It’s an old saying, but true – a rising tide doesn’t lift all boats. If your vessel is not adequately prepared, no matter how sunny a day it appears, you will sink. Witness the good ships Best Buy, Home Depot and Mattel’s Barbie – all have gone to straight to the bottom like stones! While Best Buy’s exit was rather dramatic, with outlets rapidly shuttered, Home Depot has managed to slip quietly away store by store. The Barbie outlet in Shanghai – complete with spa and cocktail bar – could never hope for a low-profile closure. I think the firms have been overwhelmed by the scale of the competition here. In America Best Buy has a couple of competitors at most – here they have Gome, Suning and Yongle, branded stores from the likes of Apple and Sony, as well as the legions of “electronics plazas.” It will be interesting to see how Germany’s gadget kings MediaMarkt, part of the Metro Group, flourish – or otherwise – in the coming months.
Others seem to be doing a little better. Consider the case of Mothercare, a brand that feels a little dated in England but looks fresh and funky on the Chinese High Street. And apparently it’s reaping the benefits – double digit growth, thanks to all those doting parents of “little emperors.” I feel the company may be playing down competitive threats, especially new online baby sites, but it’s definitely looking more shipshape than Best Buy or Home Depot ever did.
A big push overseas at the moment from China’s food firms – and they’re running into a lot of unfavourable press. Bright Food Group (parent of Shanghai-listed Bright Dairy & Food), bidding for United Biscuits, was readily painted as the unpopular new owner of British brands like Jaffa Cakes and Hula Hoops. Next up is Hangzhou’s Wahaha: CEO Zong Qinghou says he wants to take his brand of tea drinks to Britain. However, the first problem is what to call them – to native English speakers, “Wahaha” sounds like something Teletubbies drink before bed. I can’t see it catching on with a bunch of rough, ready and thirsty car mechanics in Newcastle. Surely a rebranding is in order – perhaps Forbidden City Beverages or Great Wall Drinks.
Another big problem is going to be public trust. Chinese food contamination scares are not just business chatter in the West; they feature in the tabloids and on rambunctious talk radio. Bright Food also wants to buy US vitamins and supplements business GNC. I polled a group of young Chinese white-collars at my gym who use these kinds of products – they all agreed that if they thought GNC was made in China they’d be nervous. Just imagine the reaction of notoriously risk-averse American middle-class parents who feed their kids GNC vitamins. This is going to be a massive hurdle for Chinese food groups, and in light of the 2008 melamine scandal and other tragedies, quite rightly so.
It took a Frenchman to set me right on the differing approaches to “luxury” goods between Europeans and Chinese. According to him, luxury in Europe is about well made items available only to the elite few, whereas luxury in China is about brands consumed by a significant portion of the masses. I guess this explains the success of mass market luxury brands in China such as Coach and the general indifference of the Chinese consumer about the lack of craftsmanship and quality materials in many so-called luxury branded products. Of course, it also explains why the brands prefer Beijing to Paris these days.