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How to Seize the China Opportunity, Beyond Store Openings

  • Divia Harilela

BEIJING, China — According to Bain & Company, a consulting firm, China is currently the world's second largest consumer of luxury goods, ahead of Japan and second only to the United States. McKinsey forecasts that by 2015, China will account for around 20 per cent, or 180 billion renminbi (US$27 billion) of global luxury sales.

With numbers like these, it's no surprise that a major land grab is underway amongst fashion brands eager to open new stores in China. But rapid retail expansion is only one part of a comprehensive strategy for seizing the opportunity in China. Equally important are a focused approach to local PR and product strategy.

Local PR and Marketing

Currently, the most popular way for brands to build local awareness is to host large-scale, buzz-friendly events like Miu Miu's recent 1940s-themed fashion show at Shanghai's Park Hyatt Hotel. But while grand events like this certainly make a statement about a house's spending power, some experts question their long-term impact. "It's burning money — you feed a lot of people who are not your clients, then there's another party and people forget," said former Richemont Asia Pacific CEO and luxury consultant Francis Gouten. "It's better to tailor make events to hit the potential clients [on a more personal level] such as VIP dinners."

Also effective are educational activities, Gouten continued, like the kind of historical or archival exhibitions that have been used by brands like Comme des Garçons and Hermès. "We do lots of levels of education," said Paul Cadman, CEO of Ferragamo Asia Pacific. "We've done several events where we imported part of our museum from Florence or brought artisans over," he continued. "Consumers are hungry for information and we need to let them know why our product is luxurious or has a certain value. If you see what the brand is about, it's likely you will have an emotional connection."

"I believe the goal is to get the consumer to understand the concept of the brand," added Nicole Chen, founder of NC Style, a consultancy that helps brands launch in China and counts Y-3 among its clients. "It's not just about the name — you need to give people a reason to want to buy it," she continued. "I believe Chanel became a bigger success in China because of the two films released about Coco Chanel. People in China really respect the stories and the history."

In particular, stories that focus on craftsmanship or savoir faire resonate with Chinese consumers, said semiology expert and consultant Laurence Lim. “Certain products such as perfumes and diamonds have prestige because the Chinese still do not have the craftsmanship to make these products,” he said. “So it’s important that luxury brands communicate about their craftsmanship and differentiate themselves from other brands. There’s an appeal in how these products are made. This strategy is working like crazy.”

Tailored Product and Merchandising Strategies

When it comes to product strategies, a number of brands have experimented with China-inspired items, from Zegna's mandarin-collared shirts to Ralph Lauren's cheongsams. But experts advise that it is best to avoid these clichés.

"You cannot change your product completely," said Gouten. "It's like Shanghai Tang having a mandarin collar — it's just a gimmick," he continued. "[The Chinese] want to buy the name, the product and the quality. You have to be yourself, come with your DNA and be as strong as you are in your own country. Don't try to change your identity and don't try to be special for China."

“They don’t want China-inspired products," agreed Lim. “But you cannot generalise, it’s a balance,” he continued. “Brands can do unique products, but you need to keep the Western perception of luxury.” There are less blatant ways to connect product to Chinese culture, advised Chen, pointing to artistic collaborations like those recently used by Diane Von Furstenberg and Dior. “Try to bring the Chinese culture into your brand, but not through obvious ways such as Chinese design,” she underscored.

Instead, brands should focus on promoting their most unique and defining products: Chanel's 2.55 handbag, Burberry's trench coat, Cartier's tank watch or Ferragamo's Varina ballet flats, for example, that are an iconic part of the company's history.

Some firms, like shoe designer Rupert Sanderson and sunglasses manufacturer Luxottica, are making localized products in a way that’s less about design and more about fit. “I think right now it is a smart way,” said Chen. “Many Western brands have certain cuts and styles that don’t suit the Chinese consumer.”

In terms of merchandising, there are certain product categories that offer significant opportunities in China. In a culture where gifting is prevalent, small leather goods are extremely important, while status-oriented items like expensive watches and monogram products (logos still rule the roost) also resonate strongly. Thanks to the Little Emperor Syndrome, a by-product of China's one-child policy, childrenswear is also an important product category. Indeed, Burberry's new Beijing flagship houses the brand's biggest ever childrenswear department. Luggage is also a key focus. "We know people are travelling more than they did, especially in China, so the luggage business is a category that has developed dramatically," said Cadman.

But overall, it’s important to note that the China market is evolving extremely fast. “Historically, Chinese men didn’t like to wear suede shoes but now they do,” noted Cadman. In this context of rapid change, it’s critical that brands keep a sharp eye on evolving client tastes, closely monitor their sales figures and be prepared to adapt their strategies and execute accordingly.

Divia Harilela is an editor and writer based in Hong Kong. She is founder of The D’Vine, a blog focused on the luxury and fashion market in Asia.

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The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
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