Retail Therapy
According to World Luxury Association, China will overtake Japan as World’s Largest Luxury Good Market by 2012. WLA also showed that Chinese consumers have spent USD10.7bn worth of luxury goods (excluding private jets, yachts and luxury cars) in 2010.
“China has more than 200 million luxury consumers, many of whom are based in its second and third-tier cities”, Business China says.
There is also a rumor about the Chinese government considering dropping the luxury tax, which I believe will be a major catalyst to shoot the domestic luxury goods spending off the sky.
The main purchase barrier for the local consumer to buy the goods in China is really the 20-30% tax and limited stock. Being tax free, with the brands willing to stock up their collections in their China branches, I can imagine there will be long lines in front of the flagship stores in China, just like those in Hong Kong, Tokyo, Paris and Milan.
However, what I am more interested to see is how those luxury brands would manage the shopping experience to maintain the top quality services when the tidal wave arrives.
www.shopperculture.com
“I’m going to spend about HKD200K this weekend…” said Mr Chen from Da Lian in the local TV news interview in Causeway Bay, Hong Kong.
If you go to Causeway Bay, Hong Kong, during the weekend and hang around Sogo, Time’s Square or Harbor City in the TST area, you will see many local looking people pulling suitcases on the street and around the malls.
Firstly, they are not locals. They are Chinese tourists although technically they’re not tourists either as they generally don’t do much sightseeing in Hong Kong. What do they do then? They go shopping, aiming mostly at premium goods, clothes, electronics, jewelry, and even infant milk formula. Oh, and they travel to Hong Kong to eat too.
I have a Shanghainese friend who travels to Hong Kong every month to re-stock her closet. Below is her typical weekend’s “travel plan”.
- Fly out after work on Friday
- Right after arrival go for dinner and then clubbing
- Get up on Saturday noon, go for dim sum or to a local restaurant
- Buy a new suitcase
- Start in the malls in TST or Causeway Bay area, intending to fill the suitcase to the max
- Go back to the hotel to drop off the suitcase and get ready to go out and enjoy the night
- Dinner and clubbing in Central or visiting the night market
- Get up around 11am on Sunday, having no time for breakfast
- Rush to LV or Prada to buy a handbag on the way to the airport
- Fly back to Shanghai by late afternoon for a family dinner
This is what the locals call “Xue Pin”, which means blood bath style shopping. Personally, I think it sounds very tiring and expensive, but these “professional” shoppers find it fun and indulgent. Oh, and I forgot to say that they would “check in” everywhere they go and post everything they saw on Weibo assuring that their friends would follow them in real time.
www.shopperculture.com
What’s the different between auto shows in developed markets and in China?
One is an exhibition for brands to showcase the cars that will shape the future of people’s daily life; more fuel efficient, more environmental friendly and offering more driving pleasure. One is a giant showroom that pre-sells new models to different target groups of car buyers; more salespeople, more promotions, more gimmicks.
According to the online news, 100,000 tickets were sold to the general public for the opening day. Also, more than half of those attending are looking to buy a car, so are visiting the auto show for more than just window shopping.
This year, a local car dealer offered an ultra premium “package” deal for RMB150 million. The package included the longest, gold-plated, stretch Rolls Royce in Asia (RMB42 million), a premium emerald jewelry set (RMB100 million), a limited edition Hermes bag (RMB3 million) and a rejuvenating trip for two to Switzerland for an injection of sheep placenta (RMB5 million).
According to the Shanghai Morning Post (新闻晨报), the dealerships owner came up with the unbelievably expensive package based on an insight into premium car buyers. “Normally, the husbands want to buy the super cars, but their wives will disagree and influence their decision. So we offered a package that is more attractive to the wife so the husband can buy his dream car in peace. Of course, they need to pay higher price for it.” commented the dealer.
This tactic sounds very familiar, but to apply it on such a scale in an international auto show…that’s something new and something very unique. I guess it only happens in China or maybe somewhere like Dubai.
By the way, the RMB150 Million Package was sold to a local property developer from Zhe Jiang Province at the end of the show.
eric.wong@integershanghai.com
shopperculture.com
We had a long winter in Shanghai and thank goodness it’s finally over. During last few months, I’ve had so many hot pot dinners with friends in China. Amongst the many hot pot restaurants in Shanghai, I have to say Hai Di Lao Hot Pot Restaurant comes top for me.
They were one of the fastest growing restaurant chains in China last year. There is always a big crowd in the waiting areas so on any given night, you will have to wait for at least 30 minutes for a table. Despite this, people are still willing to wait and return, time after time. The secret is simple: friendly, attentive, efficient and smart service.
Firstly, when was the last time you received a free manicure or shoe-shine while waiting in a restaurant? And when was last time someone passed you hand lotion after you washed your hands in the restaurant’s restroom? Not to mention that every staff member will greet and serve you with a genuine smile. I’ve lived in China for 14 years, and in many other cities in the region. Hai Di Lao Hot Pot Restaurant offers the best service within its price range, and perhaps even exceeds the standards of some of the five star hotels.
I once asked the waiter why they all look so happy at work because honestly, you don’t see that often in China. The answer was, “We are all grateful to work here. Our company takes really good care of us. They pay us well and provide meals and decent housing. We all enjoy working here…” Again, he said it with a smile like he meant it.
Oh, I forgot to mention the food… but who cares?! It’s hot pot, so as long as it’s fresh and clean, they all taste the same with the sauce. I’ll be going back to have more hot pot with my friends even in warmer weather.
Hai Di Lao Hot Pot Restaurant chain made RMB 300 million revenue last year. I’m sure there are a lot of different reasons such as management and sound operation strategies etc. behind the success. But I just want to point out that when your products become a commodity, your people/service will determine your business growth. Sometimes, the key to success is rather simple, take good care of your staff, and they will take care of your business…
eric.wong@integershanghai.com
shopperculture.com
On Tuesday 22nd February, Best Buy, the world’s biggest electronic store network, closed down their operations in China. The media announcement highlighted the ongoing focus and investment in local acquisition Five Star Electronic, but even so the news resulted in articles, reports and analysis, both on and offline, about the alleged flawed business and supplier strategy that caused the closure.
So will European Electronic Giant, Media Markt learn some lessons from Best Buy or be the next casualty? So far, it seems the new kid on the block is paying attention.
I loved the almost instant ad campaign where Media Markt tells ex Best Buy customers not to worry and that they will take over was the ideal way to catch the wave. It’s reminiscent of the Nike Liu Xiang campaign. The ad sets a very credible and positive brand image at a critical time. Maybe Suning or Gome were about to do the same, but Media Markt stepped up first. There must have been a pre-agreement between the two companies but to the general public, it’s an heroic statement as a new comer.
I enjoy shopping in Media Markt. The store is clean and bright and I can play with most of the gadgets without being hassled by salespeople. This breaks down a purchase barrier for a customer who does not want to get involved with potentially aggressive sales tactics. And I really love their cashier system, which allows the shopper to minimize check out and Fa Piao printing time. Overall it’s an innovative shopping experience for China.
Media Markt seem to do almost everything right, except the most crucial factor…the pricing. This is a very complicated, controversial and realistic issue. Media Markt is not just competing with other electronic retailers. Tao Bao is also their key competition with cutthroat pricing and much deeper penetration. Shoppers often go online to research for the best product for the lowest price, then they go to the actual store to test the product and bargain based on the price they found online.
Using value added service and a distinctive shopping experience to subsidize pricing may work in the developed markets, but bargaining is part of Chinese culture. Yes, shoppers are getting more sophisticated, and may be willing to pay for value adds, but we are just not there yet. One foreign retailer, IKEA has sustained and grown its business in China through its attention to Pre-Tail, Retail and Post-Tail with a fixed pricing. There will be more foreign retailers succeeding with a similar approach. Let’s see if Media Markt can. With a flexible and innovative pricing strategy I believe it could become an iconic retailer in China.
www.shopperculture.com
eric.wong@integershanghai.com
Retail Therapy