The potential spending power of young, wealthy city-dwellers is well-documented. Eighty percent of wealthy Chinese are under age 45, according to a recent McKinsey report entitled The Coming of Age: China’s New Class of Wealthy Consumers. That’s compared with 30% in the US and 19% in Japan.

The economic crisis has shaken the assumptions of the Chinese middle class like anyone else. They are less likely to take risks, spend unnecessarily, or change jobs on a whim than they were a year ago. However, individual confidence – belief in oneself – remains remarkably high, especially among females.

Female consumers in their late teens and early 20s interviewed for the research have clear plans for their futures, which involve 1) early 20s: marriage, 2) mid-20s: having a child, and 3) late 20s: returning to work.

Rather than being a hindrance to a career, the young marriage age increases the opportunities for urban women, who expect to have their child (only one child) by their late 20s. The presence, normally, of four sets of grandparents mean that childcare is free and easy to find, so women don’t have to give up their careers, and most don’t want to. Unlike for previous generations, or for people living in rural areas, these women see work not only as a right they are not willing to give up, but also an escape from the pressures of home and family.

With these social/familial obligations taken care of at a relatively young age, but both men and women retain a sense of adventure and personal belief that might for people in the West or Japan peak in their 20s. This enthusiasm is often channeled into a career, the primary means of achieving money, status, friends and personal freedom.

More details of this and nine other consumer shifts are available in Five by Fifty’s China Shifts 2009 report. For a sample, contact us.

S. Korean cosmetics retailer The Face Shop

One air-traffic route that hasn’t slowed amid the recession has been the one between Japan and South Korea. In February, Japanese tourist arrivals in South Korea were up 70% from a year ago, accounting for 48% of all visitors. Numbers were also up from China and Southeast Asia. The primary attraction is shopping, especially cosmetics.

Until now, the reason was the exchange rate, with the won tumbling and the yen soaring, making Seoul an attractive shopping destination. Although the exchange rate has since leveled off, South Korea remains attractive for Japanese, who see it as accessible and safe, and because many South Koreans in retail and hospitality speak Japanese.

The most appealing products are cosmetics, with Korean brands such as Missha, The Face Shop, Skin Food and Nature Republic selling high-quality products at affordable prices for Japanese. At the Nature Republic store in the Myeong-dong shopping area, around 80 percent of customers in April were from Japan, according to the JoongAng newspaper.

In February, the Korea National Tourism Organization chose IKKO, a Japanese transgender makeup artist, as an official ambassador. IKKO has advocated Korean cosmetics in the past.

IKKO, makeup artist and tourism ambassador

“Korean women have better skin than Japanese women,” IKKO said when appointed to the role. “I want to introduce the lifestyle of Korean women, who constantly detox their bodies and minds, to Japan.”

It’s not only the government that has wised up to the revenue potential. Retailers in Myeong-dong are adding Japanese- and Chinese- speaking staff and signage.

The most popular product is Korea-originated BB cream, short for Blemish Balm, which was Japan’s seventh most popular brand last year, according to the Nikkei newspaper. Some 2.6 billion yen (US$26 million) of BB cream were sold in Japan after its launch in April, according to its manufacturer, Hanskin. Eyeshadow, mask packs, mascara and lip gloss from mid-to-low range local brands like Etude House and Missha are also top sellers. Their focus on natural ingredients is an added appeal.

Photo: JoongAng newspaper

“Whenever I come to Korea, I buy around 10 BB creams and refrigerate them so I can use them over a year or so,” Japanese tourist Yoko Wada, 22, told JoongAng at a Hanskin store in Myeong-dong. The price is about half that in Tokyo.

With South Korean brands seen as increasingly trustworthy and desirable in Japan, and Japanese consumers being increasingly cost conscious, the opportunities for South Korean cosmetics brands are obvious. The exchange rate advantage they have enjoyed since October is evaporating, so instead of waiting for the Japanese customers to come to them, they will find it increasingly necessary to target Japanese consumers on their home turf.

To request a sample of Five by Fifty’s Korean Beauty Report, 2009, contact us.

Your message here? (AP Photo via The Daily Beast)

Without wanting to minimize the seriousness of the health issues at hand, the reality is that people around the world are considering how to protect themselves. The prospect of having to wear a face mask if Swine Flu continues to spread may be no big deal in Japan and Asian countries that experienced SARS in 2003. However, for consumers elsewhere unused to such things, the face mask poses a serious fashion dilemma.

The result is the mask becoming a canvas for personal expression. Individuals in affected areas who want to be victims of neither health nor fashion have begun to get creative and decorate their masks, as this photo gallery from The Daily Beast shows.

Mint Designs' cheeky chimp face mask

Some manufacturers like Kimberly Clark already put out limited numbers of colorful masks decorated with Disney cartoon characters for children. Japanese brand Mint Designs has fashioned a cheeky monkey-style mask, and artist Yoriko Yoshida was recently inspired to create a set of beautiful, witty and sometimes faintly morbid face mask illustrations.

Mt. Fuji face mask by Yoriko Yoshida

What’s next? The face mask covers the most important area of the body for communication, and the natural target of the eyes of others. So if face masks do become de rigueur in some places for a while (and it’s far too early to say that they will), the blank white space will become a unique marketing opportunity for the right brand with the right design and the right message.

Contact us to find out more.

Recently, bubble tea has become available in supermarkets. The brand Xiangpiaopiao offers prepackaged versions of the drink in five different flavors – green tea, black tea, chocolate, coffee and purple yam.

Xiangpiaopiao recently also introduced to the market a new version of the drink that leaves out tapioca in favor of nata de coco, a translucent jelly made from coconut water. To make it easier for consummers on the go to sip through a straw, the nata de coco is cut into thin strips. As nata de coco is high and dietary fiber and lower in fat and cholesterol than tapioca , this innovation might make the beverage more popular among young Chinese who are increasingly concerned with their health.

Luxury hotels such as this one in Seoul are facing tough times.

We have entered a new economic era. A period when the adage ‘more is good’ no longer resonates and in which conspicuous consumption is starting to be viewed as repulsive amid the world’s harsh new realities.

As companies scale back on international expansion plans and consumers tighten purse strings in anticipation of a grim 2009, this new era of ‘Controlled Luxury’ will see people in Asia and throughout the developed world become increasingly thoughtful when making daily consumption choices and measured with the purchase of larger ticket items.

It is a time when the logos and egos of luxury brands will start to look old-fashioned as people decide that luxury is no longer defined by the purchase of a designer product but is representative of something that is far more personal.

Luxury purveyors of goods and services that were oh so special and difficult to obtain but then became more ubiquitous than a convenience store bought snack will be hardest hit by this sea change.

This new paradigm will mean that luxury, a noun overused in today’s world, will no longer be used to sell everything from soap to socks but instead within the context of a specific environment, become an adjective for how we feel at the time of purchase or usage.

Going forward, we can safely assume Asians will pare back on services and brands that misuse the word luxury, especially at hotels that charge high room rates yet still expect us to feel a warm, fuzzy feeling about the hotel brand upon check-out, only to discover we have been charged for Internet access and breakfast, no longer extras in this day and age, but necessities.

How will our responses rate on customer service surveys at hotels that try to convince us with their brand messages they act as a home away from home then charge for extortionately priced breakfast – for I am racking my brains remembering the last time I paid $25 for a bowl of cereal in my kitchen. And as for hotels charging ridiculously high Internet access fees that do not reflect actual cost, this starts to feels more like an insult along the same lines as charging us to turn on the television or hairdryer.

Let’s not dwell on the outmoded and outrageous table charges for the privilege of sitting at a bar for a cocktail twice the market price at the city’s trendiest spots. If there is a positive to this crisis, it is the reawakening that it is no longer smart to overpay for products and services merely because they are fashionable or been labeled with the luxury tag. Instead, consumers will patronize outlets that offer value for money and also offer a memorable experience.

And to the car brands that once represented an area of individuality among personal expenditure, after all, our car choice was considered the mobile representation of our homes and generally speaking, the second largest purchase after the roof over our head. Who truly feels special driving a car that our neighbors, co-workers and friends also own.

Will we be sorry to see fewer designer handbags slung over the shoulders’ of young women who instead of saving for their future were instead building debt with credit card companies. The same designer accessories that were once crafted with care in the ateliers of Europe and held strong brand values dear to the buyer’s heart, but are now systematically churned out in Asian factories in gargantuan quantities that can be purchased from any trendy shopping thoroughfare in our city.

Yet despite all the doom and gloom, this new era of thoughtful spending brings opportunity. While people throughout the developed world have been shaken to their senses by the realization that the zeros that were being rapidly added to their property and equity portfolios, and consequently they borrowed on, were as fake as the bags found at street stalls in this city, there is still room in this ‘huddle down’ era for brands to shine.

In fact, now more than ever, it is critical to stand out from the pack. Not just as an individual searching for a job or even as a person trying to keep an existing position, but from a brand point of view too. During this current adversity retailers, manufacturers and brands that develop tactics to combat consumption fatigue have a real advantage in carving out a niche to dominate the marketplace of the future, both here and overseas.

By utilizing consumer insights, and there are many from this spending binge and its subsequent post consumerism hangover, we distill what people want from a retail and service experience. After all, we still need clothes, food and indulgences, just fewer of them.

What we may learn is there is no gratification in buying one in each color, or stocking up unnecessarily just to keep cupboards full or buying a second home you never get the chance to use. What we see is that the symptom of uncontrolled spending is guilt that later manifests itself in unhappiness because it appears the more we have the less we appreciate.

So, here’s the reality. We have all overeaten and now we are collectively purging on over consumption. As we look in our closets, we ask ourselves, will we return to the stores that we bought sweaters from that pile up unused at the back of our cupboards? More than likely not. Nor will we use the services of companies that were never that good to begin with but we continued to use out of convenience. In this ‘Controlled Luxury’ era, we will walk a mile to save on unnecessary costs.

With this re-examination of who we are and what we now stand for, luxury will remerge as a moment in time and a memory to be cherished, personal to its owner, not an overpriced item that can be bought on credit.

Just last week someone was telling me they found their personal reaction to the global crisis far more understated than they thought possible. He said, “What I find most puzzling is my lack of anger at losing so much money. I can only surmise that everyone around me is in exactly the same boat, so losing out doesn’t quite feel as bad.”

It’s exactly these powerful, collective emotions that will push forward-thinking businesses front of stage. The brands that understand the consumer desire to create a safer future (taking up a BRIC-country language course for example) will lead.

Consumer expenditure in the luxury sector will obviously still occur, but for the foreseeable future it will be carried out in a more reserved manner and only after a period of self-imposed abstinence. Bottles of champagne will be still be ordered, but instead of routinely and on cheaper brands, Asian consumers will splash out on a more expensive bottle as a behavioral reward to switching to filtered tap water, after forgoing environmentally polluting bottled varieties.

Moving online, targeted digital services will prevail. As consumers switch from hitting stores out in the streets to shopping out of their armchair’s in the home environment because the outside world is seen as increasingly threatening, the online malls that offer the social functions of social networking site’s (SNS) will increase in popularity.

Trust has weakened in the concept of globalization and people are naturally looking at home and to the immediate region for solutions. As we move away from the shaky foundations of what constituted the old model of globalization, South Korea is geographically well located to become a key player in the new era of regionalization. Local businesses that innovate fresh products and services that focus on originality and quality will become market leaders, both home and abroad.

Globally, countries wealthy enough to support substantial luxury purchasing are really suffering economically, and South Korea and Japan are no exceptions. But within adversity there is always opportunity. Rather than retreat in to shells, now more than ever is the time for local businesses to invest in research to become more competitive using current insights to comprehend how people feel.

I am not referring to R & D but in fact, qualitative and ethnographic consumer research to identify what people want and why. Local businesses need to invest in the kind of research that gets to the heart of what will motivate purchasing decisions in this new era, a time when the old models no longer apply. Unless local companies track these trends, this period to step front of stage in what is considered Asia’s Century, will pass countries such as Japan and South Korea by.

Local companies need to invest in international research trips to understand what consumers and leading edge companies are doing regionally, especially in economies that have experienced boom and bust cycles in the past. Consequently, this will inspire and promote a culture of innovation internally. It is only through the discovery of new knowledge and by looking at global trends will local companies move from following consumer trends to anticipating them.

The real issue here is that research is considered a value added service by many businesses and not an area of expenditure. The attitude appears to be, why pay for research when ideas can be ripped off from overseas, even if the downside is they may not resonate locally with consumers.

There is just a handful of independent companies in Seoul that work in the area of market analysis and trend forecasting. In New York and London there are hundreds of consultancies looking at change, converting new ways of thinking into innovation.

Businesses that copy rather than innovate will soon be overtaken by hungrier counterparts in India and China that are investing in culture’s of innovation.

As people scale back on purchases and reconsider the meaning of luxury, local companies that fail to bring something new to the table will find consumers choosing to eat elsewhere, most likely from an original and more imaginative source.

Nicole Fall

This article originally appeared as a front page “Think Piece” in The Korean Times.

The Ritz-Carlton and Banyan Tree both opened resorts in Sanya on the island of Hainan in May this year.

Hainan is China’s second largest island, and lies in the South China Sea. Sharing the same latitude as Hawaii, Hainan boasts sandy beaches, palm trees and a pleasant climate. Despite its attributes, it was only discovered as a holiday venue 20 years ago, only to suffer economic decline for the last decade.

Until recently. Within easy reach of Mainland China and a mere 1.5 hours from Hong Kong, Sanya, Hainan’s southernmost city, is becoming a destination of choice for tourists around Asia.

The Ritz-Carlton, Sanya is situated at Yalong Bay – the last on a long stretch of golden beach. This massive hotel features 450 rooms including 33 pool villas, as well as 21 luxury suites. Each guest room is a vast 60 square meters, possessing its own private balcony and standalone tub.

Aside from spacious rooms, the hotel has also set up the largest Ritz-Carlton spa in the region in Sanya. The ESPA at The Ritz-Carlton has a total of 24 private treatment rooms and six private spa suites offering a mix of Eastern and Western treatments.

The Ritz-Carlton, Sanya says that, since the hotel opened one month ago, visitors have predominantly been from Hong Kong and Mainland China. Already the resort has had requests to rent villas for one to two months and some guests have stayed two to three weeks.

Similarly, Banyan Tree Sanya says guests so far have mostly been from Guangzhou, Shenzhen, Beijing and some from Hong Kong. A small percentage of visitors have come from Russia, Japan, Korea and Europe.

Banyan Tree Sanya is located 5km from Sanya town, close to Luhuitou Park and Hyton Hotel Sanya.

Banyan Tree Sanya is an all-pool villa hotel, with 21 standard villas and a selection of others, including the Spa Pool Villa. Each comes with an open-air bathtub and landscaped garden. The hotel features the resort group’s signature spa facilities, including eight treatment pavilions.

The Mandarin Oriental Hotel Group also plans to open a hotel here. Following some delays, the hotel is due to open in late 2008. These three are just a taster of the resorts set to come to Sanya as tourists from around Asia rediscover Hainan Island.

Tamsin Bradshaw

The soon to open Opposite House in Beijing.

Hong Kong-based Swire Properties has formed Swire Hotels to open four planned luxury hotels in Greater China. The first, the intriguingly named The Opposite House, will open in Beijing’s Sanlitun district this summer. The name of the hotel is a direct translation of a Chinese term which historically referred to a guest house for the most esteemed guests, directly across the courtyard from the main house. The name also refers to the hotels location related to the Sanlitun courtyard, which is fast become the new center of luxury shopping in Beijing.

The 99-room hotel will be the first designed by Japanese architect Kengo Kuma, who is known for creating some of the most innovative retail spaces in Japan. The rooms are modern, with light hardwood floors, but with a touch of Chinese decor.

Following The Opposite House, Swire Hotels will open a 117-room luxury hotel in Pacific Place, Hong Kong, in the summer of 2009 and a 100-room hotel at Taikoo Hui in Guangzhou in 2010.

The recently opened Delay No Mall in Hong Kong.

The founders of a popular Hong Kong lifestyle store opened mini-mall Delay No Mall in the first quarter of this year, bringing innovation to typically stale mall atmospheres. Delay No Mall is already attracting a young, trendy and well-traveled crowd.

The name is a play on the slogan of the original boutique, G.O.D.: “Delay No More.” The phrase was a theme throughout the guerrilla advertising campaign conducted by agency Leo Burnett Hong Kong, who, in conjunction with Delay No Mall, wanted to jolt Hong Kong locals into getting their creative juices flowing.

The ad agency and the mall organized a mob-inspired street-side fashion show and had performers sit down for a picnic in the middle of a pedestrian crossing at rush hour while the green man was flashing away.

Delay No Mall, located in Causeway Bay, one of Hong Kong’s busiest districts, contains names such as gadget and lifestyle store Kartell, Japanese jewelry design brand Justin Davis and tattoo parlor Primal Ink, among other fashion, homeware, entertainment and food and beverage options.

The exterior of the mall is designed to look like the outside of an old-style cinema, with shop names in place of film names in the “Now Showing” boards. In fact, the mall is located on the site of famous 1950s cinema HOOVER.

Inside, the three-storey, 50,000 square-foot mall contains creative touches designed to inspire – such as an airport flight display-style board listing those shops now open.

Also on the cards is an exhibition space where local artists can display their works.

Tamsin Bradshaw