The first few months of 2020 have shaken an already-complex social landscape yet further. A new twist has been given to the mindset of a culture – and from the perspective of business, a crucial consumerbase – that many international brands already found challenging to fully understand. But there’s one thing that has not altered this year: the spending power and lifestyle aspirations of affluent Chinese consumers.
In a time of difficulty, while looking toward recovery and China’s inevitable return to full strength, being part of China has never been more important and potentially rewarding for luxury brands.
As we’ve written about previously, the feeling in China at the start of the coronavirus situation was one of isolation, international blame and mis-understanding. Brands that switched to a more empathetic messaging and stood shoulder to shoulder with China demonstrated the ability to not just talk about their values but act upon them.
Patriotism in its correct definition refers not to flag-waving sentiment or support of a regime, but support of compatriots: people. This aspect has grown stronger in the last month, with Chinese netizens seen commenting online that they will choose local brands where possible, in order to support their fellow Chinese who were impacted financially by the mass self-imposed home-quarantine during February and March.
A recent Insight Report by Reuter Intelligence – Luxury Chinese Consumers, 5 Macrotrends Shaping the 2020s – analysed rising Chinese national pride as a key trend that international businesses must get to grips with. This is now more true than ever.
This excerpt from the report summarises the topic from a macro-trend perspective and explains the implications and future forecasts for luxury brands:
Rising National Pride
Incredible upgrades in quality of life – well-emphasised by a strong and stable leadership – lead to national pride that is rising to intense levels. Brands can’t expect to simply say they ‘love China’ and leave it at that – a new balance of power is tipping, and fast.
“Crossing all demographics and segments, the entire population has a key element in common. Self-awareness of their sheer spending power means they understand their value to international brands, and expect appropriate respect.” – Tracy Zhang, Director, Reuter Communications.
For the last two decades, Chinese have seen one thing: a national rise. Incredible economic growth, dramatic upgrades in quality of life and prosperity, backed by a stable leadership. That Chinese consumers lead consumption – particularly in luxury – is no secret, with the country the top market across many sectors.
At the consumer level, Chinese are aware that international brands need their custom. As more or less every reasonable-sized business in the world tries to enter the China market, it’s clear who now holds the power in the brand-consumer relationship.
However, despite how crucial this market is, many household-name brands have unwittingly committed geo-political faux pas and carelessly upset the sensitivities of their Chinese customers. Luxury brands need to ensure that they do not simply react to basic mistakes, but become proactive and take a lead in staying on the right side of regulations and with a keen consumer eye.
Luxury business implications:
The sheer quality of the top global luxury brands is a safety net, yet the repercussions of brands that fall foul of offending Chinese sensibilities are growing. This also comes at a time when China is bringing in both personal social credit rankings.
Having celebrity ‘ambassadors’ and pumping out a Chinese New Year greeting on WeChat will feel like distanced and easy tokenism. Showing real integration with Chinese culture and society is a theme that international businesses must address.
Down from macro moves, the feeling of Made in China is also swinging to a new direction. Chinese technology companies have surpassed Apple in popularity and at the mass level, local is loved the most. International luxury remains a cut above, yet the future must bring deeper integration than simply a Chinese Valentine’s Day (and similar) special edition or collaboration with an influencer. Chinese designer incubation is already happening at Shanghai Fashion Week, for example, and international businesses need to see how they can cultivate Chinese creative talent.
1. Mistakes will continue to happen until a business ‘China audits’ itself
The corporate credit score, mentioned after the social credit scoring process already underway, has been mooted. At least something of a version of this seems highly likely to be enforced more over time, with authorities keen to monitor international entities. Businesses should continually conduct group-wide, ‘China-friendly audits’ to ensure that they do not inadvertently offend.
2. Homegrown luxury will take off
Due to quality and prestige, luxury is able to rise above an alleged preference for homegrown brands. Yet homegrown luxury will happen at some point in the future.
International businesses should maintain a strong radar to detect up-and-coming homegrown luxury designers and brands ripe for collaboration, integration or acquisition.
3. Integration needs to be within the business
In 2019, after certain brands fell afoul of offending their largest consumer-base, influencers had a chance to trumpet their national pride and ceremoniously cut ties. Supposedly sincere apologies were issued from the offenders, including actual declarations of “love” for China which simply opened them up to further criticism. Pro-activeness never hurt anyone.
Deeper integrations than a post-offense announcement of love should be considered. Top positions occupied by leading Chinese businesspeople and entrepreneurs, more China-based innovation centres and HQs, and permanent socio-cultural ties would firm belief that the love is real.
4. Every interaction matters
The entire brand can be working with the right Local Opinion Leaders, create China-specialised products and services and ooze cultural sensitivity, but it takes just one unpleasant interaction between a Chinese customer and a retail sales assistant overseas (for example) for dis-satisfaction to become viral. Top-down training to each employee on the frontline of brand experience has never been so important.
The report also covers technology, market entry and expansion, new definitions of luxury, and sustainability: Download the full report for free here.