The most dangerous softness in the Chinese economy is the softness of the analysis being used to probe it.
China’s beauty industry is overdue for consolidation. You need look no further than the cosmetics section of a major department store. Some brands are thriving, but others are zombies supporting a small army of bored salespeople.
Chinese consumers in the world’s fashion capital spend more than those from any other country, with 37 percent of their budgets slated for shopping, 18 percent for food and gastronomy and a mere 3 percent for visiting museums and historic sites.
This is not just about Paris, but about how luxury shopping and international travel are inexorably intertwined in the minds of a great many Chinese tourists.
Proof: Paris is not alone. The same applies to Milan, New York, London, Beverly Hills, and any city where Chinese tourists gather. Walk into anything larger than a boutique at the Forum Shops at Caesar’s Palace in Las Vegas, for example, and there will almost inevitably be a Chinese-speaker on duty behind the counter.
The lesson for brands: Chinese are global consumers seeking experience and authenticity. The old formula of name+bling+advertising is dead, and the brands that fail to notice that are heading for hard times in China.
In a major relief for the Indian government and consumers, crude palm oil (CPO) prices are likely to decline by nearly 15 per cent before the end of 2017 due to bumper supply from Indonesia and Malaysia, the world’s two largest producers of the oil
A fall in demand of palm oil wouldn’t be a bad thing for the world. Of all of the vegetable-based oils, palm is one of the least healthy, and it tends to get dumped on price-sensitive consumers around Asia.
India is the world’s largest market for palm oil. China held that title as recently as 2009, but as incomes have risen, palm oil has been discarded for a mix of healthier cooking oil alternatives.
China is the harbinger of a bigger trend, and Malaysia and Indonesia should be concerned: this is the beginning of a long-term secular decline in a key commodity.
“It would be a big mistake to adapt to a market,” [Patek Philippe owner Thierry Stern] told the Straits Times in an interview. “If people like Patek Philippe, it’s because they like the design and the philosophy of the brand. If you start to adapt yourself to every market, you are going to lose that.”
Thierry should be lauded for not adapting Patek-Philippe for China. This is a man who understands the problems that arise when you start pandering to your market rather than catering to it.
That said, not every company shows up in China with a Patek Philippe brand cachet or customer base, and few brands could get away with imitating Stern’s strategy.
The lesson to learn from Thierry Stern’s approach is that the decision on whether or not to adapt your strategy, your product, or your entire company to China has to be based on a clear understanding of your appeal with Chinese consumers, as well as a recognition of what you might lose globally by making compromises for a single market.
PARIS (Reuters) – French fashion brand Louis Vuitton, part of luxury giant LVMH (LVMH.PA), said on Friday it had launched an e-commerce website in China to tap a booming online shopping market.
Posited: That if your product can be sold online and you’re doing business in China, you need an e-commerce channel. Or two.
Some very smart people I’ve been talking to in Beijing believe that the best marketing in China is built with e-commerce rather than advertising at its core. Naturally, this does not apply as easily to some companies/products as it does to others.
But I keep this mantra close at hand because it reminds me that I spend too much time seeing marketing as one “P” (promotion) and not four (product, price, promotion, and place.) It also reminds me* that the only marketing that matters is the marketing that either sells more product or makes it possible to sell more product.
* I know, we’re marching through no-brainer country, but these things are easy to forget when you spend sixty to ninety hours a week with your head in “promotion” mode.
Prediction of the week: by the time the investigation into the business dealings of Jared Kushner and his family by the DoJ and/or Congress is complete, the writing will be on the wall for the entire EB-5 program.
There has always been an ugly side to EB-5, but it has managed to stay beneath the surface. Thanks to Kushner et al, it rises like a kraken from the depths, and will incite the desire of men to slay it.
I hear a lot these days about the ostensible “comeback” in China’s luxury market. LVMH’s recent results suggest more aggressive marketing and a possible dead-cat bounce more than a sudden return to the luxury market.
The social fundamentals in China are changing luxury consumption patterns, and possibly for good. So the luxury market in China is not coming back – it is changing, moving on, evolving.
Softbank is walking away from Uber.
Did Masayoshi Son, a man with a keen desire to create the next age, wake up one morning and realize that a company like Uber has no place in that new age?
And if so, is it because of Uber itself, doomed in part by failures overseas and a shredded reputation?
Or has Masa realized that the shared economy has hit its apogee, and that it is all downhill from here?
Back in June, Salon published a listicle detailing “5 Major Threats to Further Hasten Uber’s Decline.” Listing the sexual harassment lawsuits, the mishandling of a driver rape case, improper driver classification, the Waymo issue, and Greyball, it was better clickbait than it was journalism, doing little more than offering a summary of recent headlines. Thanks for the update, Salon.
While each of these represents a serious crisis, and while the company is being tested in its ability to deal with one, much less all of them, arguably each of these are, separately and collectively, crises that the company can survive.
Rather more ominous is the insight offered by RadioFreeMobile on the accelerating erosion of Uber’s global markets. “First Uber lost China, then Russia, and now it looks as if South East Asia may go the same way.”
He then goes on to detail the strategic investments made by Softbank and Didi into Grab, the dominant ride-hailing platform in Malaysia, Singapore, Indonesia, Thailand, Vietnam and Philippines, with a 97% share in those markets. A dominant market leader fortified with loads of cash means that Uber is essentially locked out of markets with over 560 million people, in addition to the 1.5 billion Chinese and 300 million Russians who will not be using an Uber service soon.
The big question now is where India and Brazil will go.
Uber is on its back foot in international markets. You can argue, as does RadioFreeMobile, that the distractions listed by Salon are not helping, and you’d be right. But those issues are not the cause of Uber’s missteps outside the US: the strategic flaws that have undermined Uber’s global expansion predate Salon’s list and are rooted in the nature of the company.
As I said recently on Twitter, when historians ultimately close the book on Uber, they will agree that the fall began with Uber’s failure in China. Not that Uber’s China missteps will be seen as the cause of the company’s demise, mind you, but as the first clear indication that its strategic miscalculations and flawed leadership left the rest of the world beyond Uber’s reach.
Over the past four years I have discovered that there is an implicit belief among many US public relations (PR) practitioners – especially in the large global firms – that PR around the world will develop to become similar to what it is in the US, and will follow the US lead as the profession evolves.
Axiom: it will not. If the PR industry manages to rise above its straightjacket of inertia and hubris, it will find itself changed by forces from India, China, Latin America, Russia, and Africa.
What keeps me awake at night is the fear is that ethics in the name of expedience will be the first sacrifice in that process.
Following up on my post last week about it being time for a US reset on China, it appears that the time has come for Beijing reset on Taiwan.
Without challenging the maxim that Taiwan and the mainland provinces all remain an inseparable part of China, and leaving aside the issue of of independence, let us step back and look at the situation without the filters of nationalist emotion.
Instead, let us assume that at some point, Taiwan will decide that its prospects would be brightest as a part of a single political entity with the mainland. It may seem hard to imagine, but given the great changes taking place in the world, it is certainly not outside of the realm of possibility.
If that is in fact Beijing’s desired end game, the leaders of the CCP need to ask themselves a practical question: given the choice, how would they like re-unification to unfold?
Does the Party‘s leadership want Taiwan to come crawling back, craven and broken, into the embrace of the Motherland? Does the Party want Taiwan resentful and permanently troublesome because of a loss of face in slinking back?
Or do Beijing’s leaders prefer that Taiwan should return proudly, willingly, and with face and good feelings, so that “reunification” does not simply paper over deep, abiding wounds that will fester )and eventually erupt?)
It would seem that a willing return would be the preferred endgame. And if it is, Xi Jinping has an historic opportunity over the next five years of his term in office to reset the tone and direction of cross-straits relations. Given the variety of powder-kegs that surround and suffuse China, this might well be a good time to place China on track for a win-win.
Watching the winds in the semiconductor industry, especially in China, hints at a coming consolidation of products. To wit:
- Within 18 months, Intel will be back in the memory business in a big way, but not in the way we think about memory today.
- Within three years they will not be alone.
- Within five years, specialty memory producers will either diversify, be in mortal danger, be M&A bait, or some combination thereof.
Watching the Sino-US relationship evolve, and then not evolve, since the inauguration of President Donald Trump, I have to confess some disappointment. Let me qualify what follows by noting that I am not a fan of POTUS 45. I not only crossed party lines to vote against him, I left the GOP outright and joined a tiny third party when he was selected as the Republican nominee.
So all of that said, we have reached a point in the relationship between the US and China such that a reset is in order. It has been 44 years since Nixon went to China, and nearly 40 years since Jimmy Carter and Deng Xiaoping recalibrated the US-China relationship.
That relationship was formed when the United States was entering the fourth decade of its Cold War with the Soviet Union and the Sino-US tie-up promised to subtly but importantly shift the balance of power in favor of the West. It was formed when China was crawling out the wreckage of the Cultural Revolution, and out from under the long shadow of Mao Zedong.
That relationship was framed between a large and slightly desperate third-world country that constituted absolutely zero threat the world order and a developed nation that boasted the most prosperous economy in history, the most powerful military on Earth, and leadership of an international system that it had forged with its allies a mere three decades before.
Four decades hence, China has changed, the United States has changed, and the world has changed. Yet we have been conducting this bi-lateral relationship on terms that are increasingly irrelevant and unrealistic. Let me put that another way: the US continues to conduct its side of the relationship on that basis. China has made clear to us for a long time – without ever actually saying it – that it will conduct its relationship with us on terms dictated at least as much by immediate expediency as decades-old agreements.
So it is time for a strategic reset in our relationship that accurately reflects what China is and wishes to become, who we are and what we wish to become, and the fluid state of the global order.
The call that Trump placed to President Tsai of Taiwan, representing as it did a break from diplomatic tradition if not international accords, once appeared to be Trump’s opening gambit in his version of that reset in the Sino-US relationship, and a possible change in the rules that govern that relationship.
That no longer seems the case, and one can hope that the change in tone from the White House reflects a practical desire to compel a resolution to the North Korea question rather than acquiescence to a Chinese view of international affairs. Putting off a reset in Sino-US relations for too long will only make the necessary changes all the more disruptive.
Happy July 4th!
Back in the Hutong
Visiting Xiaomi’s Mi Home store near company headquarters in Beijing.
At first glance, the store’s appearance bears a passing resemblance to the retail outlets of a famous Cupertino fruit company. As with many Xiaomi’s products, though, what is surprising and delightful about the Mi Home store lies beneath the surface.
If I can sum up the difference simply, it is this: Apple stores are a celebration of the devices. Mi Home stores are an on-ramp into a what can best be seen as a modern lifestyle enhanced and simplified at a hundred points by digital devices.
Apple talks about the digital home, but it is mostly smoke and mirrors. Xiaomi is actually delivering in a relevant and affordable way, and the Mi Home stores make that plain.
A growth-focused Apple would be advised to take notes – for their product development teams, not their lawyers.