Can China produce its own luxury brands?

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Have you ever seen any of these logos? Are you familiar with any of them? When I asked people around me to name Chinese luxury brands they know, they all looked at me perplexed. Some Chinese fellows had to think for a few minutes before they were able to provide an answer, however the brands cited were all different.

Chinese consumers are known to be generous buyers of luxury products and the world’s most active shoppers abroad. Unlike Japanese consumers who favor local brands, Chinese typically prefer foreign brands for the rich cultural heritage these products convey. Chinese consumers purchase products that have been around for centuries, such as Louis Vuitton bags and Rolex time pieces in Switzerland but reject newly developed brands that lack the timeless sense of identity or unconventional alternatives like German watches or American leather bag. However, this trend is changing and the Chinese consumers’ taste is evolving into something more sophisticated.

Despite the fact that China has historically been a substantial market for luxury products, the country has struggled to develop its own luxury brands. Nevertheless, China is eager to produce elite local brands and has accelerated its effort over these few past years. Some Chinese brands today are already perceived as “luxury” products by local people. Notable examples include Lao Feng Xiang (jewelry), Zhe Jiang Ming (jewelry), Maotai (wine), Wu Liang Ye (wine), Shanghai Woo (fashion), Goldlion (suit), K-Boxing (casual wear)…

What is the potential for locally grown brands to achieve luxury status?

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Kweichow Moutai 106 Proof – $129.99

First of all, how is “luxury” defined in the context of the Chinese market? The word “luxury” seems to be used everywhere and present in every tag line of commercials. According to existing studies, shoppers around the world focus on several key attributes when trying to determine whether a product is truly luxurious:  reliable functionality and quality, rich cultural heritage, history of excellence, and long-term durability. In general terms, luxury products convey a unique of sense of identify often associated with qualities like exclusivity, scarcity, price, consistency, and excellence.

Second, how is the “made in China” label perceived today? The “made in China” tag has been for a long time associated with affordability and sub-par quality. However, today the infamous tag is now shifting from low cost and low tech to high tech in the minds of consumers. Even though the negative stereotypes are still difficult to overcome, the “made in China” label is changing and is clearly different from what it was 10 years ago. Yet, globally “made in china” products are far from being considered as luxury.

So what about those Chinese brands considered as luxury by locals? Considering the 7 companies mentioned above, they can be split up into 3 categories: jewelry, spirits and textile.

Lao Feng Xiang was founded in 1848 in Shanghai and is one of the oldest Chinese jewelry brands. The company’s vision is highly embedded in Chinese traditions and beliefs. Lao Feng Xiang molds their gold into meaningful symbols such as phoenix and dragon which have very significant roles in Chinese culture and religions.  Furthermore, the company successfully expanded abroad and adapted product designs to different cultures in order to appeal to the young while maintaining traditional elements.

Maotai is a brand of Chinese rice liquor originated in Guizhou during the Qing dynasty (1644-1911) and is now produced by distiller Kweichow Moutai. Maotai has always been a nationally renowned brand since its creation, and is today China’s national liquor and most expensive spirit. What can its success be explained? Legends about Maotai‘s health effects such as its mythical healing powers along with Mao ZeDong’s offering Maotai to U.S. President Nixon in 1972 helped boost the brand’s reputation. The demand for Maotai was so high that the spirit became exclusive – the signature red and white bottles are so rare that it is almost impossible to buy one in the open market. Rich history and association of mythical beliefs were instrumental in securing Maotai’s unparalleled popularity in the Chinese spirits market.

Shanghai Woo was founded in 2002 in Shanghai, the company specializes in production of scarves of the finest quality. The scarves are made of the highest quality silk from Suzhou and cashmere from the best artisans of Inner Mongolia. Stephen Sun, the owner of Shanghai Woo understood the importance of culture in the luxury market and wants to prove to the world that “made in China” scarves can rival any western brands in quality and design.

In addition, it is important to understand the context in which luxury brands emerge and the crucial role cultural heritage plays in the process. Most world luxury leading brands originated a hundred years ago in developed and prosperous countries, during that time China was deeply entangled in international and civil wars. This period of Chinese history was not conducive for the development of luxury brands. Today China’s political and economic environment has improved significantly and offers attractive opportunity to grow local luxury brands.

Finally, it is also significant to note that China’s recently introduced anti-corruption campaign adversely affected sales of luxury goods companies. Foreign luxury brand such as Louis Vuitton, Gucci or Burberry are facing tough times in China as most of them plan to scale-back their expansion in the country.   

Barriers

Wu Liang Ye Liquor 106 Proof - $199.99
Wu Liang Ye Liquor 106 Proof – $199.99

Chinese consumers’ own skepticism about the quality of local brands appears to be the biggest challenge preventing the locally grown brands from achieving their full potential. It will be difficult for native brands to overcome the old stigma from Chinese and other consumers. Prioritizing quality over quantity is critical for Chinese companies; high quality needs to be part of the brand’s image for it to be recognized by the public. Expanding abroad along with hiring famous actors to represent the brand seems to be an effective marketing tactic to boost products’ brand image both domestically and internationally.

However to achieve an international reputation and expand abroad successfully, companies have to be thoughtful about their approach and adapt themselves to the host countries. Especially in terms of management and communication along with the services provided as the product alone does not make a luxury brand.

China is now experiencing a period of dramatic transformation that is quickly changing the competitive landscape for foreign luxury companies. Furthermore, China’s fast growing middle-class and demand for luxury goods create a market ready to greet new locally grown luxury products.

As these political and economic changes take place, powerful Chinese brands should leverage the opportunity to expand and grow popularity both at home and abroad. To accomplish this, local businesses will need to focus on delivering quality, as well as learning how to empower its country of origin in its own future brands.

To conclude, Chinese brands surely have high potential to establish worldwide luxury brands.

Cover photo credit: epSos.de http://bit.ly/1XpmRje

Picture courtesy: Alvin Smith,  http://bit.ly/1IeOnt4

Picture courtesy: MorrisonDM  http://bit.ly/1RgD0rE

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