Understanding the Chinese consumers' desire to Trade Up and Stand Apart

We’ve been interrogating China a lot over the past few weeks…. looking at both how the West views it as an opportunity as well how the domestic Chinese market is evolving.

 

Looking in - there has been a lot of analysis and talk around China’s economic growth ‘rebound’ – alongside what looks like an over exaggeration of companies returning home from Asia, or re-landing manufacture back home or into cheaper Western manufacturing centres.

It’s probably a good thing that people seem to have walked away from viewing China as either the saviour of Asia or of the world, and while there is a lot of scepticism about the growth prospects for China, we don’t see any of the respected sources predicting a hard landing. For investors, the big talk is about growth and expansion potential in China’s Tier 3 and 4 cities. While not as obviously dynamic or ‘brand advanced’ as the Tier 1 and 2 cities, they still represent truly huge markets for both domestic and international brands. The skill is going to be choosing the right timing – ahead of the wave or riding it - and a willingness to deliver products truly appropriate to these culturally different regions.

From within - the Chinese consumer continues to rapidly evolve. Certainly the appetite for authentic luxury brands by the truly affluent shows no sign of abating – but with over one million multi $ millionaires in PRC, why would it? But the watchword is, as ever, authenticity. Brand owners like LVMH are putting their biggest bucks, best people and best ideas into China – and that’s the key to their continued success.

 

The emerging middle class – the Sugar Generation – are using their rapidly growing disposable income and with that becoming extremely brand and quality savvy. While they no doubt like to show off brand logos in ways that Western eyes may see as immature, they are far from naïve. Brands are not bought into at any price or without consumers first appreciating the story or culture of the brand. Much of their knowledge is informed by a blogosphere awash with brand commentary and insight – not a new phenomenon, but one the Chinese have grasped with a fervent enthusiasm; some fashion bloggers have 10m+ regular followers.

The opportunity and challenge for premium Western brands considering entry or looking to develop their offer is their ability to understand the Chinese consumers’ desire to ‘Trade Up and Stand Apart’. JS

A Perspective on China's Growth Rate

We were meeting one of our US based clients earlier this week and during a discussion on whether the Chinese economy had fallen behind the pace we used the following reference to scale the current speed of China’s growth…

"China creates a Greece in 12.5 weeks. Since 2010 China has created an India".

The source of the quote was Jim O'Neill, the Goldman Sachs economist who invented the BRIC acronym.

Given the state of the Greek economy it generated a few quick gags at the expense of the drachma but is still an astounding statistic. JS

It's all about relevance

CRICKET appeared on the Ten O’clock News last night – well to be accurate, our offices  appeared  because we live in the same New Oxford Street building as the Jessop's flagship store featured in all the news feeds! However, no sooner had we started reflecting on the brand implications of Jessop's unsurprising fall into administration after 77 years trading, than the Danish luxury sound and vision brand Bang & Olufsen announced their ‘strategic’ closure of 125 European retail stores.

Is there a link and are there any lessons for the larger brand community?

Well the primary link appears to CRICKET to be all about relevance – or lack of.

In June of last year Jessop’s probably felt like some latter-day plague victim, watching the closure of the Jacob’s Photo flagship store opposite and knowing that it was only a matter of time before the High Street Irrelevance virus hit them too. 

It was largely death by Internet but there are some other factors as well. Fewer people are buying ‘never with you when you want it’ cameras now they have a perfectly good camera in a smartphone that uploads seamlessly onto their social media site. Those who are buying cameras, and who do want advice, trust the web forums more than any minimum wage spotty sales assistant and it’s a click through to purchase (not to mention probably a cheaper price). Knowledgeable enthusiasts want to go to the specialist independent where the person behind the counter is a keen amateur, knows their stuff and is able to build a relationship. Jessops were caught in the killing ground – and didn’t have time to reinvent themselves. Interestingly, our flagship store underwent a re-invention only 9 months ago… but apart from being smarter, the actual offer didn’t look any different from what was already there. It certainly wasn’t either an amazing photographic experience centre, or a re-invention around personal advice or service.

B&O have pulled the plug (at a cost of £11m) on the European franchised B&O store network it built up over the past few years due to “a significant underperformance” of the stores. They are also spending a further £10m buying themselves out of their existing dealer arrangements in BRIC markets where they are focusing their growth. Our experience of B&O stores across Europe is that they are little more than glorified showrooms… a limited sense of anything that could be called a brand experience centre. When they have control of their brand in BRIC markets it will be interesting to see how they handle it. 

The B&O brand today is much more than the bad old days of a Philips TV in a brushed steel B&O cabinet… but to realise their brand potential they have to make the brand relevant to the BRIC luxury brand market. And that’s going to require more than a glossy showroom and a chap in a nice suit. JS

Will Avis Really Try Harder?

So another sector innovator has been snapped up by one of the traditional market players: ZipCar, the car sharing business, has been acquired by the global No.3 car rental operator, Avis.

It’s a common enough story…The young, attractive, idealistic free spirit falls for the charms of the old, slightly over-weight but fabulously wealthy plutocrat…Or as mock talk-show host Mrs Merton memorably asked: ‘So Debbie McGee, what first attracted you to short, balding millionaire Paul Daniels?’.

Many acquisitions by big, traditional corporates of values-led brands have gone before - Innocent surrendering a majority holding to Coca-Cola, Body Shop selling out to L’Oreal, Green & Black’s acquired by Cadbury but now in thrall to the less cuddly Kraft, Ben & Jerry’s ice-cream owned by Unilever, albeit as a semi-autonomous entity.

What’s of real interest for brand watchers is not the motives of the seller (cash and equity realisation for the founders or expansion via funding, distribution and access to new markets) but the motives of the acquirers and how they set about leveraging their investment.

The risk is Avis imposing its cumbersome paper based bureaucracy of car rental on the fast moving, customer friendly, technologically sophisticated and paper free ZipCar experience.

The obvious business win has to be integration – resulting in more product/service offerings for customers.

But the really big win – and the learning from the Unilever / Ben & Jerry acquisition – is perhaps what ZipCar can bring to Avis. This centres around a genuinely customer centric offer delivered by an enthusiastic team who always seem to want to make a difference to customers. If Avis can understand how to transfer this commitment to their much bigger business then it really will be the biggest prize of all. JS

Forcing Ourselves To Slow Down

We all talk a good game about slowing down sometimes… taking the time to better examine what’s around us. For those of us in communications it’s often something we want our audience to do – to take the time to consider what we have to offer or to better consider what we are trying to communicate.    
            
Heiner Goebbels ‘Stifter’s Dinge’, now running at the P3 industrial space in London achieves what many crave – and perhaps gives some clues for communicators.

 

It’s an opportunity to meet the futures of music, theatre, performance and art installation, courtesy of Artangel (http://www.artangel.org.uk/). It’s a spellbinding blend of word, music and vision featuring five electronically programmed pianos and an extraordinary variety of digitally actuated sounds – from huge plastic pipes to plant containers and a supermarket bag. The natural world is explored – a forest of ice, rain on pools, the fizzing of life beneath the water’s surface.

 

It’s a triumph of the imagination and a must see for anyone fascinated by how experiential boundaries can be stretched. Described as a performance without performers by Goebbels, the pianos do make a gesture of appreciation to the audience as the piece ends.

 

Unmissable – and vividly memorable. ABD

Is There A New Bond Film?

CRICKET went to see the new Bond film ‘Skyfall’ last week. The cinema was packed… and the one we visited had been pretty solidly booked from opening night the previous weekend. Little wonder when you consider the omnipresence of advertising and publicity for the film. It seems like every newspaper has been reviewing, running Bond features and competitions; that every TV and radio talk show has interviewed the stars; and Bond specials are on every satellite and terrestrial channel. We’ve mocked up the Angling Times cover but we’re sure there were editorial meetings at both Angling Times and Crochet Monthly where supporting the movie with a feature was discussed…

So why have the media got behind this particular Bond film so wholeheartedly and is there such a thing as too much publicity? Does such an onslaught start to breed some sort of resentment amongst the public?

The answer to the first question is probably money and momentum. A new Bond in a Jubilympic year meant that the publicity machine started playing in earnest almost a year ago – and we reckon that much of that was telling trade partners that this would be big. And once that machine started everyone wanted a piece of the expected financial bonanza. So a clever bit of B2B strategy ahead of the B2C.

As to whether they over played their hand from a consumer perspective… well the numbers at the box office would probably suggest not. Skyfall had made £37.2m in the UK in its first seven days – to overtake previous record holder, the last instalment of the Harry Potter series. Skyfall is already 2012's third highest grossing movie and may now be on course to beat Avatar’s £93m for the highest-grossing film in UK cinemas of all time.

So a good UK result. But it was interesting that in talking last week to a Shanghai based client that he had seen very little publicity – strange for a film where one of the main action sequences is set in Shanghai, and a sequence that makes the city look pretty amazing. Perhaps Bond is after all an acquired taste. JS

When does being Customer Centric become digital stalking?

We are big buyers of music at CRICKET. We like independent record shops though when we’re busy Amazon becomes the default supplier. Yesterday the latest CD from Neil Young & Crazy Horse was released – a minority taste perhaps but each to their own. We also like a bit of analogue in our digital world, so late last night I re-visited Amazon to see when the limited edition triple vinyl edition was being released.

 

First thing this morning I followed a colleague’s link to the excellent Pursuitist website and a feature on the late Steve Jobs luxury yacht. I then noticed a bizarre coincidence - the pop up ad from Amazon was recommending the very same vinyl edition of the Neil Young album I’d looked at, but not bought, last night. Obviously this was no co-incidence – a minority vinyl edition from a minority musician that happened to be the last thing I looked at around 11pm on my iPad in the comfort of my home was now being promoted to me on a website I only visit in the office.

 

Clearly the Amazon cookies were busy through the night linking themselves not just to my private home computer but also to my office account… from where I order most Amazon things.

 

Dead Clever? Yes.

 

Customer centric? Maybe.

 

Smart business? No.

 

I don’t think I want to do business anymore with a retailer who is digitally stalking me. Without being over dramatic it feels like an invasion of privacy. When I buy a CD from the excellent bricks and mortar retailer Fopp I don’t come home to find an assistant hanging around outside my house with an armful of CD’s I might like. Just because digital technology enables Amazon to do the equivalent cheaply doesn’t mean it should do it.

 

We’ve talked often in these pages about the importance of managing every aspect of brand behaviour to match a company’s vision and values.

 

Amazon states: ‘Our vision is to be earth’s most customer centric company’. Making sure I’m only ever a click away from buying from Amazon may make good business sense but I’m not sure if it’s what we want.

 

When Jeff Bezos created Amazon, he said ‘If you make customers unhappy on the internet they can tell 6,000 friends’. I think they may be doing just the sort of thing that turns Brand Champions into Brand Terrorists. JS