are up in the pilot store in Hampton, N.H., by 30 percent.

This is, of course, not the death of the top of the line. Novelty bottles like the 007 Bollinger—a cross-promotion with the James Bond movie “Quantum of Solace” consisting of a bottle of Bollinger Grande Année 1999 that comes in a bulletshaped case with its own lock and key for $5,675—are aimed at wealthy collectors and they will always have their value as buzz-makers. And the making of vintage champagne will continue to be revered by connoisseurs as an art form. But Mark Cornell, the 41-year-old head of Moët Hennessy USA, is focusing less on extravagantly wooing the press—domaine-hopping helicopter junkets and truffle and caviar dinners had become de rigueur—and more on courting the middle-class consumer. If you bring a heartthrob tabloid headliner like Prince Harry to the people, the thinking goes, they will drink Clicquot, and that is what happened at the Veuve Clicquot Manhattan Polo Classic this May on Governors Island, when more than 5,000 people turned out for the charity event. The reformed bad boy Royal was a ballsy choice, but perfectly on message for the Yellow Label brand, and the event’s caterers sold an astounding amount of champagne by the glass that afternoon. More of that, the company says, is in store.

Cornell is not shy of grass-roots action. He’s going to talk to his customer every chance he gets. While investigating one of the snazzy New Hampshire package store outlets, he saw a one-on-one opportunity to recalibrate a consumer’s fixation with saving champagne for rare milestone moments. Cornell recalls:

“A woman had a cart filled with vodka and beer.
‘What are you going to do with all of that?’ I asked.
‘Have a party,’ she said.
‘Where is the champagne? You can’t have a party without champagne,’ I asked her. She asked where I was from and I said England.
‘If you’re from England, you’d drink champagne at a party,’ she said. ‘This is America.’ ”

Champagne as an industry has an unusual nature—especially considering it has become dominated by a commercial giant in the form of LVMH: Everyone in the region is aware that the fates of all involved are inextricably linked. The backbone is the growers, who own 90 percent of the land, and the CIVC, which works hard at keeping its system honest. For Henriot, therein lies resilience. “The Champenois have always found a way to push the general interests of the appellation of Champagne higher than their personal interest,” he says. Right now so much depends on LVMH’s massive ad spend. It’s so big it has become a de facto campaign for the act of drinking champagne itself.

Meanwhile, even as the big brands insist they will not degrade their products through cost-cutting, prices for vintage champagnes are beginning to sink. Roberta Morrell has just dropped Cristal under $200 a bottle, but says, “The trouble with dropping prices is how will they raise them?” If history repeats itself, those with the most to move will rage a slash-and-burn price war in November and December—when practically 50 percent of the year’s bottles are usually sold. At least one high-level distributor drew up plans in July to reduce the price on its unsold champagne by 25 percent in 90 days and to cut another 25 percent if it still doesn’t sell by the 180-day mark. It’s the bubbly equivalent of Filene’s Basement. The houses won’t see a profit, but they’ll tread water and it may be the surest way to change American perceptions. If the experiment fails and the expensive bottles languish unsold—well, it’s not the end of the world: Most of this high-end wine that’s causing all the anguish will only improve with age, doing more to raise its value and restore its reputation than any marketing campaign could.

Alice Feiring is a wine writer who has written for Food & Wine, among other publications. She is also the author of “[5] The Battle for Wine and Love.” Visit her Web site at alicefeiring.com.

Mass Affluent Magazines "Get Beat Up At Newsstands"

Mass Affluent Magazines "Get Beat Up At Newsstands"

 
A recent article in media trade website Medialife noted: "Cash-strapped readers once again cut down on their newsstand magazine purchases during the first half of the year, sending single-copy sales plummeting by double-digit percentages for the second straight reporting period."
 
The article showed average Newsstand sales "were off 12.36 percent, according to figures released this morning by the Audit Bureau of Circulations," according to the report, noting: "The dropoff was clearly a result of the ongoing recession, which has put the pinch on consumer spending."

According to the story, the drop "came after an 11.12 percent decrease in newsstand sales during the second half of 2008. During the first half of 2008, sales slipped 6.34 percent."

Particularly hard hit were Mass Affluent titles which had previously positioned themselves against the trading-up crowd which is now being squeezed.  Travel + Leisure saw newsstand sales for the first six months of 2009 fall by slightly under 30 percent, while Conde Nast titles Details (-25 percent), W (-21 percent), Architectural Digest (-21 percent) and Conde Nast Traveler (-18 percent) saw big drops.  Hearst's Town & Country saw the number of copies bought at the newsstand fall by 20 percent.



By Doug Gollan
Elite Traveler

Paris, St Germain Galleries Tour - 26th of September 2009

Meeting from 2 PM to 2.30 PM
at
Café Malongo (strating point)
50, rue St André des Arts
75006 Paris

Starting Art Galleries Tour from the Café Malongo at 2.30 PM exactly.

Please, do come before this departure time. :)

2 hours 1/2 Art Galleries Tour in Marais
Selection of 10 to 15 Art Galleries with interesting exhibition(s)

Optional drink after the Art Tour

Infoline : +33 (0)6 99 55 75 75

Twitter > http://twitter.com/ArtTour

Art Galleries Tour in Saint Honoré > http://www.facebook.com/group.php?gid=232283110477

Art Galleries Tour in Saint Germain > http://www.facebook.com/group.php?gid=52964039943

Special Segway Art Tour by Arty Club (only 7 guest by tour) > http://www.facebook.com/group.php?gid=106321234298
85€ for Arty Club Paris Members 100€ for non members
www.walounge.com/artyclub.html

Girard-Perregaux

It took fiendish engineering prowess to create the Vintage 1945, but the result is true to the sober school of Swiss watchmaking Girard-Perregaux has pursued since 1791. Even after Turin’s Macaluso clan acquired the brand in 1992, it remained a flash-free zone—its 10-year partnership with Ferrari yielded handsome watches with subtle use of the prancing horse logo. “We respect the best of the brand’s watchmaking traditions,” says
Stefano Macaluso, vice president in charge of product design. “But we do add some subtle Italian attitude.”

On this reprise from the brand’s Art Deco period, the new Italian flair is manifest in the curving case (the original was flat). It’s rare enough to find a watch case that curves, but the Macaluso team built one with two convex vaults—one stretching from 3 to 9 and another from 6 to 12. Watchmakers, working in the stillness of the Jura Mountains, bow the tapering hands so they revolve without touching the dial or the crystal. The resulting watch is smaller than the average bulging high-end brute and is one of G-P’s lowest-priced watches ever. It feels, however, less like a matter of overwrought ergonomics and more like the touch of a woman’s fingers on your arm.

Sources: Danielseanmurphy.com

Private Jets

1. Private Jet Movements Climb Back to 2008 Levels....

According to ARG/US TRAQPak which follows aircraft arrival and departure information on all IFR flights in the US (including Alaska and Hawaii), August business aircraft activity tracks very closely with July levels.  Compared to August of the previous year activity is off a modest -5.7% with Part 91 (owned) large cabin aircraft (think moguls) actually up 3.5%.

The positive data is a good sign that consumers at the very top end of the market - consumers who own and fly their own very large private jets - are feeling better, and spending more.  Looking ahead to the holiday season, the data suggests luxury marketers should focus on extremely wealthy consumers as the general population of Mass Affluent Consumers (Household Income $100,000 to $400,000) continue to re-assess the role of luxury in their lives.

http://magazine.wsj.com/features/the-state-of-luxury/cars/?mod=wsj_magazine_newsreel

Photographs by Toby McFarlan Pond, styling by Noemi Bonazzi

The economic slowdown has slammed the brakes on the fortunes of high-end car makers around the globe. BMW, the world’s largest luxury-maker, which posted a 19.5 percent drop in first-half unit sales, is leaving the prestigious Formula One motor-racing series this year. Porsche is racked with insider battles—including the recent departure of its CEO and CFO—as its merger with Volkswagen nears completion, helped along by a cash injection from the Middle East. Audi, a unit of Volkswagen, reported first-half profit down 25 percent from the year before. Results are also lackluster for other high-profile brands like Rolls-Royce, Jaguar and Saab (which General Motors is aiming to sell by the end of the year). And against the backdrop of a government bailout of the U.S. auto industry, and increasing pressure to produce smaller, more fuel-efficient cars, GM said it is selling its hulking Hummer brand to a company in China. Ford is also selling its Volvo brand. A leading bidder? Geely Group, one of China’s largest independent auto makers.

While the rest of the world stalls, China is rapidly becoming the most important market for high-end auto makers. Luxury-car sales grew 7 percent in China in the first half of 2009 at a time when the rest of the planet was shunning luxury purchases. Overall car sales have been climbing strongly, up nearly 20 percent over the same period, making the country one of the industry’s few bright spots—and turning it into the largest vehicle market in the world so far this year.

As the Chinese economy has blossomed, those at the top of the country’s economic pyramid have had ever more money to shop, particularly for one of the most visual totems of class status. Just three decades ago, a Flying Pigeon bicycle was the aspirational good for up-and-coming Chinese. Now, the global high-end auto market’s “center of gravity is moving eastward” to China, says Dieter Zetsche, chairman of Daimler, which sells Mercedes and Maybach cars. “Chinese consumers are redefining what luxury means for them, whether we are talking about automobiles, fashion or leisure activities.”

The Changed State of Luxury

A sign of the times: Rolls-Royce Motor Cars chose the Shanghai auto show in April to announce the eagerly awaited name of its new, smaller and more dynamic sedan, the Ghost, which had previously been known only by the code name RR04. Rolls-Royce’s decision was a “tick in the box for the importance of the China market,” says Richard Carter, a spokesman for the company, which is now a unit of BMW. Among the other new cars making their global debuts in Shanghai this year: the Mercedes S-65 AMG, one of its most expensive high-performance models, and a new Porsche sedan—the first four-door sedan that the company has ever produced—the Panamera.

China is the No. 1 market in the world for Mercedes’ high-end flagship, the S-Class. Mercedes sales in China are off the charts this year—up by 50 percent in the first six months of the year, compared with the same period in 2008. “It’s just a question of time before China will be a luxury-car market on a par with the U.S.,” says Jochen Goller, vice president of marketing for BMW in China. Ferrari sold more than 200 cars in China last year. For Audi, China is the second-biggest market in the world, after Germany. “In the long-term, I believe China will be the biggest Audi market in the world,” says Dietmar Voggenreiter, president of Audi’s China operations.

To help satisfy the market, Mercedes, BMW and Audi now all manufacture high-end sedans with Chinese joint-venture partners at factories in China. Daimler has built an advanced design center in Beijing to help the company stay abreast of design trends and consumer preferences in China, while research and development staff work on special equipment, such as sophisticated entertainment and navigation systems. “You have to adapt yourself to the market, to the culture and to the expectations of your customers,” says Ulrich Walker, Daimler’s Beijing-based chairman and CEO for Northeast Asia.

Maserati

Maserati GranTurismo S Automatic

Luxury-car makers are also moving to aggressively expand networks of dealers and service centers, pushing out from China’s more affluent East Coast metropolises and into smaller cities in more remote parts of the country. Even Rolls-Royce is moving into the hinterland. Its dealership in Chengdu, capital of southwestern China’s Sichuan province, sold more than 10 cars last year—roughly equal to the number sold by Rolls-Royce in some small countries. A highway connecting downtown Chengdu to the airport is lined with high-end car dealerships—from Porsche and Ferrari to Mercedes and Audi. One man who runs a family mining business north of Chengdu was visiting the Hummer showroom there recently, looking at an H2. He said he was thinking of buying one to keep his Mercedes S-Class sedan from getting dinged up on visits to the mine. Government and military elites are driven around in luxury makes. The Audi A8 is a favorite among Beijing big shots. And BMW SUVs roamed the roads of Sichuan after last year’s earthquake, when senior army officers showed up to supervise relief efforts.

‘It’s just a question of time before China
will be a luxury-car market on par with the U.S.,’
says the VP of marketing for BMW in China

Chinese luxury-car buyers share the preoccupation with quality and prestige common to wealthy consumers elsewhere in the world. But there are also differences. After the leveling of the Communist Revolution and the decades of economic stagnation that followed, China’s affluent are, by definition, nearly all nouveaux riches. McKinsey & Co. estimates that about half of wealthy people in China (which McKinsey counts as those with annual income of at least $37,000) today didn’t qualify as wealthy even four years ago. And they often don’t have as much experience with luxury brands. China’s luxury-car buyers are also far younger than their counterparts in North America or Europe. The average buyer of a Mercedes S-Class sedan in China is under 40, Walker says, while in the U.S. or Europe, the average customer is over 50. Most luxury-car owners in China still ride in the back of their cars, which are driven for them by chauffeurs. So they prefer stretched out, longer wheel-base models with more elaborate backseat entertainment options, such as flat-screen TVs and DVD players and other amenities, such as refrigerators. Since GM’s Buick line has a more upscale image in China than in the U.S., Buicks sold there have more luxurious interiors.

Foreign luxury marks don’t face much competition from domestic makers, although some, such as Geely Group and Chery Automobile, have aspirations to build luxury cars in the years ahead. Geely showed a concept car at April’s Shanghai auto show reminiscent of a Rolls-Royce, but with just a single seat in the rear for the car’s presumably very important passenger. Where domestic companies are stirring up competition is in producing smaller cars for buyers who are focused on fuel economy (BYD, a local company that has received a large investment from a U.S. company controlled by investor Warren Buffett, is racing ahead with battery technology for electric cars). In turn, this has encouraged foreign manufacturers to offer hybrids and other gas-sipping options in China.

Rolls-Royce says that Chinese customers also tend to favor some of its flashier options, such as illuminated hood ornaments, which use light-emitting diodes to draw attention to the “Spirit of Ecstasy” statuette above the front grille. Rolls-Royce’s Carter says that more than 80 percent of cars sold in China are custom-built, a higher proportion than in any other market, with customers asking for humidors and other special additions. Partitions separating backseat passengers from the driver are also popular. “A lot of business is done in the back of Phantoms,” Carter says.

Gordon Fairclough is a senior correspondent for The Wall Street Journal in Shanghai, he has previously been based in Seoul, New York and Bangkok.