Despite Huge Potential Of China’s Second- & Third-Tier Cities, Luxury Brands Hobbled By Poor Management

In Response To Concerns, More Universities Offering Luxury Brand Management Courses

Better service could entice more Chinese to shop locally rather than online or in Hong Kong (Image: Sanlitun Village, Beijing)

Better service could entice more Chinese to shop locally rather than online or in Hong Kong (Image: Sanlitun Village, Beijing)

As major luxury brands continue their march into China’s second- and third-tier cities in an attempt to tap increasing spending power, many companies are finding their progress in these markets stymied by a management “talent shortage.” Writing today on the dearth of skilled management to be found in inland cities, China Daily notes that the talent supply in inland cities hasn’t caught up with the pace of luxury expansion, and whereas staff and management in Beijing and Shanghai have steadily become more professional over the last two decades, “store managers selling luxury brands [in second-tier cities] come from a variety of fields, including the hospitality and cosmetics sectors.”

The demand for skilled management in China’s luxury industry has fueled a growing number of focused courses at universities throughout the country, most notably the Master of International Luxury Brand Management program at Renmin University in Beijing. From China Daily:

“For the first phase [of the Renmin University program], there were about 100 applicants for the program and we enrolled just 23 people. I think there will be more applicants in coming years as the size of China’s middle class grows,” said Chen Yongjun, executive vice-president of the International College at Renmin University of China.

“Most of these applicants come from service industries, including airline stewardesses and executives from enterprises, and they are all very interested in the luxury industry and believe it has quite a lot of potential in China,” Chen added.

As Jing Daily wrote last year, we can expect to see programs such as these proliferate in coming years, but the question remains whether the talent produced by these programs will really live up to consumer demand. The recent Bain & Co. study on the Chinese luxury market definitively found that luxury shoppers don’t just like better service, they expect it, whether they’re in Shanghai, Shenyang or Suzhou.

Along with other serious challenges unique to the China market, such as the country’s stiff luxury tax, low levels of consumer loyalty, the rise of online shopping and the lure of duty-free Hong Kong, in the near future luxury brands will likely find they have to bite the bullet and invest heavily in management education. Because if they don’t, then maybe China’s handful of up-and-coming luxury brands will.