Luxury Market Success In China: 8 Tips For Increasing Appeal

    With China expected to surpass Japan to become the world's largest luxury market within a few years, if not sooner, trends in China will have ripple effects throughout the global luxury market, and understanding (or at least trying to understand) Chinese luxury buyers will likely pay off in the end.
    Jing DailyAuthor
      Published   in Fashion

    Financial Times: "Sinizing" Brand, And Catering To Cultural And Geographic Sensibilities, Key To Reaching As Many Consumers As Possible#

    We've written before about luxury brands taking dramatic steps to make their products more appealing to Chinese consumers, from emphasizing their "Chinese flavor" to creating cheaper China-only sub-brands (a strategy that we, and many others, aren't too keen on) to beefing up digital outreach. This weekend, writing for the Financial Times, John Quelch of the Harvard Business School and Katherine Jocz, an HBS research associate, go a step further and detail 8 "Must Do" strategies for luxury brands to increase their foothold and appeal in the critical Chinese luxury market.

    With China expected to surpass Japan to become the world's largest luxury market within a few years, if not sooner, trends in China will have ripple effects throughout the global luxury market, and understanding (or at least trying to understand) Chinese luxury buyers will likely pay off in the end.

    The eight tips for increasing appeal in the China market, as identified by Quelch and Jocz:

    1. Think about geography

    : A "staged roll-out" starting in larger, wealthier cities and progressing over time to smaller cities is key, as these smaller cities account for most of the country's population and wealth. Quelch and Jocz note that opening locations in poorer areas might not turn a profit right away, but will over time be the source of sustainable revenue as these smaller cities become richer.

    2. Create parallel marketing campaigns


    Brands can't just focus on one medium, but need to create, then localize, marketing campaigns that differ based on consumer age, income, and location.

    3. Focus on value


    Chinese consumers need to feel that a luxury product is "worth the price," and offers exceptional quality or a great deal. Since most Chinese buyers are new to luxury and have relatively little brand loyalty, brands need to make sure they're seen as a good value, whether by having regular cash-off deals or other means.

    4. Remember “1-2-4 families”.

    With the one child policy, the new Chinese "nuclear family" is now a one-child, two-parents, four-grandparents phenomenon. The rise of the "little emperors" -- only children upon whom parents and grandparents lavish gifts and attention, means that products like computers and educational games and toys are seen as a good way to help these children get ahead later. Even at older ages, these "little emperors" have comparatively high disposable incomes, since they tend to live at home until a later age and freely spend their parents' money on fashion, accessories and technology.

    5. Master distribution


    Luxury brands need to take the fact that distribution outside China's modern metropolises remains comparatively fragmented, and plan accordingly. The difficulties inherent in China's distribution are well documented in recent books like Chocolate Fortunes.

    6. Collaborate with local competitors


    A good way to learn about the lay of the land is to join forces with local competitors through joint ventures or by acquisitions. Quelch and Jocz note the success of Volkswagen's joint ventures with Shanghai Auto and First Automobile, and L'Oreal's acquisition of domestic cosmetic brands Mininurse and Yue-Sai as evidence of the efficacy of localization through collaboration.

    7. Stay close to governments.

    Quelch and Jocz astutely point out the involvement of the government in SOEs and other areas of business in China, and call attention to the fact that government relations and good working relationships with regulators and officials is crucial for success in the China market.

    8. Localise your brand.

    Roping in local sports or entertainment stars is a good way to tap into nationalist sentiment throughout China. Localization strategies that respond to local preferences or tastes -- which differ greatly based on geography -- and ensure the transliterated brand name sounds "right" in Chinese are the most effective.

    While several of the tips put forth by Quelch and Jocz overlap with those noted by the Pao Principle's Patricia Pao earlier this year, most notably the importance of consumer education, the effects of the one-child policy on consumption, the staggering fragmentation of the Chinese market as a whole, and the priority that must be placed on suiting marketing and advertising to Chinese cultural particularities, others are helpful in getting a sense of the sweeping differences that coexist in modern China.

    As the FT article concludes, the two undeniable keys to success in the China market are big in­vest­ments and intelligent localisation of the marketing program. For brands that can't manage huge campaigns centered on these two things, however, the eight "musts" of Quelch and Jocz, and Pao's 10 Things Every Luxury Marketer in China Should Know can offer some hints about where to begin.

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