Thursday, January 21, 2016

Not just take-away and dishes

China China China.  And I don't mean the home-goods term describing generic pottery used for eating, either.  I mean that massive country with the world's biggest population.  To understand why retailers and businesses, especially those of the luxury segment, can't get their Manolo's moving fast enough toward the great Asian nation, you have to understand a little background history.

Right now, China is gobbling up luxury products - wine, cars, leather goods, and all things fashion and glamour.  The economic growth rate from China over the last 10 years has been the fastest in history, estimated to account for nearly 25% of luxury purchases worldwide.  This ravenous demand has left many companies scrambling how to, not only provide enough supply to meet demand, but to really understand their new clients' culture, tastes, and buying trends.  Everything is so new.  Everything is so exciting.  Potential beyond imagination.  The Chinese market is so enthusiastic that prices are driving through the roof, even pricing out some traditional customer demographics.  For example, the wine craze has absolutely erupted in China, driving up the prices of Bordeaux wine to record highs.  The current prices are so high, many Europeans can no longer afford the wines they know and love.

Mao Tse Tong's culture revolution literally persecuted external culture and influences.  In the late 1970s, sanctions on private ownership and personal wealth were slowly eased, but this pent up energy of the lively people was quickly replaced with a more capitalistic spirit, and it spread like wildfire.

Now, you no longer have to travel to massive metropolises like Beijing, Shanghai, or Hong Kong to find luxury brands.  Many small to medium sized cities are also home to those same luxury brands.

I absolutely love watching how brands respond to their new marketplace.  Chateau Lafite capitalized massively on their marketing campaign and prioritizing their relationships.  Focusing on the societal influencers,  Lafite included a simple number "8" on their 2008 vintage directly above the label.  Seems simple.  Until you understand how important the number "8" is in Chinese culture - it represents luck, fortune, and prosperity.  So you can imagine how this culture update paid off massively.  Same wine.  Different bottle.

It's not uncommon for businesses to tweak their assortments.  Global restaurant chains offer regional menus, while designers may offer modified size ranges more in shape with their clients' dimensions.  At Dior, for example, sunglasses come in an "as designed" fit and also "modified for the Asian market", fitting the bridge of the nose and head more comfortably and precisely.  KFC is currently the leader of the quick serve market in Africa, and offers traditional Jollof rice dishes throughout their Nigerian outlets.  Literal catering to local tastes makes for more acceptance and popularity amongst customers. 

French powerhouse Hermes didn't tweak their collections for the Chinese market; they created an entirely new brand, exclusive to their new Asian customers: Shang Xia.

Shang Xia is a brand for art of living that promises a unique encounter with the heritage of Chinese design and craftsmanship.  The renowned designer Jiang Qiong Er established Shang Xia with a mission to create a 21st century lifestyle founded on the finest of Chinese design traditions. The brand's name is simple yet profound. It embodies the concept of "up" and "down" in the continuous flow of energy from past, present and future, transmitting the essence of Chinese culture and its sublime aesthetics.  Building on 5,000 years of unique inheritance, and in the spirit of dialogue between tradition and modernity, Shang Xia integrates the warmth, balance and harmony of Chinese grace into all its products.

Shang Xia's collections are comprised of striking furniture, fine decorative objects, exquisite accessories and luxurious garments. Uniquely, it also creates an annual series of limited edition "cultural objects". These collectibles convey messages of tradition, guardianship and remembrance.  With flair and exacting attention to detail, Shang Xia preserves the historical beauty and craftsmanship born of Chinese ingenuity, to provide a simple, elegant 21st century aesthetic.

What's still even more fascinating to me is that, with all of the money and investment of brands in China, the ultra-high-net-worth and luxury Chinese clients still prefer to buy their luxury goods abroad, not primarily in the mainland.  You see, exclusivity is everything.  Buying the latest Lady Dior bag is one thing.  Buying the latest Lady Dior bag in Paris is another level.  Considering import duties, value added taxes, and consumption taxes, prices of luxury goods in China are nearly 50% more expensive than they are in the United States, and can reach as much as 75% more than their European counterparts.  It sounds a little funny, but shopping for luxury abroad can prove a bargain!

Smart businesses will have one eye looking east and one eye looking west.  they must strike a balance between retaining their identity and heritage, while extending their reach and market share.  The next time you're shopping in a luxury boutique, chances are at least one of the staff will be fluent in Mandarin, and quite possibly Shanghainese, Cantonese, or Taiwanese.


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