Starting at the top

Updated: 2012-08-17 08:45

By Wang Chao (China Daily)

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Preston at Nielsen says that he can understand the kind of "passive upgrading" that is happening to companies like Ikea.

"When a brand of a particular category enters China, it's a novelty at first, and people want to try it. Later on it becomes a premium brand as it's different, much like what McDonald's did some 20 years ago," Preston says.

But when the overall wealth of the society grows further and people get used to the novelty, the brand will revert to its original status, he says.

Ikea is not the only foreign brand that has captivated Chinese customers with its strong "foreign" aura. Clothing brands like Zara, H&M and even Forever 21 have gained better recognition in China for their authentic American or European designs.

"Western clothing brands like Zara and H&M are targeting younger customers who want to feel and dress like Americans, but cannot afford to spend a lot of money to do so," says Mike Bastin, researcher at the School of Contemporary Chinese Studies at Nottingham University. "The Zara and H&M stores are seen as outlets that are affordable, have good music and sport Western designs."

Lex Keijser, general manager of H&M Greater China and Singapore Region, is well aware of such a trend and has more than capitalized on the concept to boost sales.

"We release all our collections worldwide. Most of the products in the outlets, be it in Hangzhou, Shanghai, London, New York, or Paris, will be the same everywhere in the world."

To cater to customers' different needs, H&M offers various style design concepts. "We have eight to 10 campaigns every season worldwide. Basically there are always new products coming into H&M stores every day," Keijser says.

"We decide on the different markets and the products in our stores based on the customer demand and location," he says.

Early education

For some product categories that barely existed in China, the knowledge gap between the Chinese customers and their foreign manufacturers are so huge that brands often have to play the role of "early educators".

Although several Chinese wineries claim to have a history of almost a century, the concept of wine is actually one that is imported from Europe. Compared with the traditional white spirit baijiu, the market for European wines is still in its infancy in China.

Frederique de Lamothe, director of Alliance des Crus Bourgeois du Medoc in France, an association of 250 French chateaux, says that he feels more of an educator than of an entrepreneur.

Unlike the high-profile French wine Lafite, which is considered a symbol of wealth and big-ticket investment in China, many of the chateaux "present high-quality wines that are affordable and good to share", de Lamothe says.

"We are not in the same position as that of the factory-produced Chinese wine brands like Great Wall and Changyu," de Lamothe says. "Wines from these manufacturers are mass produced wines of the same taste. Our wines come from over 250 family-owned chateaux with a rich legacy in wine -making and a wider selection of products.

"The Chinese market has grown from virtually nothing six years ago. It has developed much faster than we thought," she says.

Though most of the wines from the chateaux are sold to high-end Chinese consumers, there are still some wines in the 10 to 25 euros ($12-30) range that are affordable for working people and ideally suited for special occasions like weddings and birthday parties, de Lamothe says.

Affordable price does not necessarily mean lesser profit for the chateaux. Last year de Lamothe held a wine tasting event in Beijing, and sold nearly 500,000 bottles of wines in less than a week, and more than 1 million bottles in a month.

As early educators, de Lamothe often has to convey the basic knowledge of wines to Chinese consumers, so that they are ready to spend money.

"Branding in China involves more explanation," she says. "In traditional markets like the US, they already know about wines; but in China we need to tell our history and basic things like how to match wines with different dishes."