Another post from Ruchika Tulshyan:
Recession got you down? There’s a new way to reach a 1.3 billion-strong market. Rebrand your run-of-the-mill American product, launch a “luxury” ad campaign and sell it in China for 20 times what you sell it for in the U.S.
Don’t trust me? Pabst Blue Ribbon did it. The PBR beer that has hipsters paying $2 for a can was re-marketed and retails for a $44 bottle called “Blue Ribbon 1844” in China. Pabst Brewing Company insists the beer is a special brew only for China, different in taste from what they sell here. Even if that’s the case, it’s like Walmart trying to sell luxury bags at Louis Vuitton prices.
But that’s the genius of marketing abroad. You can wipe the slate clean and reposition yourself to be whatever you want to be. Ailing giant General Motors found their Chinese savior in Buick. GM capitalized on being perceived as a “big, strong American car” in China, and their Buick LaCrosse model is “the fastest-growing member of China’s premium upper-medium sedan segment,” according to GM. Two days ago they announced that they passed the 100,000 sales milestone, after less than a year of launching the sedan in China. GM caught on to the trend early – 1999 – and by 2006, became the best-selling foreign automaker in China.
I spoke to Scott Galloway, founder of Luxury Lab, a think tank for prestige brands. He said scaling up when selling overseas is nothing new – think of Heineken, an ordinary beer in the Netherlands, but a premium one here. What makes China unique is that American brands manufacture their products in China, but then attach a foreign tag to market them at a higher price. Galloway agrees, “there’s a mystery associated with foreign brands.”
Coach was part of the “aspirational” luxury market that doubled its revenues between 1998-2008. China was a key market for the brand, where they marketed themselves as “high-end” and sold products at a hefty premium. And the best part of it? The majority of items were made in China, so consumers weren’t even paying more for a “Made in America” label. It’s a win-win situation in terms of costs too.
What’s more, China’s particularly brand-conscious society is spending. A Euromonitor study estimates 31.7 percent of total households in China will have an annual disposable income of US$5,000-$15,000 this year—which is a decent amount for China. “China is where the action is. In five years, they will have more millionaire and billionaires than any other country,” says Galloway.
Only one concern remains – what if brands start to flow in reverse? China Mobile has ten times more mobile subscribers than any US mobile company, and Google’s 20 percent market share in China is far outweighed by the 70 percent share of local brand Baidu. If Chinese brands start to market here, well that’s a whole another story. For now, retailers, it may be time to go East. If you haven’t already.