China Consumer

What’s in a name

What Shang Xia, Baojun and Denizen say about China branding strategies

What’s in a name

A more familiar Hermès offering

Many conversations about the world’s most populous economy are still likely to include references to the phrase ‘Made in China’, when discussing the country’s emergence as an export powerhouse.

WiC has remarked on it frequently, noting that the inference is not always a complimentary one. Companies are aware of it too – hence Steve Job’s products have often been annotated ‘Designed by Apple in California, Assembled in China’ . So news that staff at the Apple store in Shanghai are now wearing T-shirts emblazoned with another slogan ­– ‘Designed in California, Made for China’ – may indicate a subtle change of emphasis, perhaps?

Since WiC first reported on the made-for-China model in our second Focus Issue, more foreign firms have begun wooing Chinese consumers with goods tailored just for them. One such is the French luxury giant Hermès, which now hopes to convince Chinese spenders to pay a premium for products that are not only manufactured in China, but also designed by Chinese, and sold only in China.

Hermès, famed for its Kelly and Birkin bags, recently opened its first Shang Xia store – which means “Up and Down” in Chinese – in Shanghai. Shoppers will find Ming Dynasty chairs, eggshell porcelain bowls and jewellery inspired by traditional Chinese motifs ranging in price from Rmb180 to Rmb500,000 ($19 to $54,000). The materials used – zitan wood, lacquer, and cashmere – are expensive, and all local.

Hermès’ decision to create a mainland brand caught many industry observers by surprise. That’s because it is the first time a luxury-goods maker has created a line exclusively for China, and the first time Hermès has tried to build a distinct, new label from scratch.

Some analysts query the concept, believing that the new Shang Xia shop will dilute the core Hermès identity. To that end, Florian Craen, the company’s managing director in north Asia, seems to want to play down its foreign provenance, positioning it much more in terms of homegrown luxury. He told the Financial Times that Shang Xia would remain “completely separate” from the main Hermès line.

“It is a Chinese brand, developed in China with the Chinese team, based on Chinese craftsmanship and broadly made in China. We don’t want any confusion,” says Craen.

As it turns out, Hermès isn’t alone in trying to single out the Chinese market for dedicated lines. Levi Strauss, the jeans company, rolled out the label Denizen, in August – the first time the denim maker has launched a brand purely for an overseas market. Aaron Boey, president for Levi Strauss’s Asia-Pacific division, told Jing Daily that Denizen is geared towards China’s “new group of consumers” who are value-conscious yet still hung up on brand cachet – especially foreign names.

Will it work? Affluent Chinese consumers prefer foreign brands. Shoes, handbags and jewellery that are obviously of foreign design tend to sell much better than products designed for the local market, says Sun Yimin, an expert on luxury consumption at Shanghai’s Fudan University. The mentality is that if they’re going to invest in luxury goods, high-end shoppers want them to be expensive. Products designed to target the China market, on the other hand, are “less welcomed than products that are totally foreign,” Sun adds.

Still, Denizen is clearly being pitched less at high-end shoppers than value-conscious ones that appreciates a Chinese flavour but expects a “foreign” product quality threshold. General Motors and local partner SAIC, who have created the China-only brand Baojun which they plan to start selling later this year, are trying something similar. At about Rmb50,000 ($7,400), a Baojun will be a lot more affordable than the foreign brands that many of the automaker JVs produce. Volkswagen and Toyota are also considering developing China-only marques with their local partners, says the Wall Street Journal.

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