As China scales back its economic projections and faces higher inflation; is there a silver lining for U.S. companies? The answer is resoundingly yes.
“Made in America” is starting to attract more attention in China. For years, European brands have dominated the Chinese market, especially in the luxury category. But the success of these super premium brands is being threatened by overexposure and high prices.
To offset downturns in their traditional markets – the United States, Europe and Japan – many luxury brands have expanded their offerings and outlets in China. In Beijing, Shanghai and other major Chinese cities, luxury brand stores are becoming as common as Starbucks. As a result, the “exclusive” factor has been steadily eroding.
The truth is that many of these brands, just like Apple and the majority of other major electronic brands produce their goods in China and then sell them at high profit margins. For quite a while, brands have been becoming creatures of marketing rather than intrinsic quality.
A few pieces of nice leather costing less than $100 can be transformed into the latest “it” handbag selling for thousands of dollars. Never mind it was stitched together by a Chinese factory worker earning $200 to $300 a month. The sell factor was the oversized branded logo, instantly recognizable to the vast majority of Chinese women looking to make a “statement.”
But the times, they are a changing. As Chinese consumers become more sophisticated, they are beginning to look at quality, as well as the brand, and this is an opportunity U.S. manufacturers can capitalize upon.
U.S. brands, especially clothing, shoes and jewelry, are now seen as offering high quality at lower prices. Quality that Chinese consumers see as equal to, or better, than some of the cheaper European luxury brand offerings.
Top U.S. clothing brands such as Levi Strauss, L.L. Bean, Brooks Brothers, J. Crew, Abercrombie & Fitch, DKNY (a.k.a. Donna Karan New York), Wrangler/Lee, Hollister, Dickies, Pendleton/ Woolrich are beginning to get traction as high-quality prestigious items, which are more affordable, and they present a clear value proposition.
To give you an idea of how successful this trend has become, Joy City shopping mall, which specializes in offering medium brands such as Zara and Dockers, now charges some of the highest rents in Beijing. The mall is crowded with younger shoppers who come for the fun and value.
Unlike their parents these teen to 30-year-olds olds have grown up with brands and are experts in spotting fakes. This expertise has grown into an understanding of quality. They are quickly becoming some of the most discriminating consumers on earth. Their current trend is to flash an I-Phone and then buy the best brand within reach, and by best, they increasingly mean quality.
What is true for clothing is also becoming true for other U.S. products. The collective wisdom in fashion is that to enter the Chinese market, you need to tightly control your design, manufacturing, distribution, marketing and sales. Mono-branded stores, professionally designed showrooms, intensive staff training and a clear message are crucial.
The same applies to selling other goods or services in China. Regardless of the political tensions and transitions within or between the United States and China, “Made in America” is now coming into its own and may be a way for you to showcase what you have to offer.
There is a reason the United States led the world in manufacturing for almost 90 years; ingenuity was a big part of it, but what kept us ahead, for much of that time, was consistent quality in quantity. It also helped that Madison Avenue was the center of modern advertising, but you have to have something to sell.
So as you contemplate your next move in China’s marketplace, don’t forget to wave the flag a bit and earn a few dividends from the generations who made “Made in America” great.
Remember to act quickly though. Competition is tough, and markets are dynamic. The only thing you know for sure is that today’s innovative success is tomorrow’s commodity.
Einar Tangen, formerly from Milwaukee, now lives and works in Beijing, China. He is an adviser to Heilongjiang Province, Hebei Province QEDTZ, China.org.cn, China International Publishing Group, Beijing Baotong and DGI DESIGN. He is also a weekly public affairs commentator for CCTV News’ Dialogue and the author of “The Kunshan Way,” an economic development history of China’s leading county level city. While in Milwaukee, he was a partner at Jackson, Morgan and Tangen, president of E-Tech and a senior vice president at Stifel Nicolaus. He chaired various boards in Milwaukee and was a member of the Federal Home Loan Bank of Chicago. Readers who would like to submit questions or suggest areas of interest can send an e-mail to steve.jagler@biztimes.com.
