China First: Coaxing or Kowtowing?


Robb Young | April 18, 2011

Our bi-weekly analysis of the must-read luxury news headlines

Conventional wisdom suggests that a market predicted to be one defined by superlatives would call for a superlative approach to marketing. Hence the growing trend for luxury brands to pass over New York, Paris and London in favour of Shanghai or Beijing to debut new products or to show their biggest, best or most elaborate offerings.

In the past few years, fashion brands have produced a series of record-breaking shows in China and automakers have increasingly been inclined to give their Chinese customers a sneak peek before anyone else.

Last Wednesday, Burberry joined the ranks of such other megabrands in this quest to show China not only that they mean business but that they are putting the country first. According to the Wall Street Journal , the British fashion brand “is outfitting its stores in China with the latest digital technology, including touchscreens for customers and iPads for staff, at the start of a world-wide campaign to shake its stiff, older image and win over younger customers.”

But crucially, the piece also noted that “China will be the first market to launch the digital retail model [while] other markets will follow suit.” Such a gesture makes perfect business sense when put into context. The firm’s CEO, Angela Ahrendts, told the WSJ that China is set to become Burberry’s biggest single market in just five years at its current rate of growth – which is already the company’s fastest.

Offering a technologically enhanced ‘debut’ geared toward China’s youth is also a strategic one, considering that McKinsey & Co. estimates that 73% of luxury buyers in China are under the age of 45.

“ Offering a technologically enhanced ‘debut’ geared toward China’s youth is a strategic one, considering that 73% of luxury buyers in China are under the age of 45 ”

It’s not just about showing the Chinese that they are already a brand’s number one priority. Size matters too. To mark the occasion of the digital debut, Burberry also threw what The Daily Telegraph’s retail correspondent called “the mother of all parties”.

In a 21,500 sq ft sound stage at Beijing Television Centre hosting almost 1,000 guests, the brand rented what is normally used as a gargantuan film and TV set for popular programmes. Here, Burberry made a digitally enhanced fashion show into a true extravaganza by flying in the band Keane to give a concert surrounded by both real and hologram models who collided with one another in clouds of dust and simulated rain.

A moment of illusion when holograms met models, making the Burberry extravaganza in Beijing seem ‘magical’

On the same day as the Burberry show, China Car Times revealed that Audi’s new model, the Q3, “will be having its premier in Shanghai rather than New York or Frankfurt as the demand for luxury crossovers in China is reaching fever pitch with BMW, Mercedes and other manufacturers planning to offer locally assembled products.”

Another way that luxury brands have been trying to seduce China with preferential treatment is by launching exclusive models, products and occasionally even entire ranges for the market. On top of all the fashion and auto brands which have been using this strategy, Reuters recently reported that InterContinental Hotels Group is planning to develop an entire new brand of hotels for China.

Keith Barr, IHG’s CEO for Greater China cited differences in taste as the motivation behind the new hotel. “There are thousands of years of history that have shaped their culture, their backgrounds and their beliefs — the way that you should arrive at a hotel and be treated, it’s just different,” he said.

Audi’s Q3 which will be unveiled in public at the Shanghai Auto Show this week

But there are more than a few luxury analysts and executives who, off the record and occasionally in print, have begun to raise concerns about what they see as overzealous efforts in China. A few weeks ago, Thierry Stern, chairman of Patek Philippe, told Bloomberg “I’m not putting all my eggs in the same basket. It’s a big mistake I think that a few brands are doing… They focus everything on China and it’s dangerous.”

More recently, Jing Daily penned a fascinating piece called, “Is Diane Von Furstenberg Overextending in China?” As a case study, it’s rather telling and one of the author’s ponderous final lines could give many a luxury executive pause for thought. “While Diane Von Furstenberg is hitting all the right keys, presumably, in her China expansion effort, hob-nobbing with media elites and art stars, poking the zeitgeist via Sina Weibo, and holding lavish events in Beijing and Shanghai, is she expecting too much from the China market, too soon?”