– My long-held belief that, rather than attempting to go global, Chinese brands would simply acquire troubled or bankrupt Western brands and revamp them, appears to be gathering pace. The Italians seem to be particularly popular – Dongxiang has done wonders with Kappa while Chinese interests have also moved on Sergio Tacchini and others. Li Ning has just launched the spring/summer collection for Lotto, yet another slightly washed up Italian brand they’re pushing in China. We’ll see how it goes – Lotto does not seem to me to have the level of prior brand reputation Kappa had when it launched in China. Whatever success comes Li Ning’s way will cost a lot more than Dongxiang paid to win with Kappa.
– Indeed, the whole "Go Global" push by Chinese companies has been problematic. It appears that Ben Simpfendorfer, chief China economist for the Royal Bank of Scotland, has heard the same complaints from Chinese manufacturers expanding internationally as I have. Simpfendorfer notes in his excellent new book, The New Silk Road, that as everyone in China enjoys the same advantages of cheap labor, subsidized utilities and a stable currency, they’ve found that when they open up shop abroad they are invariably competing with each other rather than the locals. The result is that in trying to escape low prices and tight margins at home they’ve merely ended up fighting the same fight in a strange land to the benefit of very few of them. Better then to buy proven foreign brands that will benefit from China’s cheaper costs, but where a decent margin is still attainable through brand power.
– A lot of Western brands in China at the moment are acting really dumb. Panicked in their home markets, head offices are demanding cuts and so, despite China being trumpeted by most of them as their fastest-growing market, they’re being forced to make lay-offs. It makes no sense except as some sort of warped political correctness – every country office must lose 10% of staff regardless of performance. Several major brands that are all over the Chinese High Street (with swooshes and stripes) have been forced to sack experienced staff simply to show an improvement on their spreadsheets this quarter. What a shame – they’ll never get that experience back and it’s already starting to show in their month-on-month sales.
– Spent an afternoon talking to a group of managers of various Shanghai four- and five-star hotels the other day. They were not a happy bunch. Occupancy levels are hovering around a dismal 50%, room rates are being slashed and all the future holds is more capacity as new hotels open while many recession-hit business people and tourists opt for the cheap and cheerful likes of Motel 168.
– The managers were divided over the future of the MICE (meetings, incentives, conferences and exhibitions) business. A few years ago, when Shanghai was internationally in vogue, it did well out of this market. But magazines now describe other places as "hot" and at least a dozen inland China cities offer comparable facilities, lower prices and a more edgy experience for guests. The World Expo might help, but only temporarily – come October 2010 that potential bounce will stop like a speeding car hitting a wall.
– We’ve seen some pretty blatant product placement on Chinese TV over the years but the local version of the US hit show Ugly Betty breaks new ground. Rather than call it over-the-top or gauche the advertising profession uses the nebulous term "clutter." I spoke with Mateo Eaton, head of the branded-content division of Mindshare North Asia, and even he admitted the level of product placement was, "a bit over the top." Still advertisers, TV producers and, most importantly, viewers don’t seem to be complaining, so we can surely expect more of this on screen in the coming years.