Monday, July 19, 2010

Burberry in China

Burberry recently announced its decision to buyback their store operations in China from Franchisee Kwok Hang Holdings. for 70 million pounds. I personally think it's a great move. You have full control over your brand delivery, but more importantly, the entire profit is yours. Burberry over the last few years have been extremely successful in building an aspirational brand but it is definitely moving younger and Chinese youths have spending power.

Other brands / retailers who have declared this recently included GAP, Pumpkin Patch, Forever 21 and I'm sure there are many more. It's even more interesting to see brands like Levi's pulling out of China and then re-entering it. Have we reached a point where businesses would seriously lose out by not being in China? Google was just approved its renewed license to operate in China, another fine example of a company succumbing to China.

There is no doubt that the luxury market is growing double digits annually in the Middle Kingdom but the question is, how many of these fashion houses will actually be profitable? Chinese customers are much more sophisticated than they used to be so it's not just about owning a status symbol but also about the quality, material, cut, craftsmanship etc. Do all these brands know what the Chinese consumers want?

Since many of these foreign brands actually have their products Made in China, will the Chinese consumers still fall for them? We can argue that there are millions and millions of consumers in tier-3 or tier-4 cities in China who are still aspiring to own a Louis Vuitton bag no matter where it is made but how long will this last?

Ideally what I would personally would love to see is whether a Chinese brand can grow global and become a premier brand for style, quality and luxury. Do you think it's ever possible? I personally believe so. Shanghai Tang is a great example of a Chinese brand expanding globally. They are focusing on the Chinese heritage combined with a Western style of Service and Store Environment. I think there is room to mass market this brand and make it more affordable.

What do you think of fashion brands moving in China? Why are some of these brands acting so late in the game? Would they be able to survive this late into the game? Is it too late?

1 comment:

  1. I guess no one wants to be the first one especially to a market like China, theres many issues like government, the stability of the economic foundation etc etc... there are more complications than just entering and fighting for the market leader position

    definately the right move for burberry cos china is too big of a market to miss and you need to send your image right


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