This is China! blog

An American acquanitance at a mixer in Shanghai complained to me last week that it was as expensive now to have a suit made in Shanghai as it was to buy it off the rack in America. Five to ten years ago we could get decent suits made for 30- to 50-percent the cost of a comparable design in the West.

My biggest problem with having suits made in China is still ensuring the tailor gives enough fabric to the pockets, which they are always inclined to short to save material. Let’s hope foreign menswear brands like Hugo Boss won’t be passing on suits in China with pockets barely deep enough to hold coins.

The Wall Street Journal reported that Hugo Boss plans to open about 60 new stores in China’s mainland over the next three years. It currently has 86 stores.

The rocketing growth the luxury sector in China has experienced for the last three years is fading, however. It used to be that the name brands were experiencing growth rates of 40- to 50-percent. Increased competition in the sector, a slowing economy, outrageous tariffs and the nouveau riche transfering their wealth abroad are putting the breaks on the sector’s explosive growth.

The Boston Consulting Group (BCG) expects China to still contribute 30-percent of the world’s growth in the fashion market through 2017. Clothing and apparel leaped to roughly US$73 billion in 2011, an increase of 15-percent over the previous year. BCG expects the sales to nearly double by 2015.

Hugo Boss will be investing seven-percent of its sales to marketing globally, much that dedicated to China.

They’ll need those deep pockets to market its attire in China. Hugo Boss suits ain’t cheap. The group will price its suits from from 16,450 yuan to 46,000 yuan ($2,600 to $7,300).

There better be lots and lots of fabric in those pockets at those prices.

Source: WSJ

Technorati Tags: bill dodson, luxury, retail

China is a gift-giving culture. I seem to be reminded of this every couple of weeks as I fork out money to the official gift-giver in the family to buy gifts for this or that Chinese relative or neighbor or stray cat. And I have learned never (never) frown when surrendering over said funds.

The Wall Street Journal recently reported that the luxury segment of gift-giving in China is slowing. Though sales ros 15-percent in the first quarter of 2012, they slowed substantially over the previous two years. The first quarters of 2010 and 2011 saw saies increases of 40-percent.

Jewelry sales increased 20-percent in the first quarter of this year, a stark contrast to the 59-percent rise the previous year.

In contrast, non-gift related markets in the luxury space slowed down less than those related to gift-giving. For instance, high-end cosmetics rose 15-percent in the first quarter of 2012, a come-down of seven-percent over the previous year.

Clearly, ladies of some level of wealth know what to let go of and what to hold on to.

Source: WSJ

Technorati Tags: bill dodson, lifestyle, luxury, retail

A couple times in the past month I’ve eaten delicious bowls of noodles at local Master Kong Chef’s Table. Master Kong is a brand owned by the Taiwanese food maker Ting Hsin International Group . The brand is best known in China for its instant noodles and muffins. Both its noodles and muffins completely dominate the shelves of hypermarkets like Walmart and Carrefoure in China, and convenience stores like the Ting Hsin-owned chain Family Mart.

The Group has been extraordinarily successful at leveraging its noodle brand image Master Kong (Kang Shifu – Master Healthy – in putonghua)  into highly successful service sector businesses with reputations for quality and attentive staff.

The first Chef’s Table restaurants opened nearly six years before in Shanghai. The Chef’s Table has only just opened in Suzhou, with at least two locations of which I’m aware: downtown Suzhou at Guanqian Jie and the Suzhou Industrial Park, at Xinghai Square. The establishments are consistently awash with customers and clamor, a testament that the Group has got its formula for China market entry right.

In Shanghai last year October the Group opened the first eatery to meet the needs of low- to middle-income professionals. The formula for pricing the low-end noodles is half the amount of the average hourly wage. That would place a bowl of rice and a drumstick at around six rmb, or the cost of a bowl of noodles at a neighborhood hole-in-the wall. Chef’s Table prices hover around 30 rmb for its noodle soups and dishes.

The Chef’s Table restaurants are bright and cheery, and the staff of young people quick and attentive. Though portions could be more generous, the recipes are delicious – especially the spicy beef noodle soups that are the flagship products. The decor is set in warm reds and yellows framed with dark wood furniture.

The successful launch of the restaurant chains presents lessons for all would-be foreign investors into the China market:

- Leverage off whatever brand awareness your business has already created in the F&B space;
- Chinese are highly value conscious – identify your niche and price accordingly;
- Go for comfort foods with localized tastes that offer sustenance and flavor;
- Create an environment in which customers feel somewhat intelligent, instead of like cattle being herded through a corral.

Oh, and unless you’re well-practiced at slurping noodles, be sure to wear a bib.

Technorati Tags: bill dodson, china, f&b, food & beverage, food and beverage

She looked different to me, though I couldn’t quite decide how. I saw her frequently enough, serving Starbucks at one of the chain’s establishments in Suzhou, and always found bantering with her fun. The twenty-one year old student had a very slight build and from behind and at a distance could be unpardonably confused for a 13-year old boy. Her long ponytail, however, was a clear exclamation mark of her sexuality.

Then she batted her eyelashes at me.

Oh, I realized, that’s what it is that’s different. False eyelashes.

Fake eyelashes seemed to have fluttered into the fashion scene in a big way here in China about a year ago. They’ve apparently been popular throughout East Asia for years, starting with young Japanese girls. Slight women with slight features suddenly were able to bat eyelashes that were large enough to fan a pharaoh cool.

In the West, false eyelashes are a sign of – well – fake. Something a woman wears for fun: to a party, to a disco. But not to work. Still, in the Chinese woman’s exploration of her sexuality and how the rest of the world has been interpreting femininity since World War II, fake eye lashes are the height of fashion for twenty-somethings that have few – how to delicately put it? – distinctive attributes.

The Wall Street Journal recently wrote: “Ironically, despite high levels of short-sightedness, a new trend is catching on across China: young hipsters who opt to wear empty plastic eyeglass frames as a fashion statement. That way, their fake eyelashes can stick out unimpeded, and they avoid having to peer through glass lens that fog up when walking outside on hot, humid days.

Technorati Tags: bill dodson, lifestyle

Technorati Tags: bill dodson, consumer behavior, personal care

Michael Dunne, president of Dunne & Company, a Hong Kong-based consultancy specializing in Asian car markets, wrote a nice piece in the Wall Street Journal recently about the explosive growth in the luxury SUV automotive sector. He writes:

Chinese consumers will buy an estimated 310,000 luxury SUVs this year — spending, on average, more than $80,000 a pop — according to forecasting group LMC Automotive.

Before going any further, let’s do the math on that: The cash that Chinese will spend on luxury SUVs this year alone is enough buy all 20,000 homes currently for sale in Detroit (median price; $94,000) and still have $22 billion dollars left over.

In 2011 J.D. Power and Associates conducted research that revealed that more than 90% of luxury SUV purchases are settled in cash.

Conspicuous consumption is playing a greater driver in the motivations of the nouveau riche, as they want to announce their status to the world. Dunne writes:

“When we buy a luxury car, we’re telling the world that we’re rich,“ Cai explains. “But with a luxury SUV, we’re saying look at me: I’m rich – and different and powerful. I drove a friend’s Mercedes M Class recently and I could feel the people looking at me.”

Mercedes, especially, has benefited from the high-end market. The company sold 848 SUVs in China in 2005; in 2011 they sold 54, 016, nearly double what they sold the year before.

European brands overwhelm the segment with two out of three SUVs sold in China made by Audi, BMW, Porsche and Mercedes. Cadillac, Lincoln, Infiniti and Lexus are working over-time to cash in on some of the largesse of the new class.

Read more: WSJ

Technorati Tags: automotive, bill dodson, branding, china, consumer behavior, lifestyle, luxury

Chinese web sites and television reports have of late been relentless about how yogurt in China is really made by domestic producers. A Chinese associate named Marie told me she was concerned about the health of her son, who is in middle school, and who loves to eat yogurt.

Coincidentally – or not, given the amount of media coverage on the topic – my (Chinese) wife had just called me a couple hours before to tell me she had been talking with a neighbor that very same afternoon about yogurt made in China.

The locals are getting restless, and are boycotting purchases of the runny stuff in favor of making it themselves. Yogurt-making machines are cheap – anywhwere from 60 rmb to 90 rmb. Most of the neighbors make yogurt themselves for their children to eat.

Apparently, the real turn-off is the shoes yogurt makers are putting into their product. It took me a few days to get to the bottom of why shoes were a valuable ingredient, though. It seems the adhesive used in pasting soles together makes for a great yogurt coagulant.

After all, who actually likes eating runny yogurt? (I don’t, for one). Though I understand yogurt drinks are quite popular. (I am unclear whether yogurt drinks have the same sole as container yogurt).

Yogurt in China has been a relatively protected industry since the meltdown of the dairy sector in 2008. Then, producers were spiking dairy products with a close cousin of plastic, melanine. The scandal cost the lives of more than a dozen children and sickened hundreds throughout the country, and several government officials and executives charged with ensuring food safety.

Though sterilized milk products from France, Germany and Australia haven been available on shelves, no fresh alternatives have been available save a South Korean product. Fresh South Korean milk, however, has only become available again since last autumn in the region.

Yogurt imports do not appear on local grocery shelves. Consumers may be fortunate to find them in foreign shops that specialize in imports. Buyers though, pay a premium for the privilege. Still, with the prospect of eating local yogurts containing the old soles of Chinese shoes, the price may be worth it.

Or, Westerners in China can do what my family did: purchase a yogurt maker and Do-IT-Yourself.

image: beijingshots.com

Technorati Tags: bill dodson, food & beverage

On a recent week-long business trip to Shenzhen I was shocked to find there were no more prostitutes hovering around the hotels. At least, there were none at the Marco Polo hotel at which I stayed, about a ten minute drive from the architecturally mind-bending city hall. The last time I had stayed at a hotel in Shenzhen, about five years ago, prostitutes literally lined up outside the main entrance of the hotel, and swarmed the open lobby. I recall being on the phone once in the lobby lounge when a young woman with heavy make-up sat across from me.

“I’m on the phone,” I told her, knowing her intentions, “go away.”

“It’s ok,” she said, and fingered her mobile phone. She composed herself to wait patiently for me to finish my conversation. “I’ll wait.”

After I finished my phone conversation I had to be quite rude to make her go away.

Later, she and one of her compatriots literally cornered my client – a tall, middle-aged American man – on the mezzanine level of the hotel as he was walking toward the elevators. One pinched him on the butt. He turned around to see his assailant. He backed into the elevator, believing the doors had slid open. They hadn’t yet. He put up his hands as if to surrender to the young women, to buy him some time. The doors finally opened, and he stepped in. Without escort.

As the city’s wealth has developed city leaders have been trying to upgrade the town’s image from grimy factory site to upscale metropolitan. Two years ago the city was the site of a controversial move to cleanse the city’s image. Young girls who plied the trade were lined up in queues of shame and paraded through the streets. For the most part the internet community was against the humiliation.

The governor of Guangdong province has also been actively promoting the region’s two largest cities – Guangzhou and Shenzhen – as services outsourcing platforms. Services not only generates a higher tax base, but also demands a more sophisticated kind of employee – and customer. Truly, my encounters with the prostitutes a few years back were certainly off-putting, and slightly embarrassing for me and the client.

I’m sure Shenzhen still has a going concern in the “oldest occupation in the world” in other parts of the city; however, the area in which I stayed for the week was fun and refreshing: malls, outdoor cafes, bars and shops were inviting and relaxing. Not a bad setting after a long day’s work.

Technorati Tags: bill dodson, lifestyle

The past month here on the ground in the Yangtze River Delta has seen activity that runs counter to macroeconomic measures in the property development sector. By all accounts, construction sites are supposed to be grinding to a halt and new projects deferred indefinitely. Instead, what I and Western friends are seeing is an acceleration of construction activity. Where for the last two years we’ve only had to bear incessant noise, dirt and dust from sunrise to sunset, now we are hearing construction activity 24/7 the past three weeks (whenever I became conscious in the shift of pace of construction). And new development projects are continuing to sprout up around us in a region that theoretically is economically mature. It seems a near-impossibility to escape the din of construction machines punching the ground or stamping steel or crunching concrete.

One building that friends and I were talking about in the Suzhou Industrial Park is still having floors stacked on its skeleton frame of concrete and steel while construction workers fix mirrored-windows to lower levels of the same structure.

We’re not entirely sure of why construction activity has accelerated recently; however, we’re sure it has to do as much with uncertainty about what the government will do next with the property sector as much as uncertainty about the Chinese economy in general. Some of the questions likely at the forefront of the minds of developers include: will the government end bank loans to developers completely at the end of the year? will they end all construction projects for and indefinite period of time? and will they be able to find buyers for their residential projects and renters for their office property?

One thing, however, is certain: the accelerated pace of construction does not fill me with any greater sense of security in the integrity of the finished structures.

Technorati Tags: bill dodson, china, construction, economy, infrastructure

This past weekend I had the pleasure of introducing Simon Gjeroe to local Suzhou residents interested in hearing dramatic tales from the China’s warlord period. We had gathered for a monthly Royal Asiatic Society (Suzhou branch) talk on Chinese culture and society. Simon is proprietor of Beijing Postcards, which sells reprints and books of photos taken by foreigners visiting China in the 1800s and early 1900s.

The warlord period in China took place during the roaring 1920s, when warlords shifted sides and assassinated each other as often as they changed concubines, and when the majority of expats in Northeast China lived in the lap of luxury. Simon gave us all a unique peek into the life and times Zhang Zuolin, one of the mightiest warlords in China during the chaotic 1920s, as chronicled and photographed by the Danish arms dealer and adviser to Zhang, Robert Christensen. He also showed a 25-minute long documentary about the era, all of which was made up of photos and film footage taken by Christensen himself.

Simon revealed that five years ago Chinese were universally embarrassed by the photos taken of the country in the late 1800s through mid-1900s. “Why,” they would ask him, “do you want to look at old photos of how poor China was?” Now, Simon said, the Chinese make up the majority of his customers in Beijing. I was astonished when Simon pointed out that nearly all the old photographic and film images of China are from foreigners. The Chinese have little idea of what their lives really were like during the end of the Qing and warlord periods.

That is, not beyond the latest rounds of soap operas on Chinese TV.

Listen to my interview with Simon here .

Technorati Tags: beijing postcards, bill dodson, china, history, robert christensen, simon gjeroe, warlords