Even the briefest study of international media should turn up clear indications of the power of the Chinese consumer. Bain & Co’s “China consumes 32 per cent of global luxury” is perhaps the best-known indicator that any luxury business intent on finding success really needs to have a strategy for finding success in China.
First, there’s the “how?”. You have to think digital. You need to work with KOLs (key opinion leaders), China’s supercharged version of the West’s “influencers”. You have to understand all the apps, platforms, bells and whistles expected by your customers – spread out over the world’s third-largest country, where “small” cities have populations of over 5 million, and big ones have populations of 20 million – each with its own distinct dialect, culture and history.
The sheer size of the market makes the urge to connect with the Chinese consumer understandable. The “China Opportunity” offers perhaps the greatest potential for profitability that the World has ever seen. Yet for all the savvy marketing campaigns, digital calibrating, consumer targeting and app configuring, one simple fact is often overlooked.
And that’s to do with the “where?”. After speaking to some true China experts, it is apparent that the simplest way to succeed in China – to connect to the consumer and win in business – is to actually be here.
That may sound obvious. Yet, quite often, strategic decisions about doing business in China are being made outside China, by people who have rarely even visited – let alone lived in – the country.
I met up with Barry Lin, general manager of China’s travel booking giant TuNiu, when he was in town visiting ITB China. He said, “In China, everything is about trust, partnerships and knowing each other. What that means is the top people, the leaders of a brand, need to come to China – and for some time. Not just a few days saying hello to people, but for several months – bring your family if you have to. Because from this business sense, it’s not only about ‘how you talk to the Chinese consumer’, the business reality is who will do business with you and who will help you.”
There are still a number of luxury brands operating on decisions made without locally-based expert guidance. This is can be fatal for a number of reasons – and it’s not only on aspects such as strategy and executive decision-making.
Focusing on the question of how a brand can connect with the affluent Chinese consumer, the answer may involve something like finding the right retail space, selecting the ideal e-commerce platform, “doing KOLs”, and the like. This is all fine, but we are still talking about business in China – and business in China runs on guanxi. This does not mean that underhand interactions take place; it simply refers to the fact that it’s relationships – long-term and based on mutual trust – that make things tick.
Perhaps your luxury hotel or resort is negotiating a deal on a travel app. Maybe there’s media coverage to be sought. Or what if a popular emerging artist is seeking to collaborate with a luxury brand? Gaining beneficial outcomes in such instances often depends on the on-the-ground relationships that can turn ad hoc chats into top-down, successful business decisions.
Claire Chung, China general manager of YOOX-Net-A-Porter, told me how companies cannot rely on an overseas HQ making local decisions: “Localisation is a big focus at the YOOX Net-A-Porter Group and China had its own dedicated China plan. We all know of many companies entering and exiting China simply because they replicated the global model and never bothered to localise and truly try to understand the market and its evolving luxury customer base.”
Queennie Yang, editor (Asia) of VOGUE International, also said that one office base cannot support nationwide decisions: “Before you judge anything, please listen to the local experts for their insights and rationale. Spend more time communicating with them, give them more respect. Please remember, China is as big as a continent – it is not only a country with one culture. People in different provinces have various differences. For example, don’t assume that one office or one staff in Hong Kong will be able to well-understand all of China.”
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It’s understandable that, because of timeframes and budgets, not every company can open offices across China. If that’s the case, other ways to find local acumen should be considered – perhaps partnering with the right agency, or finding an expert on the ground who can start a personalised recruitment drive, and so on.
Whatever the methodology, if you want to succeed in China, you have to be here in order to understand China in the first place.
This article originally appeared on The Luxury Conversation.