Yesterday, at the invitation of WPP Group and China Policy I made a day trip to Shanghai to present my views on the China luxury industry, past present and looking forward to 2020. Although tiring, and with regular delays, flying in China provides another great insight to consumers, brands and the changes taking place in the country.
As my presentation had touched on all of these things and my mind was on brands, I was expecting a bit of a rough brand experience on the China Eastern Airlines flight back to Beijing, where usually getting a pillow is even a struggle. Unexpectedly, I was on a brand new China Eastern Boeing 777, with new cabin layout, well trained and fully bilingual crew, descent meal and individual large touch screen entertainment system with wide selection of international TV and movies (in economy).
I was blown away with their upgraded service and judged it the best domestic flight experience in China I ever had and, I’m now willing to change my allegiance of airlines to China Eastern (from Air China). Its impossible for all China Eastern flights to simultaneously upgrade to this level of service, but in terms of the brand reinvigoration they have made one giant leap and now can roll the new service out across all routes.
This is something China is great at! They suck at something like fashion design, airline service or consumer brands for a very long time and then suddenly in one fell swoop they put all the technology and knowledge they have absorbed from the rest of the world into one major upgrade and bamm! – they are instantly globally competitive! Airlines is just one example, its happening with internet companies, mobile phones, automobiles, you name it, China consumer brands are coming.
In Beijing we pulled up next to a China Southern Airlines Airbus A380 arriving from Guangzhou. Does anyone know of other countries operating A380s (the largest passenger aircraft in the world) on domestic routes? I’d be interested to know where else has enough passengers to justify using these massive jets on short haul domestic routes and surmise that most other global carriers would save the A380s for long haul international routes.
As people traveling by air tend to fit the white collar or wealthy consumer demographic that premium brands love to target, time on the road gives the opportunity to take in the latest fashion and luxury advertising campaigns and new store openings the airports. Its obvious that despite China’s slowdown in luxury spending, travel retail and media spending on airport advertising are still going strong.
Besides dissecting the ins and outs of China’s airlines industry and media planning, the other great thing to do on the road is people watch. Again, because many travelers are white-collar business people or at least from the middle class, prolific adoption of international fashion and luxury brands (often head to toe) is easy to spot. The number of people seen using iphone 6s is also creeping up, and I’m sure a lot of these were purchased overseas in Hong Kong, or quite likely on the black market for a premium by those who just cant wait.
My presentation on the China market was broken into three parts: 2008 to 2012 where a lot of brand building in China was done through store expansion and big events (as Mao Suit covered back then), the anti-corruption and other market shocks that hit simultaneously around 2012, and finally what the China luxury market is going to look like in 2020.
As we approach 2015, brands are waking up and acknowledging that the market is in a “new normal for consumption” and never going back to the pre-2012 days of hyper growth. This demands brands take a new approach to their China strategy and while they busy themselves with consolidating current operations, its also time to re-assess and form new China strategies for the next five years to get us to 2020.
Discussing five-year strategies for the biggest global luxury market with some of the leading brand executives in the fashion world was enthralling. At the end of the day, winning the Chinese consumer over the long term will not be rocket science, in fact quite the opposite. China is going to follow a trajectory where it becomes a normal consumer market like other developed economies around the world (albeit much bigger).
By “normal” I mean that consumer fear from the anti-corruption drive will diminish and people with (legitimately acquired) money and desire to purchase fashion and luxury items will feel at ease to do so. By “normal” here I also mean that China will become a regulated and competitive market where brands wont be able to rest on their laurels and assume that their logo, brand power, Chinese consumers need for status or gifting inspired purchasing will be enough to drive customers into stores.
Instead, big brands will have to do what they do in other markets and build sustainable businesses over time by competing for consumers through brand promise, heritage, product design and creativity and most importantly a truly unique and luxurious customer experience (both in store and out).
Overall, this may have brand executives cowering as they fail to achieve double digit growth each year, but ultimately China will become a much healthier consumer market for all.
Speaking so much of brands, its not gone without my attention that Mao Suit is currently lacking a defined story or USP of what it is all about. As I dig deeper into the business of fashion and luxury I can see that the rules of brands apply just as much to fashion as they do airlines, and to international companies as they do Chinese ones.
So forgive the continued randomness of Mao Suit you’re experiencing as I continue to refine its narrative. Despite this, Danwei has been kind enough to include Mao Suit on its 2014 Model Workers China blog list.
As I skipped posting last week, this week’s newsletter is extra long (and maybe a touch out of date).
Meet Yang Li, a designer putting China on fashion’s biggest stage – Washington Post
BEIJING: Online retail sales in China are growing more than four times as fast as overall retail according to official figures, and the traditional retail sector is going to have to develop greater agility if it is to keep pace with consumers.
China spends $1.5 billion pampering pets – CNN Money
It’s the latest growth industry in China: pet lovers are spending billions pimping their pooches.
E-commerce doubles up at symposium – China Daily
Liu Qiangdong, founder of e-commerce company JD.com Inc, and Luo Feng, chairman of Internet direct-selling platform IZP Technologies Co Ltd, were both invited to attend the economic symposium to offer grassroots facts and complaints to Premier Li Keqiang.
This is very significant and the crux of why Mao Suit has been talking about policy lately. With the government needing continued consumption, jobs growth and lives Chinese companies going international, right now e-commerce is answering these issues.
A trademark spat between Chinese e-commerce giant Alibaba Group Holding Ltd and rival JD.com flared into public view after JD published an Alibaba letter urging publishers to be careful about advertising in promotions for China’s annual “Singles’ Day” spree, the world’s largest online shopping day.
Why analysts are bullish on Alibaba – Financial Post
Apple’s Tim Cook and Alibaba’s Jack Ma speaking separately at a technology conference yesterday, said they’re open to working together on projects that would turn phones into tools for buying and selling stuff.
A possible alliance in electronic payments between two of the tech world’s hottest companies—Alibaba Group Holding Ltd. and Apple Inc.—could open new doors for both in China, the world’s biggest e-commerce market.
Some luxury brands Macao stores are (or at least were) amongst the best performing in the world.
DOING BUSINESS IN CHINA
How LinkedIn Cracked the Chinese Market – Bloomberg
Alibaba Group, with its record-breaking $25 billion initial public offering last month, may be the poster child for China’s growing influence on technology, but numerous other players from the People’s Republic, some with Beijing’s official backing, are aggressively moving into the U.S. market through expansion and acquisition. At the same time, a growing number of American companies can’t exit key parts of the business fast enough.
“Chinese online retailers are attracting a lot of attention,” said Ms. Chen, who was born in Beijing but moved to the U.S. when she was 14. “The important factor, more than just compensation, is growth and opportunities.”
JD hired Ms. Chen as one of the first participants in its new International Management Talent program, which recruits overseas M.B.A. graduates and provides them with a fast track to become executives at the Beijing-based company. JD launched the program this year, and the first-year recruits joined the company in August.
Now that it’s apparently the third largest smartphone maker in the world, China’s Xiaomi needs experienced heads to help it build its business outside of Asia. And that’s exactly what it’s getting. TechCrunch understands that the company has completed a significant international hire, poaching Donovan Sung, who was Spotify’s first product manager in the US, to run its international product development team in a role based out of Beijing.
Xaiomi’s Hugo Barra doesn’t like to be called a copycat. He used a conference appearance Tuesday to point the finger back at Apple, arguing that iOS and the iPhone have taken their fair share of “inspirations” from Android as well.
Beijing’s massive Z-innoway startup complex makes your local co-working space look pathetic – Tech in Asia
The accelerator boom (or, as some would say, bubble), is now sweeping through China in full force. From its humble beginnings as a neglected street of dilapidated bookshops, Haidian Book Street has been transformed into Beijing’s concentrated effort towards replicating that Silicon Valley “fan’er” (Chinese for “vibe”) domestically. In June 2014, Z-innoway (the Z stands for Zhongguancun, Beijing’s tech hub) opened its doors to a series of startup cafes, accelerators and other startup ecosystem players.
LIFE IN CHINA
Everyone is leaving China – Medium
….I will continue to defend China, but the direction this country is going in is no longer a laughing matter, no longer a simple dinner conversation.
What’s happening here is scary, and I am slightly scared to be writing about it. Gotta puke it out. Here’s to sharing my thoughts and to not getting deported….
China’s desire that blue skies and traffic-free streets greet world leaders at a summit in Beijing next week — after air pollution in the capital reached hazardous levels at least 10 days so far this month — is prompting the city to ask residents to go away.
Beautiful weather the last few days and city seems quiet. Flights to Southern China resort city of Sanya have been booked solid all week as Beijing residents take advantage of unexpected holidays.
China Jockey Club does not appear in official registration documents and several organisations that were reported to have been partners denied any involvement