Foreign brands retain status in China

20 August 2012

BEIJING: Many consumers in China continue to regard foreign brands as being more premium than their local competitors, a trend benefitting companies from Days Inn to IKEA and H&M.

Days Inn, the hotel group, pursued a major repositioning from 2003 to 2011, starting as a 2.5-star chain with a limited reach but now running 100 luxurious sites, around 30 of which opened last year.

"When people move up the economic ladder, they often aspire for high-value products and services. For Chinese people, the foreign brands were always the symbols of high-end luxury and quality," Harry Tan, CEO of Days Inn China, told the China Daily.

Yvonne Yin, PR manager for IKEA Retail China, the furniture specialist, argued it has used the same mass market stance as elsewhere in the world. Shoppers, however, have contrasting perceptions.

"Most customers treat IKEA as a symbol of Western way of life," she said. "That's why we are considered a 'petit bourgeoisie' brand, maybe because of our display, but not because of our intention to do so."

Dale Preston, managing director, retail measurement at Nielsen Greater China, the research firm, suggested this kind of "passive upgrading" follows a clear pattern.

"When a brand of a particular category enters China, it's a novelty at first, and people want to try it. Later on it becomes a premium brand as it's different, much like what McDonald's did some 20 years ago," he said.

H&M, the fast-fashion retailer, has similarly thrived by catering to the desire of young shoppers who hope to "dress like Americans" on a low budget, said Mike Bastin, from the School of Contemporary Chinese Studies at Nottingham University.

"Most of the products in the outlets, be it in Hangzhou, Shanghai, London, New York, or Paris, will be the same everywhere in the world," Lex Keijser, general manager of H&M Greater China and Singapore, added.

Growing demand for wine in China has also reflected a shift in outlook. The Alliance des Crus Bourgeois, a French trade body representing 250 chateaux, has adopted a unique approach in response.

"We are not in the same position as that of the factory-produced Chinese wine brands like Great Wall and Changyu," said Frederique de Lamothe, director of Alliance des Crus Bourgeois du Medoc.

"Branding in China involves more explanation," she added. "In traditional markets like the US, they already know about wines; but in China we need to tell our history and basic things like how to match wines with different dishes."

Data sourced from China Daily; additional content by Warc staff