An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.

Patek Philippe to China: Do this My Way

Patek Philippe & Co. watch
Patek Philippe & Co. watch (Photo credit: Wikipedia)

“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.”

Source: Why Luxury Watchmaker Patek Philippe Won’t Adapt for China | Jing Daily

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.

Going E

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.

Source: LVMH’s Louis Vuitton launches e-commerce website in China

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.

Kushneria

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.

Luxury’s Comeback?

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.

So Long, Masa

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?

Uber and Crystal Balls

No Uber, lah.

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.

PR World

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.

A Reset Across the Straits

Map of the Taiwan Strait
Map of the Taiwan Strait (Photo credit: Wikipedia)

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.

Memory Loss

Watching the winds in the semiconductor industry, especially in China, hints at a coming consolidation of products. To wit:

  1. 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.
  2. Within three years they will not be alone.
  3. Within five years, specialty memory producers will either diversify, be in mortal danger, be M&A bait, or some combination thereof.

 

Time for a Sino-US Reset

English: President and Mrs. Ford, Vice Premier...
English: President and Mrs. Ford, Vice Premier Deng Xiao Ping, and Deng’s interpreter have a cordial chat during an informal meeting in Beijing, China. ID #A7598-20A. Français : Gerald Ford, sa femme, Deng Xiaoping et une traductrice lors d’une réunion à Pékin en Chine (1975). (Photo credit: Wikipedia)

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!

Mi Home

IMG_0240

Back in the Hutong
Thinking Geek
1427 hrs.

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.

Three Reasons Alibaba Wins

Someone asked me the other day why I thought Alibaba was such a huge winner in the China e-Commerce game. I see three reasons.

  1. Trust. For a long time, people in China were wary of e-commerce in China because they were simply afraid of getting ripped off when buying goods sight unseen. We didn’t really face that issue in the US to the same extent, because Sears, Wards, and JC Penney had been selling goods to Americans sight-unseen for over a century. Over that time, we had not only discovered which mail-order brands we could trust to “deliver the goods,” we also compelled the creation of terms, conditions, and practices that formed an (often unspoken) contract between retailer and buyer. When it created Taobao, Alibaba put together a series of terms and conditions that allowed both early adopters and the mass market to trust them enough to send their money into the ether. That trust went deep enough that, with Alipay, Chinese now trust Alibaba with their money.
  2. Experience. Alibaba understood from the outset that it needed to offer a an efficient and enjoyble buying experience, but that it did not need to go crazy. The company understood that it had a low bar. The Chinese retail experience was always miserable, and has improved only a little over the past two decades. Simply by making the experience a bit better than what you get at a typical Chinese retail store, and spending the rest of their effort on reliability and trust, Alibaba won.
  3. Scope. As Jeff Bezos understood, the key to winning in electronic commerce was not to focus on being the best bookstore, or grocery store, or anything store. The key was becoming the go-to place to shop, regardless of what you want to buy. Alibaba used Taobao to build unmatchable scope in a very short period of time. Now the default choices are traditional retail and Taobao, and everyone else has to fight harder for consideration, even as a specialized niche site.

It is difficult to see how anyone might knock that wall down.

Still, Alibaba faces two challenges. First, it has to figure out how it can continue to sustain high growth once it has secured its role of China’s national online department store. That market does not continue growing at double-digits forever, and Alibaba is already hunting for how to grab the next large chunk of users’ wallets – or extend its strengths abroad.

The second challenge is that as e-commerce matures, more companies will figure out how to build their own retail empires, much like Xiaomi – and, to a lesser extent, Apple –  has done. Once Taobao and TMall have accustomed people to buying big brand merchandise online, the value for brands of building their own sites begins to grow. Alibaba will be challenged to address the defection danger in the coming 2-3 years.

For now, though, Alibaba sits pretty, all based on an unimpeded view and unmatched understanding of the Chinese consumer.

When Lux and Tech Collide

However, the cost of providing customers with devices and gadgets to gain access to new tech and maintaining them is not a small expenditure for most luxury fashion businesses. What’s more, when a customer is enthusiastic about testing a hi-tech headset in a store, it does not necessarily guarantee that he or she has the desire to purchase a $1,500 handbag.

Source: Village: How to Combine Tech and Luxury Fashion in China the Smart Way | Jing Daily

I confess that when I began my career thirty-odd years ago, I saw the luxury fashion industry as an easy target for ridicule: alien rituals and strange affectations aside, I found it hard to give credence to a group so focused on the capricious whims of the planet’s most pampered posteriors. That perception was both short-sighted and immature.

The opportunity I had to watch China’s luxury market sprout and blossom has given me a different perspective. Luxury consumers are an informal yet exacting standards body. I have found that the more that we can conduct any consumer-oriented business or marketing activity in accordance with the standards of this rarified niche, the better we can serve all consumers.

That’s why I was fascinated by this London panel talking about the use of technology (specifically augmented reality (AR) and virtual reality (VR)) to sell more luxury fashion.

One truism I’ve never forgotten about luxury customers: they all want the most fulfilling possible experience delivered with the least possible friction. The gratuitous application of kludgy technology (and, let’s face it, while AR and VR are getting better, neither are ready to fulfill their promise) seems to be a guaranteed way to chase luxury buyers out of your store.

Which leads to a second truism: The well-to-do are not early adopters. They’re the demanding knife-edge of the mainstream user, the guardians of the far side of the chasm twixt “niche product” and “widespread adoption” into which so many promising inventions fall.

If you can tweak a technology or product to the point wherein you can match the exacting standards of the luxury consumer, the big-time awaits. Smartphones went mainstream when the iPhone passed the lux test; satellite radio went wide after Damlier, Toyota, Nissan and BMW were able to make them accessible to finicky upscale buyers; and electronic cars went mainstream when Tesla introduced its luxury roadster and Toyota made the Prius hip with the well-to-do.

China is no exception to this rule. The Chinese luxury consumer often shares as much of her psychographic profile with her counterparts in Europe and North America as she does with her home-girls in Shanghai or Bengbu. Until you can offer her a great experience with the minimum of friction, forget about being first-to-market: go back to the lab.

Flavor Fail

It's the picture of Italian ice-cream in a sho...
It’s the picture of Italian ice-cream in a shop of Rome, Italy (Photo credit: Wikipedia)

The lobby of my hotel in Beijing had a happy hour ice cream special: a scoop of Movenpick ice cream for RMB 25 ($4). Intrigued, my family ordered a few scoops.

I ordered Cappucino, and watched the server mark from the bin clearly marked as such. It was with great surprise, then that when I put the first dainty taste of ice cream into my mouth I tasted not the expected creamy espresso, but the cloying super-sweetness of butterscotch.

The staff could not figure out the problem, but to someone who has managed companies in China, the issue seems as clear as day: somebody got it mixed up in the kitchen, and figured “hey, what the hell, who is going to notice?”

Ending “Marketing gratia Marketing”

Aggressive marketing campaigns are common, thi...
Aggressive marketing campaigns are common, this one features Coco Lee (Photo credit: Wikipedia)

Source: From Mini Apps to KOLs: 6 Effective Luxury Marketing Campaigns on WeChat | Jing Daily

Jing Daily, the leading publication covering the business of luxury in China, does regular features spotlighting social media campaigns using WeChat to engage luxury buyers.

One recent example:

4. WeChat x Online to Offline (O2O): Chanel

From April 12 to 24, French luxury powerhouse Chanel opened Coco Café, a pop-up café-themed beauty store, in Shanghai. Visitors to the store could order a cup of coffee and some snacks provided by the brand while browsing beauty products and enjoying customized make-up services. Coco Café has been a huge hit, attracting thousands of visits to the site every day. Chinese social media was filled with photos taken by consumers in the store, who seemed undeterred by the long line snaking around the block. VIP customers could avoid the long lines by reserving a spot on Chanel’s official WeChat account ahead of time.

The campaigns are clever, and the coverage is thought-provoking. What is unclear, and what the article never probes, is whether any of these campaigns do anything to increase market share, drive more sales, increase brand awareness, or drive business goals. And that highlights a larger problem.

There is nothing wrong with using technology to deliver clever campaigns in marketing. But when the technology is being used on tactics and campaigns with vague objectives like “increase engagement with the brand,” “deepen affinity,” or “increase visibility,” something is broken. Each of these phrases is euphemistic shorthand for “conduct activity in order to be seen conducting an activity.” In short, marketing for its own sake. Or worse, marketing for the sake of marketers.

The true promise of technology in marketing is the ability to reduce the size of a target market down to the single individual. I call this “sniper marketing,” the ability to market to each targeted individual personally, using the right pitch, the right channel, at the right time, and in the right place, and do so in a way that makes the entire experience fun and meaningful.

What so much of marketing – even good marketing – remains, especially in China, is spray-and-pray: get in front of a whole lot of people in the hopes that, somewhere in that mass, is a subset of people who want to buy your product. All of the people reached who are not in that subset represent money wasted by the company, time wasted by the consumer inconvenienced with superfluous messages, and credibility wasted by marketers for touting campaigns that deliver anemic returns on the time and money invested.

We should applaud the creativity behind the campaigns on Jing Daily. But we should withhold our cheers, recognizing that these efforts were but a temporary stage in our efforts to do much better. Because companies are not going to put up with this type of activity for much longer.

It is time we evolve past this interim phase in marketing technology set about using the tools we have been given to downscale marketing so that we can conduct a million individually-targeted campaigns for the same money (or less) than it would cost us to conduct a mass campaign aimed at a million people. The result will be orders of magnitude greater effectiveness, measured in the only currency that matters: additional sales and deeper customer loyalty.

Anything less, and we are betraying the trust given us, and marketing will follow farriers and feather merchants into premature obsolescence.