This time last year, there were more Chinese government officials and company executives sporting Cartier or Rolex timepieces than you could shake a stick at. Today, many of those same
luxury timepieces are locked up in drawers at home or are on sale at second-hand stores such as Brand Off in Shanghai. Most government officials wouldn’t be seen dead wearing one.
This reflects a crackdown on shows of wealth in government circles, which has filtered into the business environment too. China’s political leaders have watched nervously as popular
discontent in the Middle East and Africa has led to the overthrow of governments. Some view these events as a window into China’s future, and are keen to rein in any visible signs of venality. In a key sign of a tougher and more conservative approach in China, new leader Xi Jinping has made the fight against corruption his number one mission.
Gift giving is ingrained in Chinese culture, and – for the most part – should not be confused with corrupt activity. The problem is that China’s increasingly empowered middle class has grown suspicious of modestly salaried government officials with a penchant for expensive watches. And that is precisely what China’s leaders fear. Xi Jinping himself has warned of the dangers of a government that is divorced from the people. The new state mantra is all about self-discipline and restraint, therefore.
The gift-giving crackdown has been particularly bad news for a core of luxury goods brands. According to China’s Hurun Report (drawn up from an annual survey of China’s millionaires),
Cartier was the second most popular gift among luxury goods consumers at the start of 2012, while Rolex ranked ninth. Fast-forward a year and Cartier dropped to fifth while Rolex slipped off the list altogether. The only timepiece-specific brand to make it into the latest 2013 ranking is Longines (at number 15).
Louis Vuitton (LVMH) and Hermes retain their positions as the first and third most popular gift brands, while Apple, which is not strictly speaking a luxury product, has jumped from sixth to second place. This reflects a trend toward more modestly priced gifts. Montblanc pens have also become popular, replacing timepieces in many instances (a pen is more discreet than a watch, after all). Top-end luxury brands are still visible in gift giving, but the trend is toward more understated products.
Timepieces are not the only big casualties of the gift-giving crackdown. The super premium baijiu brand Maotai ranked as the fifth most popular gift brand last year (among millionaires), but – like Rolex – has disappeared from the current top 15 ranking. Government officials – to all sense and purposes – are now banned from spending public funds on cigarettes and luxury alcohol. And many business leaders have followed this lead. As a result, mid-range baijiu is often more visible at company’s banquets and annual conferences than Maotai.
The death knell has not sounded for the luxury gift culture in China, and is not likely to. Rather, the portfolio mix has changed to reflect a more conservative (and risk averse) political climate. In turn, this is fuelling a shift toward subtler, lower profile luxury goods consumption in the business world. Luxury gifts will continue to beguile, but there is a sense that less is now more. And that presents some big challenges going forward, especially for the jewellery and timepieces categories.