Luxury Brands Fail Chinese Quality Control Tests: What Fallout Could We See?

Study Finds 60% Of Tested Garments Substandard, Failing Inspection Of Labeling, Chemical Levels, Colorfastness As Jing Daily and others often note, one of the greatest strengths that major imported luxury brands have over their domestic or domestically produced counterparts is a perception of superior quality among Chinese consumers. This week, some of the world's top luxury brands are undoubtedly in damage control mode in China, following the release of a study that indicates the majority of garment samples tested from brands like Hermes, Versace and Dolce & Gabbana failed to meet quality control standards. These samples, which consisted of "a range of attire," according to China Daily, included t-shirts, sweaters, suits and skirts from a number of department stores and boutiques in Hangzhou, Ningbo and Taizhou. From China Daily: Defects in the manufacturing [of these luxury garments] included poor color fastness [sic], unacceptable amounts of acid and high levels of formaldehyde, which can cause skin rashes, eye irritations, allergies, respiratory problems and even cancer, the report warned. Another fault uncovered by the test included improper labeling. In response to this claim, Cao Lei, a communication director with Hermes in China, said:"Zhejiang administration took the samples in December 2009 and we were informed of the results in January 2010. It is undeniable that we have made some mistakes in labeling and we have started to correct all of the labels on the mainland, which will be finished by the end of March." Dolce & Gabana [sic], Paul & Shark and Trussardi said they have just been informed of the results and declined to comment at this time. The release of these results either couldn't come at a worse time, or were purposefully released (depending on your viewpoint), yesterday, March 15 --World Consumer Rights Day. So what gives? Brands like Hermes, in particular, are renowned for their craftsmanship and quality, so does this mean these companies are indeed lax in their inspection, or does it indicate that they've possibly been foisting lower-quality garments on the China market? It's impossible to tell at this point, since most of the companies included in the study have yet to respond. It could be that China's quality control tests for foreign brands are far more stringent, possibly unfairly so, than they are for domestic companies. However, as we are unable to find specifics about the tests or the testing authority in either English or Chinese, we'll have to leave that idea up in the air as well. Though these testing standards sound a bit opaque, Dan Harris of China Law Blog points out today that any manufacturer exporting their products, whether small or large, must be absolutely sure of what is expected of its products in China before sending the first box. Simply "not knowing" China's laws isn't a defense anymore, and companies risk major PR nightmares if they stay in the dark about quality control or consumer protection laws in China. So what could be the end result of this bad publicity for foreign luxury brands? As usual, it's hard to guess because the China market, and consumer behavior there, is somewhat harder to gauge than older consumer markets like Europe, Japan or North America. But we can safely guess that the response will follow the same model employed by other foreign companies who have been involved in quality or consumer safety flaps in China in the past, such as Johnson & Johnson (on the consumer side), HP in the tech industry, or luxury brands like Hugo Boss and Burberry (in 2006): assuaging consumer fears by (publicly) stepping up inspection standards, then taking proactive measures to increase consumer outreach (likely through both old and new media), and over time rebuilding their reputation for quality among Chinese consumers. Although a company with a deep perception of superior quality like Hermes -- who will probably get something of a boost in reputation this year anyway, with the launch of their new China-built brand Shang Xia -- won't have to work as hard as many other companies to rescue their image, quality controversies are not something any brand would want to deal with, especially in a market like China where consumer loyalties are fragile and one scandal can doom a company, or at least imperil its chances for future growth, in an instant.

Sectors

Insights

Company

Luxury Brands Fail Chinese Quality Control Tests: What Fallout Could We See?