Fireside chat: the biggest mistakes luxury brands make in China.
China & I founder Jasmine Zhu spoke to Luca Solca at the luxury symposium by French Chamber of Commerce on Feb 22, 2022 calling for the global luxury brands to lead from China rather than localizing from afar.
BOF readers commented:
“Even in this globalized world, brands take decisions thinking mainly about their home market, partly due to fear of losing control of the branding and partly also due to a good dose of ‘contempt’ for the requirements of different cultures.”
“China may have 40% of the luxury market but it does not make them the most important. I know of luxury companies employing China envoys for feedback and direction - but then they dismiss that feedback entirely.”
"These 10 mistakes are hardly new, they are very recognizable issues for the last 10 years."
Jasmine: It all started with a paper Luca and I wrote together last year - “The 10 Most Common Mistakes Luxury Brands Make In China”. In the paper we call for global luxury brands to lead from within China rather than localizing from afar. It was first published by Bernstein and then The Business Of Fashion came to us and asked to publish it. I thought what we wrote was quite controversial, so I asked Luca. Luca said “ Controversy is good!”. So we agreed to publish it and the paper became the trending article of the week. It received thousands of comments from all over the world on social media. So we thought: “Alright. The word is out.”
Luca: China is the world’s most important luxury market but key business decisions concerning this market largely are still taken by Western executives based in Europe or the US. This was our starting point to break down the shortcomings of luxury brand management in China.
Jasmine: We believe to make the most of the enormous opportunity in China’s luxury market requires a bigger shift, restructuring the way European brands operate in the country: lead from China within rather than localizing from afar. I am a Chinese millennial, a luxury consumer myself, I work in the luxury industry and today I run my own business managing new brands’ entry into the Chinese market. Luca and I know very well these 10 mistakes are hardly new, they are very recognizable issues for the last 10 years - from the D&G ad scandal, to Burberry’s Xinjiang cotton problem, Dior’s Taiwan ‘map’ issue, and in general top luxury brands’ shallow depicting of Chinese culture, from Cartier and Burberry to Prada.
What happens when brands continue the same management style in China?
Jasmine: I think from a business point of view, China incredibly quickly became the world’s most important luxury market, a global phenomenon - in terms of market share, growth, opportunities, innovation, consumer voices, creation and adoption of trends. Sales for many of the luxury brands exploded in China in the past years. Businesswise, this is great. However, from a societal and political standpoint, China has never been so complicated, so different, and so demanding.
Luxury continues to operate in the old-fashioned way in this dramatically different and fast evolving market. There is a mismatch between what is offered and what is expected. Brands are being challenged by powerful consumers here like never before - be it over the choice of certain celebrities as brand ambassadors, the release of a product or service, or a creative campaign or marketing message.
The luxury mentality: Why is it so difficult for brands to adopt a more decentralized approach when it comes to the management of the China market?
Luca: Brands always have a very real and justified fear of losing control about their brand image, their brand message. They hire their own teams in China to manage the market in the way they are familiar with, the way they manage other international markets. What they often end up with is confusion among Chinese consumers who see an authentic European brand offering them a brand experience that is neither truly European nor truly Chinese.
What makes things so different in China and why brands need to be managed differently in China.
#1 On Politics and Creativity
In China, people don’t like to talk about politics but political influence is everywhere and affects everyone. The government has the power to change policies in any way and any time - and by this cause shifts in consumer behavior overnight. Indeed “Politics eats Strategy for Lunch”. This obviously is very different from the West, where individual freedom and freedom of expression are basic and very important rights and especially creative people like to ‘push the limits’. In China, you can be creative but you have to make sure first that what you do is within the accepted limits or the framework. Industries like luxury thrive based on creativity and innovation. However, when most international creatives are created in or near the brand’s headquarter, it is very easy for disconnection to occur with the local reality of the Chinese market, leading to conflicts over what is acceptable and what not.
#2 On Pride and Respect
Chinese people are very proud of their culture and the economic success story of their country over the past 30 years. The rise in economic power has brought along a rise in self-confidence and made Chinese people more sensitive - or you can also say more nationalistic - about how foreigners treat China or act in China. Chinese consumers want to be respected and treated as equal to their Western peers. The proliferation of social media amplified and accelerated that trend. You will not be welcome as a brand if you hurt feelings, even if you do so unintentionally. And Chinese people do not like to be lectured about national political matters. Example of Adidas, H&M is becoming a symbol of foreigners meddling in Chinese affairs: “Boycotting Xinjiang cotton, while making a big profit in China.” Adidas has lost 15% sales in China in two consecutive quarters, according to FT.
#3 Chinese values and Western Identity
Being respectful of Chinese values in the China market sounds like a no-brainer, but sometimes these values conflict with a brand’s own values or Western values. The Chinese here would like to see a “When in Rome, do as the Romans do” approach. It is expected that international brands genuinely respect the Chinese value system, acknowledge the differences and invest in local expressions of brand building and operation principles.
Moving forward, the key take-aways for global and China luxury management communities
Overall, the lesson is simple: Let China manage China.
It has become very obvious that international headquarters often struggle to manage the Chinese market and make decisions for it from afar. Almost all mistakes brands made are to some degree related to where the decisions were made, the governance of the decision-making process and how it was executed.
The Chinese market today deserves fully localized teams with the power to make decisions locally. And it is time for the Western brands and management teams to truly establish trust with the local teams and expert networks on the ground to get things right. A brand can be much more confident in approaching the Chinese market if they can demonstrate a full understanding of the cultural and political environment they are operating in, without losing their strong sense about their own identity.
BOF readers further suggested:
“Perhaps luxury management and related education and training should take place in different cultures and regions, with proper content and time split.”
“Luxury brands need a new perspective in Asia, simply understanding what luxury means based on culture would be a huge step forward...The problem is new brand managers don’t listen to old classics like “Let them eat cake!”
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