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Tag: China

  • China awards fourth telecoms license

    China awards fourth telecoms license

    Chinas’ big three operators will have new competition, with the Ministry of Industry and Information Technology (MIIT) issuing the nation’s fourth telecoms license to China Broadcasting Network.

    The license will allow China Broadcasting Network to provide domestic internet data transmission and telecoms infrastructure services.

    With the license the company willl be able to provide key telecoms services including broadband, calling and text messages, Shanghai Daily reported. The company will offer services via its subsidiary China Cable Television Network, which operates cable TV services nationwide.
    Chinas’ big three operators will have new competition, with the Ministry of Industry and Information Technology (MIIT) issuing the nation’s fourth telecoms license to China Broadcasting Network.

    The license will allow China Broadcasting Network to provide domestic internet data transmission and telecoms infrastructure services.

    With the license the company willl be able to provide key telecoms services including broadband, calling and text messages, Shanghai Daily reported. The company will offer services via its subsidiary China Cable Television Network, which operates cable TV services nationwide.

    A spokesperson for the MIIT said the introduction of a new operator is expected to improve market competition, as well as technology innovation and integration.

    The allocation is also in line with the ministry’s three-network convergence project, which aims to combine telecoms, television and internet services into a single network.

    China Broadcasting Network was founded in 2014 and has registered capital of 4.5 billion yuan ($691.9 million).

    Shares in incumbent operators China Mobile, China Telecom and China Unicom all declined slightly in the wake of the news. But Reuters reports that the introduction of China Broadcasting Network to have little impact on the operators’ businesses in the short term, due in part to the broadcaster’s capital constraints.
    A spokesperson for the MIIT said the introduction of a new operator is expected to improve market competition, as well as technology innovation and integration.

    The allocation is also in line with the ministry’s three-network convergence project, which aims to combine telecoms, television and internet services into a single network.

    China Broadcasting Network was founded in 2014 and has registered capital of 4.5 billion yuan ($691.9 million).

    Shares in incumbent operators China Mobile, China Telecom and China Unicom all declined slightly in the wake of the news. But Reuters reports that the introduction of China Broadcasting Network to have little impact on the operators’ businesses in the short term, due in part to the broadcaster’s capital constraints.

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  • Indonesia to take part in Beijing Tourism Expo

    Indonesia to take part in Beijing Tourism Expo

    The Indonesian government will participate in the Beijing International Tourism Expo (BITE) to be held on May 20-22 to realize its target of attracting two million Chinese tourists this year.

    The Indonesian Tourism Ministry would be one of the main sponsors of the expo, Deputy Tourism Minister in charge of International Tourism Marketing Development I Gede Pitana stated here, Friday.

    The ministry was optimistic that Indonesia would be able to attract Chinese tourists during the long holiday from October 1 to 7 this year, he noted.

    China has become Indonesias main tourist contributor, according to Tourism Minister Arief Yahya.

    Last year, some 987 participants from 81 countries took part in BITE, which was visited by some 120 thousand people.

    BITE has been organized annually for the past 13 years, and Indonesia has taken part in the expo twice.

    Other countries expected to participate in BITE this year are the United States, the Maldives, Seychelles, Thailand, Sri Lanka, Japan, Taiwan, South Korea, Malaysia, India, and some European countries, among others.

    Indonesia has set a target of attracting 20 million foreign tourists by 2019, from 9.7 million last year.

    This year, Indonesia hopes to lure some 12 million foreign tourists.

  • Starbucks: New Stores Are Nice, But Here’s The Real China Domination Plan

    Starbucks: New Stores Are Nice, But Here’s The Real China Domination Plan

    Last week, I reasoned why Starbucks’ growth plans in China would lay the foundation for the company’s ultimate success in the long-term. Put simply, China will make you rich as a Starbucks shareholder.

    The “long game,” as CEO Howard Schultz describes it, includes opening 500 locations per year for the rest of the decade, to build on the 2,000 stores the company has in 100 cities.

    But growing its store base isn’t the only plan. While expansion is a driving factor for long-term growth, the company’s plans in the short-term should make shareholders very happy as well: digital growth.

    In 2014, Starbucks really started to press forward with its mobile app ambitions. Schultz predicted the drop in mall traffic and strain felt by traditional retailers as a result. While he talked about the revolutionary features the app would bring, the stock price languished, trading sideways for much of the year.

    But in 2015, we saw a rejuvenated stock, one that climbed almost 50% as its app-based payment method accelerated sales growth in the U.S. This year, look for Mobile Order and Pay to be the driver in the U.S., and for delivery to boost results next year. It’s why the Americas segment boasts such strong same-store sales growth, up another 7% last quarter despite growing comps 7% in fiscal 2015.

    To say the company’s digital efforts have made an impact would be an understatement. It increases the brand strength, encourages higher spending, more loyalty and gift card loading. It was a total game-changer, and it remains that way today.

    That’s why taking it over to China will make an enormous impact.

    Several times, and most recently in the latest quarterly conference call, Schultz has referenced that the company is bringing its digital presence across the Pacific.

    I am more convinced ever that… as we fully roll out our new partnerships with the leading digital companies and brands in China and leverage our unique digital, mobile, card, gifting, and loyalty programs across our business in China later this year and ultimately across CAP overall, we will perform at even higher levels of success and profitability in the future than we do today.

    Although revenues respectfully climbed 18% and 14% in China/Asia-Pacific last quarter, I would look for a deeper mobile push in China to be like gasoline on the fire.

    Taking a peek at the most recent conference call from Alibaba (NYSE:BABA) sheds some light on the mobile/online retail world of China (bold emphasis added):

    So retail sales is going against the grain of what many consider to be a decelerating economy. And that’s because the shift of the Chinese economy is going from investment-driven to consumption-driven… e-commerce penetration continues to grow and that is largely because Alibaba is behind driving that penetration of online commerce. And we’ve seen a very massive shift of users going online, that’s because of the advent of the mobile device.

    Starbucks is also a beneficiary of this move, even though sales aren’t done online necessarily, but through a mobile device. I know this doesn’t seem like a big deal to some, but when shares were trading sideways throughout 2014, that’s when the company was gearing up to unleash its mobile potential.

    SBUX Chart

    Despite the doubters, Schultz continued to stress the “flywheel effect” that Starbucks’ digital efforts would create, and boy was he right. It has propelled the Americas segment to new heights and it will continue to do so going forward.

    There’s no reason China will be any different. Although recent comps in CAP have been disappointing by many analysts’ expectations, I think this will help to drive them higher later this year and throughout fiscal 2017. Given that CAP comps have been underwhelming this year, it should also be a low bar to hurdle next year.

    So while increasing the store footprint in China is the right thing to do for the long-term, the digital expansion was absolutely necessary for the short and intermediate term. Especially for such a big and technologically-driven Chinese market.

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  • BreadTalk to open in Myanmar next year

    BreadTalk to open in Myanmar next year

    Myanmar’s growing group of middle-class consumers can now look forward to Singapore bakery giant BreadTalk’s pastries and baked goods as the home-grown bakery brand will soon be available in Myanmar.

    It signed a franchise agreement with Myanmar Bakery on Tuesday (May 3), which will allow Myanmar Bakery to hold the master franchise to operate BreadTalk outlets in Myanmar.

    The first outlet is expected to open in Yangon by early 2017 in one of the shopping centres owned by the Shwe Taung Group. Myanmar Bakery is part of Myanmar conglomerate Shwe Taung Group, which owns an extensive network of real estate businesses in Myanmar.

    The deal marks the first food and beverage venture in Myanmar for the Shwe Taung Group and is also BreadTalk’s maiden foray into Myanmar.

    “With a growing middle class and rising retail consumption, there are immense growth opportunities for BreadTalk in Myanmar,” said Mr Tan Aik Peng, chief executive officer of BreadTalk’s Bakery division.

    “The Singapore team is working closely with the Shwe Taung Group to understand the Myanmar market and we promise an exciting line up with BreadTalk’s first boutique bakery in Yangon.”

    He added that BreadTalk was confident that they will “introduce a new lifestyle of bread appreciation” to Myanmar’s burgeoning middle class.

    BreadTalk operates close to 800 outlets across Singapore, China, Hong Kong, Indonesia and Thailand.

    The Shwe Taung group of companies is a conglomerate involved in real estate, construction and engineering, infrastructure, hotels, entertainment, trading and investment. It also operates the Junction Centre group of shopping centres, which include malls in Yangon and in Naypyitaw, the country’s administrative capital.

    The group is also behind the upcoming Junction City, which is an integrated development in downtown Yangon which will comprise a lifestyle shopping mall, an office tower and a five-star luxury hotel scheduled to open in the first quarter of 2017.

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  • Apple India stores a step closer

    Apple India stores a step closer

    A government panel has recommended the removal of a trading obstacle that would free Apple India to open single-brand retail stores across the country, one of its few growth markets.

    A three-member panel has recommended the waiving of the mandatory 30 per cent local sourcing condition for Apple, which earlier this year asked the government to consider the exemption. The reason for the waiver is said to be the cutting-edge technology the company would bring to India, reports The Tech Portal.

    With the committee’s finding, Apple is just a step away from a final decision. The Department of Industrial Policy and Promotion (DIPP) will send the proposal for final approval to the Finance Ministry.

    Apple has retail stores across the world, including China and Japan. In India, it sells its products through exclusive reselling arrangements with chains such as Imagine and iStore.

    In November last year, India scrapped the condition of 30 per cent local sourcing for overseas companies seeking to invest more than 51 per cent equity in the single-brand retail segment, if certain other conditions are met.

    Chinese tech retailer Xiaomi has also applied to open single-brand stores in India while seeking the sourcing exemption for a range of products including Wi-Fi amplifiers, Bluetooth speakers and power banks.

  • New lifeline for sagging Rocket Internet fashion sites

    New lifeline for sagging Rocket Internet fashion sites

    Investors have injected US$339 million lifeline into GFG, which owns the struggling Rocket Internet fashion websites.

    Rocket Internet and others have sunk the euro 300 million into its Global Fashion Group, raising GFG’s valuation to €1 billion – which is about a third of what it was worth hardly a year ago, when it raised €150 million.

    Launched in Luxembourg in 2014, GFG is a holding company formed from a merger of five eCommerce fashion companies – India’s Jabong, Latin America’s Dafiti, Russia’s Lamoda, Middle East firm Namshi, and Zalora (Southeast Asia and Australia).

    GFG acting CEO Romain Voog says the financing will provide the group with the capital it needs to continue with its strategy of “building out its leading position” in the online fashion sector in emerging markets.

    Rocket claims GFG’s performance has improved in the past year, easing its losses and raising its adjusted EBITDA margin. But it has been struggling to gain market share, and pulled out of Thailand and Vietnam, one of the fastest-growing eCommerce and internet markets in Asia.

    And GFG’s Jabong business in India, considered the next big market after China, has reportedly been up for sale for months with its valuation eroded by a tenth in just a year. Meanwhile, rival eCommerce companies like Flipkart and Snapdeal have soared in value.

    Voog is optimistic the reduced losses combined with this funding round will help accelerate the GFG’s path to profitability while it expands. A third of the €300 million raised came from Rocket. Swedish investor Kinnevik was also involved, along with existing shareholders.

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  • China blamed for Apple sales slump

    China blamed for Apple sales slump

    Apple sales slumped 26 per cent in Greater China in the latest quarter, driving the tech giant to its worst result in 13 years.

    CEO Tim Cook said the Hong Kong market was largely to blame, due to its currency value being pegged to the US dollar. Sales in the mainland fell by a more modest (but still alarming) 11 per cent. Greater China sales totalled US$12.49 billion, equivalent to about 24.5 per cent of its global revenues.

    Cook added that a year ago Apple sales in China soared a remarkable 81 per cent year-on-year, suggesting that made for a tough benchmark for this quarter’s results.

    But Apple cannot blame all the company’s current woes on China: sales in its US home market fell 10 per cent as well.

    Globally, Apple sales totalled US$50.6 billion, down from the $58 billion of the previous corresponding period. Its quarterly net income fell from $13.6 billion to $10.5 billion and gross margin fell from 40.8 per cent to 39.4 per cent. International sales accounted for 67 per cent of the quarterly revenue.

    Despite the sales decline, Apple is showing no sign of slowing its aggressive expansion program in Greater China which it predicts will soon become its largest single market, overtaking the US.

    During the quarter the company opened seven more stores, with five more planned in the current quarter, taking the network of large format stores to about 40.

    The company will also take a hit from the Chinese Government’s decision last week to ban Apple’s iTunes music store and its Apple Bookstore – both selling digital content to Chinese customers who have invested in iPhones, iPads or Apple computers.

    The biggest drain on sales is the iPhone, which is now struggling to keep pace with a myriad of less expensive models offering similar technology at often vastly lesser prices. Apple sold more than 51.2 million iPhones in the first three months of 2016 – nearly 10 million fewer than during the same quarter of 2015.

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  • North Korean beer sale in China

    North Korean beer sale in China

     

    A North Korean beer brand rarely available in China up to now has been spotted on grocery store shelves in cities close to the North Korean border, although the brew is too highly priced for Chinese consumers, sources said.

    “There is a billboard advertising Taedonggang beer on the roadside in front of the Dandong train station,” said a Chinese resident of the border city in northeastern China’s Liaoning province, who declined to be named.

    “Even the daily newspaper has revealed the state-owned, North Korean beer company’s address and phone number of the brewery’s offices in China,” he told RFA’s Korean Service. “It seems that China has officially imported Taedonggang beer.”

    Taedonggang beer, named after the river that runs through North Korea’s capital Pyongyang, sells for 20 yuan (U.S. $3.09) per 640-milliliter (22-fluid ounce) bottle in stores in Dandong and Shenyang in northeastern China’s Liaoning province, four times more than the price of domestic Chinese beer brands which typically cost 5 yuan (U.S. $0.77) per bottle, sources said.

    North Korea, which was hit with tough new international sanctions in March for conducting another nuclear test and long-range rocket launch, has had to step up efforts to participate in markets abroad to generate foreign currency to finance the regime of national leader Kim Jong Un.

    So far, the beer’s distribution has been limited in China—North Korea’s largest trading partner—and is only available in stores that offer Korean and other foreign products and ones in areas with growing Korean communities, sources in Shenyang and Dandong said.

    “Some grocery stories have been selling Taedonggang beer most recently, but there is only a small quantity, which is why other people still don’t know about it,” a Chinese resident of Shenyang said.

    Good quality, high price

    Even though the taste and quality of the full-bodied lager, which has a five-percent alcohol content, are appealing, Chinese consumers will not buy the beer at such a high price, sources said.

    “Although the alcohol content of the beer is slightly higher than that of Chinese beer, the North Korean beer has a dark color and a smooth taste,” said a Chinese source who has tried the beer at a restaurant in Dandong.

    “The quality of the North Korean beer is fairly good, but I think it will be difficult for Chinese consumers to drink it often because it is too expensive,” he said.

    China imposes a 17 percent value-added tax and 250 yuan (U.S. $39) per ton on foreign beers, said a North Korean who lives in China.

    “Taedonggang beer’s price of 20 yuan is very high considering the market margin and importers’ profit,” he said.

    In North Korea, foreigners can buy the beer at hotels, but they pay an inflated price for it as a means of bringing in foreign currency.

    North Koreans can buy bottles of Taedonggang for the equivalent of about 1 yuan (U.S. $0.15) each on the black market, sources said.

    “It seems that the fixed beer price is due to the import price, meaning the retail price in North Korea itself is high,” the North Korean source said.

    Showpiece brewery

    Taedonggaang got its start in the early 2000s when former North Korean leader Kim Jong Il acquired a defunct British brewery. A team of North Koreans traveled to the plant site in Trowbridge, a county town of Wiltshire, England, where they dismantled the brewery and reassembled it in Pyongyang. The plant began operating as the Taedonggang Beer Factory in 2002.

    The regime ensured that the showpiece brewery had abundant supplies of fresh water and quality ingredients to manufacture the brew, while millions of its largely impoverished people were undernourished from a lack of food.

    North Korea began exporting Taedonggang to South Korea a few years later, but the South Koreans stopped importing it in mid-2007 after the regime suddenly hiked its price, according to a Reuters report in March 2008.

    In 2012, Britain’s The Economist magazine ruffled feathers in South Korea with an article that contrasted Taedonggang with what it called the South’s “boring beer” and said “brewing remains just about the only useful activity at which North Korea beats the South.”

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  • Is Growth For Luxury Brands in China Over?

    Is Growth For Luxury Brands in China Over?

    China and the Chinese played a primary role in the growth of the luxury sector in the past decade. But what was once a boon for luxury goods brands is now turning around.

    Chinese consumers account for the largest portion (31 percent) of global luxury spending, up from only 1 percent in 2000, according to a study by consulting firm Bain & Company. And in the past decade, thanks to China and Chinese shoppers abroad, the luxury goods market worldwide grew by 72 percent in size.

    luxury goods

    (Statista)

    “The relentless expansion of the domestic economy that fueled China’s voracious appetite for the finer things in life has slowed,” Exane BNP Paribas analyst Luca Solca.

    “This only compounds the chilling effect that the government’s anti-corruption campaign has had on demand for luxury fashion and fine jewelry.”

    Many luxury goods brands opened up store after store to tap the Chinese market. The experts are now debating whether they are too exposed to China.

    In his analysis, Solca looked at whether each brand is over- or underexposed to the Chinese market based on the number of stores they have. Accordingly, Versace is the most over-exposed brand with 22 percent of its stores based in China. Moncler, Tod’s, and Dolce&Gabbana are among the overexposed brands as well.

    The only large brands underexposed to China are Hermes, Tiffany, and Michael Kors. And these brands still have some retail expansion opportunity in China, according to Solca.

    (Source: Exane BNP Paribas analysis, RE-Analystics, Business of Fashion)

    (Exane BNP Paribas analysis, RE-Analytics, Business of Fashion)

    Sales of luxury products in the mainland have started to slow down after Chinese regime leader Xi Jinping launched his political anti-corruption campaign in 2013. Many of the Chinese officials and their numerous cronies and associates notorious for using luxury items for bribes stopped shopping for those items.

    A slowdown in the Chinese economy since mid-2015 was the second blow for luxury brands. Some brands have already started closing stores in China.

    “A corollary to the drop in domestic sales is a reduction of the store footprint by most brands, with a greater focus on fewer, larger, and better-located stores” Bain & Company stated in its report on China’s luxury market in 2015.

    Louis Vuitton, which is the most valuable luxury brand in the world, closed six stores and opened two new stores in China in 2015. And the company recently announced the closure of two additional stores located in Shanghai and Shanxi.

    Meanwhile, Gucci closed five stores in China, Burberry closed two stores, and Prada closed four stores in 2015, according to the Bain report. Due to collapsing demand in China, brands are expected to shut more stores across the country in coming months.

    Adding to the industry’s woes, publicly traded luxury goods companies announced weaker than expected results in April 2016, caused by slowing Chinese tourism in Europe. Burberry Group Plc, Prada SpA,Kering SA, and LVMH Moet Hennessy Louis Vuitton SE all reported disappointing results following terror attacks in Europe.

    According to Bruno Lannes, a Bain partner based in Shanghai, luxury brands should place greater emphasis on exclusive and fashionable collections, digital platform engagement and digital content, as well as pricing, in order to remain competitive in rough times.

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  • Tesla Opens 17th Experience Store In China

    Tesla Opens 17th Experience Store In China

    U.S.-based electric car maker Tesla has opened a new experience center, which is the company’s largest experience center in North China and its fifth owned sales site in Beijing.

    Tesla will reportedly build ten new stores in China in 2016. At the same time, the company will stick to a direct sales model, which is the core model of Tesla. At present, Tesla’s new cars need to be booked via its official website and the cars will be delivered to physical stores.

    So far, Tesla has opened 17 experience centers in China, covering North China, East China, and South China. Those experience centers are mainly located in first-tier cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, and some are in Hangzhou, Chengdu, and Xi’an.

    Zhu Xiaotong, head of Tesla China, said that the company will continue to develop within the market of first-tier cities in the future. On one hand, the potential of those super cities has not been fully explored and they can still digest Tesla’s capacity; on the other hand, it is complicated to expand into a new city. Therefore, Tesla will seek stable development based on existing sites.

    During the opening ceremony of this new store, Tesla’s new Model S also made its debut in China.

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  • Awakening giant: E-commerce in China

    Awakening giant: E-commerce in China

    With the largest population and the most Internet users of any country in the world and the rise of its middle class, it is not surprising that China is also the world’s largest and fastest-growing e-commerce market. However, capitalizing on this huge market is becoming increasingly difficult for a variety of reasons.

    Recently, McKinsey, the consulting giant, released a new report on this burgeoning market that holds “enormous potential”.

    A growing market

    Two years ago, China’s online retail market overtook the United States’ online retail market. In 2015, China’s online retail market was approximately USD $630 billion of sales, the world’s largest and nearly 80 percent bigger than the US’.

    E-commerce in China accounts for 13.5 percent of all of its retail spending.  Although in the near term Chinese e-commerce is forecast to increase significantly, McKinsey’s survey shows that companies need to prepare for major changes in the Chinese market.

    Major changes coming

    From new customer segments to new product categories and sales channels, China’s online market is set for huge future growth. Representing 30 percent of total retail sales, the categories of consumer electronics and small appliances are well-established online categories, as is apparel.

    On the other hand, Food (including packaged and fresh food), is a category that faces more challenges and opportunities. Though 50 percent of respondents have purchased some food online, online spending represents only five percent of the total food spending.

    The category of food holds promise for companies that can attract consumers to do their regular grocery shopping online stand to capture a lot of business.

    Online-to-Offline (O2O)

    Consumers in China are accustomed to buying through O2O services companies—they are attracted to the website or app, then buy offline. The top sectors for O2O seem to be travel, dining, and mobility, where respondents who use O2O vendors report spending much more than they did before.

    Huge Opportunities

    McKinsey’s survey of China’s digital consumers tells us that growth in e-commerce and O2O is shifting to new areas. “Succeeding in this market is a matter of keeping pace with changes that are playing out across geographies, product categories, and channels.”

    The opportunities are huge for companies willing to look closely into these aspects of the market to find them, then move quickly to take advantage of them before their competitors can.

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  • Apple sales fall 26% in Greater China, optimistic on China and India

    Apple sales fall 26% in Greater China, optimistic on China and India

    Apple’s double-digit growth in Greater China, which has helped fuel the huge success of the iPhone over the past few years, came to a grinding halt last quarter, with revenue falling 26 per cent as iPhone demand softened.

    Sales in the Greater China region, which includes the mainland, Hong Kong and Taiwan, dropped to $12.5 billion in its fiscal Q2 ending 31 March. The region accounted for a quarter of Apple’s total revenue, down from 29 per cent a year ago.

    Revenue in mainland China, Apple’s second largest market after the US, fell 11 per cent (7 per cent in constant currency terms) – a year ago sales surged by 81 per cent.

    Apple yesterday reported its first-ever quarterly drop in iPhone sales,which dropped 16 per cent to 51.2 million units.

    Apple CEO Tim Cook said in the earnings call he doesn’t think China is as weak as everyone says. “In China we may not have the wind at our backs that we once did, but it’s a lot more stable than what I think is the common view. So we remain really optimistic on China.”

    He noted that it opened seven stores in China last quarter, taking its total to 35, and will open five more this quarter.

    Cook talked up its services businesses, which expanded 20 per cent last quarter and represented the company’s second largest revenue-generating category in Q2. But with Apple suspending its iBooks and iTunes Movies services in China last week after the country’s video and publishing regulator imposed stricter guidelines on online content, its growth prospect in services could be severely dampened.

    Beyond China
    The company faced declining sales across the Asia-Pacific region, with revenue falling 25 per cent in Asia Pacific (ex China and Japan) to $3.16 billion.

    Japan was the bright spot in the region, reporting a 25 per cent jump in sales to $4.13 billion.

    Responding to a question about India, the third largest smartphone market in the world, Cook said infrastructure and sales channels will be key.

    The LTE networks being rolled out in the country will “unleash the power and capability of the iPhone in a way that an older network, a 2.5G or even some 3G networks, would not”, he said.

    He noted that unlike in the US, where operators sell the vast majority of phones, in India the operators in general sell virtually no phones. “So it’s through retail, and retail is many, many different small shops”.

    The company has been working on its sales channels for the last 18 months, and Cook said he is encouraged by the results that it’s beginning to see.

    “But because the smartphones that are working there are low end, primarily because of the network and the economics, the market potential has not been as great there. But I view India as where China was maybe seven to ten years ago, and I think there’s a really great opportunity there,” he said.

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  • Does Your Brand Need a Store in China to Succeed?

    Does Your Brand Need a Store in China to Succeed?

    As brands speculate about continued economic buoyancy in China, the necessity of having physical stores has come under increasing scrutiny. The unrelenting enthusiasm for e-commerce shown by Chinese consumers has also given cause for questioning the relevance of physical retail.

    Luxury and fashion brands have scaled back on their original optimistic plans to store expansion in China. Most notably, Louis Vuitton announced the closure of several Chinese stores last November. Also Walmart, has this week, launched a major brand repositioning to offer e-commerce solutions to Chinese consumers.

    Pessimism about store space is becoming endemic. Dangdang.com, a local online bookseller similar to Amazon, has launched an audacious plan to create actual bookstores based on the idea they will receive free-rent in increasingly vacant shopping malls in big cities.

    When a store, is not just a store

    Looking at the importance of a store presence in China requires a specific cultural lens. A key starting point for most, if not all, foreign brands is that they are not inter-generational. That is, the reputation and trust of the brand has not been passed down through family legend. Instead, brands are initiating relationships from scratch with a fresh generation of consumers.

    Taking the case of luxury, consumers have experienced the brand as a personal form of development. A key moment of truth in their relationship with brands is formed through store experiences –the physical inspection and feeling of products.

    When interviewing Chinese consumers, the key difference that strikes me is how emotional the store experience and service are in the stories they tell about their favourite brands. Often, they become aware of a brand through peer recommendation, but their loyalty and ultimate advocacy is created through their retail experience.

    Forgoing or not maintaining a retail presence is like introducing a ‘circuit breaker’ at the most crucial stage of brand adoption. Stores, irrespective of economic forecasts, must be seen as a symbolic, practical and emotional stepping stone for new consumers in China.

    In one particular interview with in Chengdu, the thriving city in the Western part of the country, a Chinese entrepreneur was describing to me that one of his favourite brands was Tod’s (which he could not pronounce, and jokingly called it “potato slices” because it was the closest Chinese word he could find).

    Despite having extreme difficulty in engaging with the brand at the official level, he has become a Tod’s aficionado based on his experience at the store – that he described as “like the home I imagine I would live in Italy”.

    For him, the brand was the retail experience, it was enough to cement this loyalty and enthusiastic promotion to a large group of businessmen, who like himself, were ‘finding their feet’ with luxury brands.

    Beyond a transaction point: Chinese stores as brand equity

    From a broader strategic point of view, brands need to see stores in a wider cultural perspective. Beyond a point of transaction and sales number, stores are the clearest and most uncompromised expression of your brand to new consumers in China.

    In the context of ‘face’, retail presence in new malls and as part of the new middle class’ weekend walkabouts is essential to suggest status and respect to Chinese consumers.

    Once again, using Chengdu and luxury as an example: The way foreign brands were perceived in terms of their premium offering was directly related to their presence in two of the city’s new mall developments –meaning Burberry and Michael Kors enjoyed almost equal rating as early-arriving European brands.

    Adding to perceptions is the way that Chinese consumers share their recommendations with others in-person and online is almost always footnoted with a proof point on quality. Invariably, this is described as the look, feel, or physical appearance of the product materials – the fabric of the dress or the sheen of the casing. In this initial peer-to-peer introduction to brands, physical inspection at a store is an essential part of the purchase journey.

    Forgoing or not maintaining a retail presence is like introducing a ‘circuit breaker’ at the most crucial stage of brand adoption. Stores, irrespective of economic forecasts, must be seen as a symbolic, practical and emotional stepping stone for new consumers in China. Something that e-commerce, or lack of stores, can not address.

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  • Starbucks China sales soar 18 per cent

    Starbucks China sales soar 18 per cent

    Starbucks China has recorded a massive 18 per cent increase in sales in the second quarter, fuelled by a 5 per cent increase in transactions.

    The Chinese boost was one of a string of highlights in the quarter in which Starbucks set a new sales record of US$5 billion globally, up by 6 per cent on a same-stores basis.

    The Seattle-based coffee giant served nearly 16 million more customer occasions worldwide in the three months to March 27, 12 million of those in the US where it is experiencing a resurgence.

    Earnings per share rose 18 per cent to a record 39 cents, with US and Americas comp-store sales up 7 per cent. Operating profit rose 11 per cent to a second quarter record $878 million, its operating margin up to 17.3 per cent.

    Starbucks boosted its worldwide store network by 350 to 23,921.

    CEO and chairman Howard Schultz described the Starbucks China performance as “stunning” and said the overall financials underscored the strength of the brand and the resilience of the global retail and consumer packaged goods business.

    “Loyalty, technology and innovation are continuing to fuel our digital flywheel and propel our business forward all around the world.”

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  • On Pedder takes first step into eCommerce

    On Pedder takes first step into eCommerce

    Hong Kong shoe retailer On Pedder has launched an eCommerce site featuring a curated mix of luxury footwear.

    It is centered around the retailer’s Pedderzine, a seasonal art-fashion hybrid magazine distributed to customers.

    Complimentary shipping is being offered by the site, with returns possible, for customers in Hong Kong, Japan, Macau, Philippines, Singapore, South Korea, Taiwan and Vietnam, as well as Australia and New Zealand.

    Brands include 3.1 Phillip Lim, Aquazzura, Chloe, Common Projects, Gianvito Rossi, Giuseppe Zanotti Design, N⁰21 , Neil Barrett, Nicholas Kirkwood, Paul Andrew, Rene Caovilla, Sophia Webster and Valentino.

    More brands are showcased under the “On Pedder Love” section of the site, along with exclusive product.

    On Pedder collaborated with Hong Kong photography and video artist Luke Casey for Pedderzine this season, which focuses on Hong Kong and Kowloon’s roots and was shot on the streets of Jordan and Sham Shui Po and Jordan, including karaoke bars, back alleys, markets and brothels.

    “We wanted to create an online destination for our customers to enjoy the energy and aesthetics of our in-store curation,” says Pedder Group president Peter Harris.

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