My friend Andrea (not her real name) sends a link to What China Should Learn From Hong Kong’s Luxury Malls and I know you’re thinking, “so what does that have to do with me?”. A lot -particularly in the context of a recent post from Iconoculture called Fury Over Fakes. Before I get to that, were you aware of the controversy of fake Apple stores in China? The case -which was discovered by a traveling blogger– has spurred international attention and fear among commercial enterprises. The summary of international discussion is that if Chinese businesses are ballsy enough to open fake Apple stores so convincing that employees thought they worked for Steve Jobs, what hope is there for any brand’s integrity?
But back to Iconculture’s Michael McCune who says:
…while US consumers are familiar with China’s fake iPhones and Fendi bags, fewer likely know that Chinese brands suffer the same fate. More important, Chinese consumers themselves are hurt when their children are at risk from toys with lead paint or their milk is tainted with melamine.
When national pride, health and their hard-earned yuan are on the line, Chinese consumers demand the genuine article. According to a China Market Research Group survey, the “overwhelming majority” of consumers said that their biggest fear in life was buying products that could harm their health (CNBC.com, 28 July 2011). The masses of angry consumers who’ve stormed the copycat stores and joined class-action lawsuits are an even better testament to how fed up they are over being duped.
Meaning, Chinese citizens are -surprise, surprise- your unlikely partner in maintaining your brand’s integrity because it serves their best interest. Which circuitously returns us to the matter of luxury malls in mainland China vs those in Hong Kong because dontchaknow, Hong Kong is ranked as the world’s best city for luxury shopping and by extension, a place you want to sell stuff.
For background, I started reading Maosuit’s Are Luxury Malls in China Successful? and was struck by unintended analogies to DE producers targeting the same. Consider (emphasis is mine):
These developers [of shopping malls]…have little or no notion of what the luxury retail business is about. All they know and believe is ‘money talks’ and think that by throwing cash at the brands they will be happy to open big flagship stores in every mall on offer.
…One major disconnect between the government developers and luxury brands is on shopping mall management. Chinese developers simply don’t have the experience or know how to manage a luxury atmosphere, create tasteful PR and marketing campaigns, attend to VIP customers and monitor CRM programs, all of which are at the forefront of the luxury brands’ minds and demands.
My first point is that many DEs don’t understand luxury well either (I certainly don’t) and think a premium product is a combination of high pricing and the IKEA effect (it must be good since you made it) which is really no different from the mainland Chinese mall developers idea of throwing money at the problem. Returning to the link I opened with that Andrea sent me, Maosuit says:
…many Chinese developers are state owned entities and there is simply a lack of planning and consultation done prior to building the mall. The government will designate a piece of land for development and someone will just decide it will be a luxury mall. Ask any shopping developer in China and chances are their dream is to build a luxury mall. The way they think is: “if Chanel opens a store in my city, it shows we are modern, successful and have status”. Often these mall developers will rush out and contract architects then design and build a mall before even talking to a luxury brand, consulting retail experts or ever taking into consideration what criteria is needed for a luxury mall to succeed.
Maosuit says that mall developers in Hong Kong go about it differently. They hire consultants to conduct planning on mall design as well as “what composition of retail, residential, office and hotel facilities would be needed for the mall to succeed in that given city or location.” You can approach this problem from so many levels both micro and macro in that it applies to the development of your operation, what you sell and where you aspire to sell. Sure it’s complex and heady stuff and maybe you don’t intend to shoot so high but analogies abound.
There’s also the option of a short cut to planning retail location that is used by Lowe’s and CVS (analogous to what you could do). Lowe’s wants to be located as close to Home Depot as is possible, preferably on the same lot. CVS does much the same; they’re usually right across the street from Walgreens. Since Home Depot and Walgreens spend a lot of money on location selecting, Mr. F-I and I often ponder the (minimally) chagrin of these two entities in light of their free-riding competitors.
Summary: if you’re interested in luxury goods, exporting and intellectual property, it’s worth subscribing to Maosuit.