Beyond Brand Origin: New Attitudes of Chinese Consumers Spell Opportunities for Home-grown Luxury Labels

According to a new report by the consultancy McKinsey, Chinese consumers now prioritize factors such as “value for money” and “quality of products and services” over “brand origin” during the buying decision process, having developed a more nuanced attitude toward global and local brands. The finding indicates Chinese people’s long-standing obsession with foreign labels has waned among major categories. A new attitude is quickly taking shape, which is likely encouraging news for the Chinese government, who has called for the nurturing of Chinese domestic labels for some time. McKinsey’s November report, which is based on surveys of nearly 10,000 consumers aged 18 to 65 across 44 Chinese cities, states that today’s consumers in China have very clear expectations of both foreign and domestic brands. The direct outcome of this trend is the rise of local Chinese brands in all kinds of categories, with the personal digital gadget and personal care sectors becoming two main early beneficiaries. In the fashion domain, domestic brands have also received a strong boost owing to the increasing trust they have received from the country’s consumers. The past November 11 Singles’ Day Shopping Festival has exemplified this change as well. The top-selling fashion and accessories brands came mostly from local labels such as Zhejiang-based Peacebird, Jiangsu-based Bosideng, and Shanghai-based Metersbonwe. Over the past year, a number of home-grown fashion brands including UR, Moamp;Co, and Heilan Home have all posted impressive sales growth as they upgrade their production, marketing, and branding efforts, according to domestic media reports. A previous report by domestic fashion media outlet “Mendao” even indicates that the indifference to brand origin is particularly true among the post-95 generation, which represents a significant consumption force in China’s fashion and luxury industry for the foreseeable future. As it is clear that local fashion labels have become viable competitors to international brands in the Chinese market this year, a question for luxury brands to consider is whether this consumer trend will soon spill over to the luxury industry. For years, a consistent lack of influential Chinese-originated luxury brands has bothered Beijing, which is currently initiating a restructuring of the country’s manufacturing industry. The goal is to shift from “Made in China” to “Brand China” in the coming decades. In a recent commentary by Tan Haojun, a financial commentator for the Communist Party’s mouthpiece the Global Times, the writer proactively states that China needs to become a luxury supplier and not only a consumer to “reflect the country’s status in high-end manufacturing.” “If China becomes the world's largest economy and it is still just a consumer of luxury goods rather than a supplier, it will arouse scorn in other countries and lead to doubts about the foundations of our economic success,” the commentary argued. However, it is not a simple task for China’s home-grown brands to go up the value chain to attain luxury status even with support from the government. The same Global Times article recognized the difficulty in building an authentic Chinese luxury brand in the short span of time. “The reputation that famous [luxury] brands have is based partly on the length of time they have been around,” Tan wrote, “companies that aim to become well-known brands overnight are unlikely to succeed. Products that can enter the luxury category only come from enterprises that are devoted to producing goods for a long time.” This stymied success is not from lack of trying by local players, though. Some contenders are Hong Kong-based Shanghai Tang and Hermès-backed Shang Xia. Both of them, however, have encountered many obstacles to catch up with foreign luxury players in recent years. Moving forward, it will remain challenging for the development of the home-grown luxury business in China, but a blurring line of global and local brands for younger generations has removed one of the significant barriers for local brands.

Beyond Brand Origin: New Attitudes of Chinese Consumers Spell Opportunities for Home-grown Luxury Labels

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Published December 01, 2017

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Beyond Brand Origin: New Attitudes of Chinese Consumers Spell Opportunities for Home-grown Luxury Labels