China commands unique approach

12 October 2010

BEIJING: Brand owners from Hermès and BMW to Pizza Hut are taking a unique approach in China, as increasing numbers of companies view the country like "their home market".

Hermès, the French luxury specialist, sells a broad variety of items within its Shang Xai range, developed specifically for the world's most populous nation.

These include porcelain bowls, chairs, jewellery and other items tailored to Chinese tastes, all using desirable local goods such as zitan wood and Mongolian cashmere.

“Until quite recently, the attitude has been, ‘Let's invent in the West and ship to China,'? It didn't work,” Hubert Hsu, a senior partner at Boston Consulting Group, told Newsweek.

“There's big money to be made in high-end foreign food and beauty and health products that market their Chinese ‘essence'.”

McKinsey, the consultancy, has forecast Chinese consumer spending should reach $2.3tr by 2025, making it the third largest market worldwide.

It further reported that the rapidly-growing economy already holds the leading position concerning purchases of automobiles and TV sets, and occupies second place for PCs.

Jewellery sales are also improving by around 25% a year, an acceleration standing at 20% regarding cosmetics and hitting 50% for premium cars.

“The redistribution of global growth following the financial crisis was more dramatic than anyone could have predicted,” Yuval Atsmon, an associate principal at McKinsey, said.

“There's now a sense amongst many foreign firms that they need to start treating China as their home market.”

BMW, the German automaker, released a limited edition version of the M3, called the Tiger, to coincide with Chinese New Year, and which was coloured orange and black.

Levi Strauss, the apparel company, introduced a new bespoke label, Denizen, which it hopes will tap in to the different requirements of Chinese shoppers when compared with the US.

In its Shanghai store, electronics pioneer Apple boasts a prominent sign stating the “customer is always right in China.”

Equally, Apple's staff have abandoned their characteristic black shirts, replacing them with red alternatives carrying the words “Designed in California, Made for China.”

This reference reverses the “Designed by Apple in California, assembled in China” marking featured on the back of the iPhone.

Hewlett-Packard, the IT giant, has also established a factory in Chongqing, manufacturing devices such as low-cost laptops, targeted at rural consumers.

“HP has adopted an 'In China, for China' strategy," Todd Bradley, evp of HP's Personal Systems Group, said earlier this year.

Elsewhere, restaurant chain Pizza Hut has positioned itself as a more luxurious destination than is often perceived in the US and Western Europe.

“Whenever my team finishes a project, I always give them a choice of a meal at a top spot – the Four Seasons or the Ritz, for example,” Shaun Rein, of the China Market Research Group, said. “But they always choose Pizza Hut.”

Data sourced from Newsweek; additional content by Warc staff