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Jun
2015

Brand positioning; the key step to success

WendysmallWendy Yuen was born in Hong Kong and moved to Shanghai in 2002. She has worked in marketing for more than 20 years, the first 12 years in cosmetics before moving into the luxury fashion with Zegna, Dunhill and lastly as GM of Loewe China.

In 2013, Wendy established her own business in the cosmetics sector and has offices in Hong Kong, Shanghai and Melbourne.

 

You have worked for both Dunhill and Loewe in the past five years, can you provide some background to these brands in China?

Loewe entered China in 2000 opening its first store in Beijing China World, and it took a while for the brand to gain traction. Four years ago a new CEO joined Loewe who directed focus to the brand history and craftsmanship, and moving stores to more suitable locations, which made a real difference.

Loewe product quality is in my view, as good as that of Hermes but perhaps this is not well known in China. Hermes may have been better at telling its story to Chinese consumers than other brands. In 2011, when I was GM, we achieved significant growth which I would put down to improving the local team, being more aggressive with our promotional events and selecting better store locations.

I moved from Zegna to Dunhill in 2007 after hearing about the ‘home’ they were soon to open in Shanghai. This was a big attraction to me as I felt that although the brand had been in China since the early 1990’s, the home was a real way to differentiate the brand, and I still feel that the one here in Shanghai is the better one of the four the brand has globally.

I was able to use the home as a good base and run 2 events per month including seminars working with banks and luxury travel agents, and holding wine tastings and gala dinners with partners. Because Chinese people see price as luxury, but not lifestyle, we wanted to present an experience of the brand. The home changed the image of the brand, but now I feel they need to reinvent it to inject more life into it, as other brands have introduced similar concepts within their flagship stores.

Why are leather bags so popular in China, and what are the drivers for purchase?

Woman will spend most money on bags and shoes, but less on clothing because fashions change routinely, iconic bags however, last forever. Consumers buy bags for both themselves and as gifts, that by their nature must be expensive. Bags are regarded as durable, and brand names elevate their value, of course these days’ greater travelling means that Chinese understand more about the heritage of luxury brands and want to buy into it.

Bags are easy gifts, there is no size issue, and they can be changed in store if you don’t like what you are given. In Chinese terms they provide the giver big face in front of the receiver. Approximately 20% of bag sales at Loewe are purchased as gifts and Beijing stores perform better for gift purchase’s than those in other cities. However, bag sales have been affected by the latest government regulations associated with gifting. Although bags could be purchased for less money overseas, the gift giver will need an official FaPiao (receipt) to claim the money back, so these purchases remain a domestic activity.

The promotion of bags is driven via the media and stores in expensive malls like Plaza 66 in Shanghai and the Bejing Shin Kong Place. The brands themselves invest a lot of money in visual merchandising to embed the vision of luxury products in the minds of consumers.

When marketing leather bags, what can you tell us about the importance of positioning?

Positioning and maintaining one’s positioning is extremely important in China, if you are ‘luxury’, you must say and demonstrate this. We have seen some big bag brands become very well recognized by consumers of all levels in China over the past five years, so much so that the very wealthy will now not buy them and choose to purchase those they see as exclusively luxury such as Hermes or Chanel instead. These brands have somehow to recover their luxury status, which will be very hard for them. If they try to upsell, they may potentially alienate the less wealthy customers they have who are the volume buyers. It is of course possible to position a brand as luxury, but to have some affordable luxury items in the store, but these should not be actively promoted, or consumer perception will change.

Once you set a position, don’t change it. If you want to sell another range, create a sub brand. If you are affordable, you must still develop your brand recognition initially as this is critical to your success. Try and keep a consistent management team, and also be consistent in your focus to avoid confusing consumers.

Who would be the top ten brands for leather bags in China, and how does their positioning differ?

The following are my top 10 ranked luxury bag brands: Hermes, Chanel, Prada, LV, Gucci, Bottega Veneta, Celine, Dior, Fendi, MiuMiu

All these brands are European and well received by the Chinese, I don’t see US brands competing as luxury in the sector. With the exception of Celine and MiuMiu that are designer brands, the others have a long history and heritage that is important in China. The designer brands can benefit from the designer themselves, but if the designer changes, then the brand perception changes with it.

Those brands that sit under a group have the ability to use their better negotiation powers to leverage in terms of marketing and retail space. The others are less fortunate. If I take Hermes as an example, everyone knows Hermes has a Birkin bag and the brand keeps using it as a main theme. The bag itself represents the brand positioning: luxury (expensive), quality (best leather) and niche (often lack of stock means it is very special, not easy to get). So even if customers cannot get a Birkin for some reason, they still want to buy something from the brand because they are in their eye’s ‘luxury’.

What advice would you give a brand manufacturing leather bags that had yet to come to China, in terms of brand building?

As I have already mentioned, brand positioning in China is the key to everything else. It is important for brands to know who their customers are and their characteristics; they can then determine how to communicate with them appropriately.

The biggest challenge now for most brands is that they all want to capture different types of customers, so they have bags from a few thousand to hundreds of thousands of RMB which confuses customers in terms of their positioning. At the end of the day, the ‘really’ top customers will go to the brands that are really luxury and for those who can only afford a bag for a few thousand RMB they will shift down market because there are now more choices in this category.

Using the media is very important. In terms of print media, focus on the key magazines for your brand, and not all magazines. Find a conduit directly to the editors, rather than pumping out press releases, as these relationships will pay dividends in the long run. Airport advertising is expensive, but in my view it reaches a narrow group of business people who are keen luxury buyers. Be creative when running events, and keep these small. Large events do not get you close to your target audience.

CRM is a critical tool as far as I am concerned, and it is becoming more important in China as consumer needs and experiences change. Many brands use it quite lightly, but I have always seen it as a means to both gather customer information and tailor marketing activities specifically for groups of my customers.

It is strong in the cosmetics sector, but fashion in China only started using it 3 or 4 years ago. Fashion brands used to talk en-mass to Chinese consumers, but now they need to use CRM to focus on people. If it is effectively used, it reminds the customer that you are here, and it is especially important as these people also know all about other brands and will hear from them regularly as well.


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