China on a Shopping Spree

photo credit: yogma

There was a telling article yesterday in Time Magazine online about China's recent shopping spree around the world. The Chinese government has a wallet bursting full of cash, $2 trillion to be precise, to buy everything from non-branded commodities to flashy branded cars. In the current economic climate, the Chinese state entourage is a welcome sight for country hosts as all are eager to be lavished with some red Maoist money. I find the picture quite ironic, since here back in China it is the foreigner who casually flicks a coin in the pan of the poor Chinese man. Anyway, here's a quick summary of the top 5 recent spends by country:
1. Russia $25billion (loan to state owned oil co.)
2. Brazil $10billion (loan to state owned oil co.)
3. Germany $10billion (incl. $2.2billion worth of BMWs and Mercedes)
4. Great Britain $2billion (incl. 13,000 Jaguars)
5. Spain $320million (incl. gallons of olive oil)

This is a telling sign where the wealth in the world now lies. The spending at government level is reflected also at consumer level where the majority still say they will spend more this year than last - probably the only people in the world to say this right now! However, the nature of goods and brands spent on will differ. There will be more trading down and looking for more value for money, which could mean in some categories, like home appliances and household daily items, people will switch to reputable brands that offer a more competitive price. However, in times of recession, people do still need the little luxuries in life, so sales of beauty products are expected to continue to prosper, but consumers will be more discerning, which means it is imperitave to get all your marketing and communications right...relying more and more on effective in store which can help drive your bottom line up.

Points-of-sale, Points to Ponder

Last week I was asked what would be the best store entry strategy in China for a particular new luxury skincare brand. It was a very specific request because the brand is already in China, albeit with little to no awareness of it's presence, plus they had a very real offer to operate a 2 week trial space in the promotional area of a Shanghai department store. If they perform well during the 2 week trial period, they will secure a permanent space in the store but if they don't then...that's it, out! So a very critical 2 weeks to say the least.

Anyone with even a half-baked understanding of the Chinese consumer market will be able to tell you that point-of-sale activities are one of THE most effective ways to spend your limited marketing dollars. Of course, the usual sexy ATL stuff, PR and new media should also be part of your toolbox but POS activities (or BTL, the larger category to which POS activities belongs to), are so closely linked to sales results that it should constitute a key part of any marketing plan, and does not deserve relegation to it's sometimes poor Cinderella status. True, it may not seem as strategic as ATL or as glamorous as PR but when handled properly, it not only drives brand awareness, helps educate consumers about your brand story and gives customers real value, but also keeps you in the department stores' good books and not least, brings out shining sales results without breaking the bank.

Why are POS activities so effective? The 2 main reasons are the spontaneous nature of purchase decisions (back in the day, working in a large FMCG company, we estimated that in the region of 70% of purchase decisions in China were made in-store); and secondly, POS activities are very targeted and hence helps cut through the clutter ie. you capture the right audience, at the right place, with the right message. And the cherry on the cake - the costs are low and the results are easily measurable. In the current climate, that's surely enough reason to give it some serious thought.

More in a later post on what constitutes good POS activity.

Department Store or Fashion Museum?

photo credit: dubbie

Rumours in the industry today that the high end retailer from HK, Lane Crawford, is struggling in Beijing and could close down soon. That would be another embarrassing and expensive flop in China after the failure of Lane Crawford Shanghai and Hangzhou in previous years.

So is there any truth to the rumour? Well, having walked through the beautiful airy store, with it's glimmering mirrors and shiny counters it really seems to be the model of what a fashion and beauty sanctum should look like. Described as a 'fusion of fashion, art and architecture', it's new edgy, artsy communication is also very refreshing BUT BUT...despite seemingly having done everything right, the biggest let down has to be it's location. It's out of the way, in a part of town not frequented by shoppers, it's not convenient, it has no residential area close by, it has no thriving eateries and restaurants in the vicinity (a very important factor driving store traffic in China). The place has the grandeur and emptiness of an impressive museum during closing hours.

However, it would be a shame if it did close, after all it houses 600 high-end fashion and beauty brands, many of which are new to China, like Alexander McQueen in fashion and Ole Henrikson in beauty but somehow I can't imagine Lane Crawford letting a $38million investment go down the drain like that in what has only been just over a year. Let's see.