Rich Chinese Are Keeping Luxury Brands Alive!

Why does it seem like Chinese people love luxury brands the most? And are these luxury brands actually fully dependent on the Chinese market moving forward? Yeah, we got to talk about it because there's some stock news, Andrew. LVMH stock hit all-time highs due to China reopening. And the upper class and the middle class buying up all the LVMH products. Andrew, they're going ham at Louis Vuitton, Tennessee. They love the Chinese market, Asia market. Yeah, well, 43% of the global revenue of LVMH comes from Asia. And of that 43%, 80% of it comes from China specifically. And those trends are extrapolating into the future. So long story short, Andrew, Asia Pacific, specifically China is going to become the number one market for all these luxury brands, probably 10, 20, 30 years in the future. Now, of course, Andrew, the internet exploded because some people view luxury consumption as soft power or consumer power. But make sure you like, subscribe, turn on your notifications. Andrew, we're about to get into it. Silly to serious, Hot Pot Boys breaking it down. Andrew, the first comment was from offended Westerners. They do not want Asia and specifically China to become the number one consumer of luxury goods, right? Because what does that mean? That shows something maybe, right? Well, I think if Americans or the Western world used to be the number one consumer, but now Chinese are, or Asia is in general, what does that mean? Does that mean China is going to be indeed more powerful and people are living better lives in China? I don't know, man. But obviously, so it is true that you have to remember that those profits from that profit margin of every bag from like an Hermes bag is still going to go back to Europe. Right. So Europe's still getting rich off this, even though like still actually a lot of Chinese factories are still making a lot of the material for these luxuries. Somebody said, man, China's success is so overhopped in the media for clicks. They're just fear mongering us. Maybe they'll have a chance 500 years in the future. They still got that Evergrande mortgage crisis and the population crisis. That's unavoidable. Hey, I'll tell you this. A lot of people in a lot of countries got a lot of crises. Somebody said, you guys have to understand spending power is completely different over in China due to the cost of some items being much cheaper, some items much being more expensive. Basically, the structure of everything is completely different of how people can like have purchasing power. Somebody said, yeah, plus the ability for Chinese to survive on three bowls of rice every day with soy sauce is way different. Do you think Westerners can achieve that? Yeah, you know, I eat this rice every day with no flavor so I can afford this Hermes bag. Somebody said, of course, Asia and specifically in China, they have some gigantic macro problems, but LVMH is probably not lying on their public financial statements that 80% of their Asia sales are coming from China. Yeah, and then this next comment was like, well, they still want to be American though. And I was like, okay, you know, I actually don't think that a lot of Chinese want to become American culturally. They want the freedom and the protection of what being American is like. Yeah, essentially, a lot of rich Chinese people want American passports. Yeah, but they also like Canada too. And I'm saying that overall, Chinese, especially when you're talking about rich Chinese, they respect the legacy brands a lot more because the middle class has a lot of Chinese brands, like local, like domestic brands that maybe the middle class will consume. The lower in the middle class. Yeah, but as far as when you get to the upper crust, all they want are the luxury European brands. That's all. That's it. For sure. Maybe want some Japanese streetwear brands as well. Somebody said, it's actually just called materialism. I think that Asians in a Western sense seem materialistic because they just really love luxury brands. I guess a lot of Asians, Andrew, they do have a very high IQ for like brand hierarchy, right? I mean, you know, they know what an iPhone is. They know what LV is. They know there's a whole like spectrum. I mean, I would say this Asians like valuable things and they actually see the real, like, I don't want to say real value because real value that can mean different things, but they see the value in buying luxury. You're saying almost like the asset value. Well, because they hold the value. It's almost like in a way buying gold to an extent. You're saying like buying a Rolex just because the market for that brand has been so established. It's not even like Supreme where Supreme is going to go out of fashion in like 10 years. Rolexes will maintain their value like a hardcore asset class, like a commodity, like silver or gold at this point. Somebody said, if you understand life in Asia, there's just way less stuff to spend your money on. People in America have gun collections, yacht collections, summer homes in the Hamptons, jet skis, boats, cars. A lot of people in Asia, they don't even have a garage spot for their car, even if they have money. So they got to spend on these small, expensive items like Rolexes, et cetera, et cetera, Bulgari. Do you think this person is making a point? Yeah, it is true. Like a lot of life in Asia, Andrew, is centered around these, like mega cities, at least in East Asia, or really Asia in general, really crammed apartments. You're just not going to have jet skis. No, I mean, like, and listen, even if you're a rich person in like a second or third tier Chinese city, really what can you buy in that city that's going to be super duper fun, other than buy a bunch of Moet Hennessy at the club, pop bottles, you got all the luxury goods, you're going to buy Lamborghinis, that's not LVMH, but you know what I mean. I guess like rich Germans would have like, I need my track car for the Autobahn, but it's like, they wouldn't have that in Asia, right? Or like maybe legacy rich whites in America would have like, ooh, you know, I'm going to ride my six horses in the Hamptons. I just don't think even rich Asians have horses. Well, you know, Chinese, they don't really have that high class society in the same way because, you know, they're still coming out of communism, like not that long ago. Well, all Asia, even Japan to a lesser extent is coming out of insane poverty, right? They just don't have those, you're saying that Victorian culture, right? They're not going to buy those big wigs. Maybe in Malaysia, they're going to buy those wigs, but like, you know what I mean? Like they don't have the wigs, they're not going to buy the wigs. No, it was just not as much like, I don't know, horse racing going on, equestrian stuff, I don't know. Yeah, maybe in the colonies a little bit. Somebody said, why are we as Asians always white worshiping French brands, huh? Why we're just buying Supreme, we're buying LVMH, we're drinking Moet and Hennessy. Don't we need to focus more on like Asian things? I mean, first of all, globally speaking, those have been widely accepted as the brands. Right, for like 300 years. Like even Japanese who make a lot of great brands themselves, they still agree. The Japanese are like, yeah, I do have to acknowledge LVMH is a top brand. Somebody said, for example, a lot of Asians, but specifically Chinese people, they do buy expensive Chinese things, but they're more like relics and furniture and decorations, but just not clothes. Because let's be honest, even to a Chinese person, Shanghai Tang is not that cool of a brand. No, listen, you walk into a rich Chinese person's home, they're going to have some vases, some picture frames, some very nice like jade sculptures that are worth like tens of thousands of dollars. But then they'll have the Hermes bags. They'll have the Givenchy. They'll have the Fendi. They'll have like, you know, the drinking Hennessy XO Extra Old. They might have some expensive Baijiu too though. But just, yeah, I mean, they go buy whatever, like they're like, you know, the fog war and they're so good at the luxury items. You know, I like the Chinese furniture and acupuncture, but for the other things, I let other people handle it. Somebody said China is just at the phase of capitalism where they are still in the esteem phase. Now, these are what like cultural scientists or anthropologists, they denote different stages of capitalism. Basically, they're saying that China is in an esteem driven phase. Whereas if you look at certain places like Japan or Sweden, they are starting to move into more of a nature harmony phase. Yeah, I think that they're trying to be more like happy with their lives solely, where in China, it's still a lot about flossing because you're like, ah, I just make money. I just come up. I gotta show everybody that I am rich now. Yeah, this is driven by a new rich mentality and it literally just has to do with the stage of capitalism that your society is locked in at. Yeah, I think Sweden is just, people in Sweden are just very like happy knowing that their country runs really well. And they're like, ah, I like my Volkswagen. It's good, a Volvo. Oh yeah, nobody's poor. Nobody's homeless. Well, that's why I think it's interesting that Chinese investors actually bought Volvo because Volvo is known for being like a quality over branding company. That's interesting. I didn't even think about that. Somebody said, all Asians are pretty much status driven, but in China in particular, you need brands to get you into certain circles. And once you get into the certain circles, you can actually be protected even politically. That is the calculus behind having brands in China. This was an interesting perspective. Yeah, listen, I mean, listen, the cool thing about America is that a billionaire, you wouldn't even know that they're a billionaire by looking at them. Yeah, I think it's been maybe changing a little bit recently, but for the most part in America, there's a lot of stealth wealth, right? Yeah, yeah, and also if you're old money, let's be honest, you're a little bit, you're classy, but you're not like flashy. Somebody said also in other societies, there's a lot more other ways that people rank people. For example, who is more alpha in a physical confrontation? That is not even a thought that people have in China with each other. But it's true, it's true in America, especially in the streets, man. It matters who can murk who, man. That's a hilarious point because like when it comes to social capital, it's really more materialistic in China because like there's, I mean, there is some social capital and being tall and buff and like don't, and you don't have a lot of money, but in America that plays a lot better. Being tall, buff, good looking, but maybe you don't have a lot of money. Yeah, because I think America is a very mixed country. I don't even want to get into it, but a lot of people don't understand. It's actually like part barbaric, part super advanced, whereas China, they're just trying to be more, you know, with the eunuchs and the scholars and the dynastic imperial system. Somebody said rich Chinese are just a small ratio of actual Chinese people. Many Chinese people only make $300 a month. I'm so sick of everybody acting like China's so rich and advanced. It's obviously a comment from a Western person. By the way, what they're saying is partially correct. You know, the truth is, Andrew, with 1.4 billion people, even if 1% are rich and then 2% are kind of rich, that's still 42 million consumers with money. 42 million is already more than the population of most countries on earth. So it's true. In some districts in Shanghai, you're going to see stuff that's as pretty or even prettier than anything in the US, but you're also going to see some people living in a level of poverty in China. A lot of people living in a level of poverty in China that is unmatched by anywhere in the US. Like higher in a way, a little bit higher highs, but way lower lows. I mean, it's very difficult to categorize countries of 1.4 billion people, right? Because the variance is insane. Somebody said the margins that these luxury brands make off Chinese trying to be aspirational and uplift their own self-confidence are insane, man. It's crazy the way people sell these brands to people who want to feel rich but might not even be rich. Dude, the markup on luxury brands, I don't even know, man. It could be 10,000% on a product. It's crazy. But what they were saying is that these luxury brands are actually selling aspirational feelings, emotion, and self-confidence. Well, like someone said earlier, it's kind of like potentially if you buy enough, it's kind of like your membership into a club. You're paying to be seen as part of this class of people and it helps you ping. It helps you meet people. It doesn't make you a better person. It doesn't make you more useful, but it does help you ping with those people. And do you agree that needing the luxury brands to gain access to a club, that seems like more in old world societies, maybe like Russia or China right now, than in America? America seems like it doesn't matter as much right now. I would agree with that. Somebody says there's a reason why Arnold is the richest man in the world despite inventing nothing. At least Elon, Steve Jobs, and Bill Gates were geniuses that fundamentally changed our lives day to day. Whereas Arnold just invented status symbols that really have no raw value. Well, they're talking about the Arnold family, right? Which is actually like the richest family like in the world right now. Do you think this is true? Because it's true. The other people, they invented stuff that like people use every day. Whereas the other one is status. No, it's true. You don't need an LV bag. You don't need it. There's nothing about- Does it even work better than a regular $10 bag? I think it's probably more better, well put together and the leather's nicer. But sometimes the leather's not even real leather anymore. I don't know. They're using like some type of weird vinyl. Composite, yeah. Yeah, anyways. Somebody said, man, you guys don't understand raw cogs which is cost of goods sold versus brand equity. But what do you think, Andrew? As we've gotten older, do you care more about this brand stuff or do you care less? I care more about luxury brands only for certain things and like maybe certain items because I still see the value in quality. But no, obviously we don't collect like a bunch of watches. Yeah, I will say this. You know when I was younger, Andrew, and I could only afford Forever 21 clothes, I still had a real LV wallet. And nowadays, Andrew, I can afford better than Forever 21 clothes but I actually just use a vault wallet that I got off Amazon because of the usability. So you, in your age, have become more utility-based. Yeah. A little bit more. Is that me moving beyond the esteem phase on this late-stage capitalism? Wow, David, are you thinking real Swedish? Are you becoming Swedish and Japanese now? Well, I don't know. Maybe I'm on a different place than Maslow's IOKM needs. Let's get to the takeaways, Andrew. Why do you think Chinese are such a main driver of the Arnault family's wealth? Obviously, they're not doing it because they want to make this French guy rich. It's because they like the products that LVMH of the conglomerate have all bought. I mean, yeah, trust me, guys. These Chinese people are not trying to become French. Like, yeah, you know, I buy all the French brand but I don't even eat French food. Right, they're still eating malaxianguo and all these things, right? Uh, no, I mean, I think it's because they look at European culture. First of all, these are brands that are established. They're super high quality. They have a super high standard, super expensive. They hold their value. Oh, the branding. Like when you walk into Tiffany's, even though the diamonds and the jewels and the gold are overpriced, obviously, there's just a whole vibe when you walk into Tiffany's, right? But I will say this. I do think Chinese understand the value of like which country they want to go to. So I think while they want to go shop in Paris, I think they would like an American passport and a Canadian passport or an Australian passport, right? They would still value those even though they're not like, yeah, I don't like any like American brand, maybe beside Nike. But like aside from Nike, I don't care about any American clothing brand. Right. You say they want French clothing, an American passport and to eat hot pot. Who knows, man? What do you think about these French European brands still trying to figure out how to market to Asia Pacific and specifically China? Since China may in the next 10, 20, 30 years become their number one target market, even more than Western countries. Are they still going through this process? Because there has been a couple high profile mess ups, whether it was Dolce and Gabbana, being racist, Dior doing the eye slant, Gucci picking certain models that had hyper stereotypical features, Mercedes doing the same thing as well. Are they trying to be edgy? Are they trying to show respect, but they just, it goes wrong? Or is it more like D&G where it's just like, yo, what were your marketing people thinking? Yeah, I think though, I think as they continually market towards Chinese specifically, it will actually help the soft power of Chinese overall globally a little bit. Because when these brands cater to Chinese, other people will see that and then they might subconsciously treat Asians a little bit differently. However, I will say the people who are primarily buying luxury brands, I don't think that these are always the same people who are hating on Asian people. Right. I think those are mostly separate. Do you think China will ever grow out of this esteem phase of wanting to stunt on each other in a obvious brand driven way? Probably not for another, I don't know, 80, 100 years. No, I don't think so. Thank God, listen, you may want to speed up the stages of capitalism, but whatever phase you are in, it is a candle that must burn at this low pace, and good for us. John, you know, John Wick. Yeah, I think, I mean, dude, Chinese are gonna love material thing and status things for many years. Do you think that China will ever develop its own luxury domestic products like Japan did? I mean, you see it a little bit now with Li Ning, you know, the way away 10 shoes, they're like 250. You see it a little bit with their phones, you know, some of the Huawei, OPPO phones, they're like $2,000. They have a couple wines that I heard that are really expensive. They have some expensive Baijiu. I think it'll look different. As far as like- Neo cars are expensive, right? Yeah, I don't think it won't be, it will be necessarily competing in the same lane as Hermes and Gervonti and all that stuff, so. It's very hard even for an American brand to reach that tier. Yeah, but they'll have other high tier brands, maybe not watches and stuff, you know, other brands, other brands. To address the geopolitical comment that we started off with, Andrew, how much does the consumption of luxury goods mean on like a who's winning the world scale? I don't know. Maybe it also means that Chinese people are just trying to like get their money into some products and not in like, don't keep it in cash. You know, because obviously there is some instability there. That's why people want foreign passports and stuff. Yeah, I don't know. I mean, what do you think? I honestly think that it doesn't really mean much. I mean, I think it's like one of the things of like 20 that means something in terms of like who the luxury brands are catering to. But I certainly don't think that it means everything. Yeah, I don't know if the American military cares about this stat that China's like, well, you know, China has bought all the luxury goods. They're buying all the LVMH. That means that their army is strong. Is it like in John Wick, Andrew, who is the high table catering to in John Wick? Is everything John Wick? Who knows, man? Let us know in the comments section below. How much does this mean? Does it mean anything? Does it mean nothing at all? Keep it civil. Until next time. We're the Hop Out Boys. We out. Peace.