By Nick Withycombe
Even the briefest of browses through international media should turn up clear indications of the power of the Chinese consumer. Bain & Co’s ‘China consumes 32% of global luxury’ is perhaps the best known, while big number after eye-opening stat can be trotted out to really clarify – to anyone who has been living in a cave for the last decade – that your luxury business really ought to be selling to the people that want to buy most of it.
The next level of China-business content is the ‘how’. You have to think digital. You need to work with KOLs, China’s super-charged version of the West’s ‘influencers’. You have to understand all the apps, platforms, bells and whistles expected by your customers – spread out over the world’s 3rd largest country and with ‘small cities’ that have populations of over 5 million, with the big ones at 20 million, each with its own distinct dialect, culture and history.
This enormous market makes the urge to ‘connect with the Chinese consumer’ understandable. The China Opportunity is perhaps the greatest potential for profitability that the World has ever seen. Yet amongst the savvy marketing campaigns, the digital calibrating, the consumer targeting and app configuring, a simple aspect is often not mentioned.
After some recent time spent speaking with people who actually can be called ‘China experts’, one simple way to succeed in China – to connect to the consumer and win in business – became clear. You have to be here.
Surely that sounds a little obvious? Yet, why are strategic decisions made outside of China, by people who have rarely even visited – let alone lived in – the country?
I met up with Barry Lin, GM of China’s travel booking giant TuNiu, when he was in town visiting ITB China. He said “In China, everything is about trust, partnerships and knowing each other. What that means is the top people, the leaders of a brand, need to come to China – and for some time. Not just a few days saying hello to people, but for several months – bring your family if you have to! Because from this business sense, it’s not only about ‘how you talk to the Chinese consumer’, the business reality is who will do business with you and who will help you.”
There are still a number of luxury brands still operating on decisions made without locally-based expert guidance. This is can be fatal for a number of reasons – and it’s not only on aspects such as strategy and executive decision-making.
Focusing on the question that each brand is piqued with – how to connect with the affluent Chinese consumer – the ‘answer’ is usually said to be as above – to find the right retail space, to select the ideal e-commerce platform, to ‘do KOLs’ and the like. This is all fine, yet we are still talking about business in China – and business in China runs on guanxi. This does not mean that ‘underhand’ (or under the table) interactions take place. It simply refers to the fact that relationships – long-term and based on mutual trust – make things tick.
Perhaps your luxury hotel or resort is negotiating a deal on a travel app, maybe there’s media coverage to be sought, what if a popular emerging artist is seeking collaboration with a luxury brand? Gaining beneficial outcomes in such examples stem from the on-the-ground relationships that can turn ad hoc chats into top-down, successful business decisions.
Other experts were unanimous in their acumen. Claire Chung, China GM of YOOX-Net-A-Porter told me how companies cannot rely on an overseas HQ making local decisions: “Localisation is a big focus at the YOOX Net-A-Porter Group and China had its own dedicated China Plan. We all know of many companies entering and exiting China simply because they replicated the global model and never bothered to localise and truly try to understand the market and its evolving luxury customer base.”
Queennie Yang, Editor of VOGUE International explained the same message of how one office base cannot support nationwide decisions: “Before you judge anything, please listen to the local experts for their insights and rationale. Spend more time communicating with them, give them more respect. Please remember China is as big as a continent, it is not only a country with one culture. People in different provinces have various differences. For example, don’t assume that one office or one staff in Hong Kong will be able to well-understand all of China.”
It’s understandable that the realities of time and budget mean that not every company can open an office – or a number of them, across China. But in that case, other routes should be considered for finding the local acumen needed – whether that’s partnering with the right agency, finding an expert on the ground (in the right place – one Hong Kong office may not suffice for the entire country!) who can start a personalised recruitment drive, and so on.
Whatever the methodology, if you want to understand ‘how to succeed’ in China, you have to be here in order to understand China in the first place.