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Today Chinese luxury market has remarkably grown to one of the most significant luxury markets in the world. The Luxury market in China is slowly gaining reputation in the world market due to its products. Despite the competition in the market to gain the attention of international buyers, Chinese entrepreneurs have often had their share of the market segment. Currently China is one of the fastest growing luxury markets marketing the world.
Most of the international companies have come up with different strategies having enhanced the sales of luxury products in the global market. While some international companies have been pushing their way in to the ever growing Chinese luxury market, the local entrepreneurs have not maximized the marketing strategies at hand. As a result, the Chinese market is flooded with foreign luxury products. In addition, the Chinese luxury business persons have not worked on their own strategies to improve their sales. Instead, they have copied the practices from the western merchants. This has in return pushed Chinese consumers to look up to the western luxury products, and thus, affecting sales of the luxury products from local sellers.
Despite the continuous struggle by Chinese merchants in the local market, the Chinese luxury is slowly gaining more reputation. With the use and application of new strategies, growth of the luxury sales has become remarkable. However, there is a lot of counterfeit products in the market that is directly affecting the sale of the original products. In this regard, Chinese government has come up with a strategy that has in turn reduced the influx of the fake products.
The Chinese luxury market is currently flooding with foreign brands from the western countries, including Europe and the United States of America. Amongst the luxury products that are in the market, there are ladies, gents, and baby wear, electronics, and luxury vehicles. Out of these, the ones selling the most in the Chinese market is the apparel for ladies and jewelry. Clients that contribute the most in the buying of the luxury products are rich and wealthy Chinese consumers. However, recent statistics show that the middle class people are slowly catching up with the luxury products buying.
Market researchers have set out their studies to determine the urge behind luxury goods buying by Chinese consumers. According to the studies done in the past, the Chinese consumers have unique passion for obtaining luxury products. Most of the rich consumers travel to far countries to buy the product of their choice. In China, brand loyalty is highly different. The consumers are ready to go an extra mile to obtain the brand of choice despite the cost and price of the product.
Quality is also another aspect that has contributed a lot in the economy growth. Most of the luxury products from the Western countriesare known to be of better quality. As a result, this issue has caused many rich Chinese consumers to shy away from the local products which have been known to be of poor quality. In addition, the Chinese consumers have an attitude of showing off their wealth. They exhibit their wealth by buying expensive luxury products from the importing companies while others order by themselves. This has, hence, led to the growth of the luxury market in the recent years.
Chinese luxury market today
Nowadays, China has rapidly developed its economy. From 2000 to 2010, China has maintained about 10% growth of GDP during those 10 years. On the other hand, the number of rich Chinese and middle class people were increased. Wealthier Chinese demand for luxury goods from the luxury sellers, which has also created a huge top-luxury market. In the year 2004 statistics revealed that about 28million people travelled to the Western countriesto buy luxury products (Owen and Griffiths p. 119 2006). Data shows: China luxury goods group has reached 14% of the total population (about 200 million people) now. China is expected to surpass Japan as the world's largest consumer of luxury goods in 2012 (Liwoke p. 1 2011). World Luxury Association also released the latest 2011 report, stating that the luxury market located in Mainland, China, last year's total spending had reached $ 10.7 billion, 25% of global share. More and more famous luxury goods makers being awared of this opportunity have to enter the Chinese market.
In the Chinese luxury goods market, there are about 10 million – to 13 million buyers of luxury clothing and accessories, such as watches, handbags, fashion and jewelry and so on. By 2014, China will become the first major luxury apparel market. In order to meet the arrival of peak consumption of luxury apparel, European and American luxury brands have additional sales outlets in China. Amongst these about 48 percent of women in China buy expensive jewelry including diamond jewelry from Hong Kong (Goodman p. 199 2008).
China top consumer class of the rapid rise of global luxury fashion industry has attracted attention of the huge market potential for development and a lot of interest, driven by foreign influx of many top brands in China to seize the high fashion market. The corresponding luxury apparel market in China consists of foreign products and brands occupation. In the luxury apparel market, China has not yet formed confrontation with the local luxury goods industry. There is necessity of Chinese luxury goods industry developement in the coming years, as Chinese huge market potential of unlimited luxury apparel is only surrendering foreign giants. Therefore, the development of China own luxury brand clothing is of great importance.
History of luxury market in China
Luxury market in China began way back in the year 1982. During this time, China was considered the best one in clothes production for which they used famous silk material originated from the Chinese traditional making. By this time, only a few brands were in the market, but they were not well known outside the borders of China. Amongst the first brands of luxury products in China, there was the NE.TIGER that was founded in 1992.
It has so far taken several decades before the Chinese brands began to gain reputation in the market. During the era of renaissance and revitalization, the Chinese brands came up, and due to uprising of this age, the Chinese brands began to develop.
Chinese began making fabrics centuries ago, that is during 139 B.C. At this time, Chinese business people brought in Silk fabrics from Persia and the Roman Empire in Europe. Europe had already been known as a place where fashion had been well established. By 1800 B.C., China had caught up with the fashion industry, and started to gain reputation fast with high cultural input in the apparel made by dress makers. China was known as the world cultural center. Ladies dresses were well adorned with stones and ancients designs in the TANG Dynasty.
However at a given time, initiation of the Chinese brands was brought to a halt by the Chinese feudal system. The Chinese luxury business slowly lost its hold of the luxury market. In the end, they have given up all the opportunities in the luxury market. As a result, many foreign investors came into the Chinese luxury market and introduced their products. This was aided by the opening of the sea which facilitated transporting and importing of the luxury goods to China. Western brands obtained a good and mature market with the best locations for the sale of the luxury goods that contributed to the expansion of the foreign brands.
Despite remarkable downfall of the Chinese brands, the market is slowly collecting itself and getting stronger day by day. Today, Chinese brands having come up are giving the foreign brand significant competition as they gain recognition. The Chinese business people have since discovered the marketing techniques that will enhance the growth of the luxury market, and the strategies have been put in place.
Success that China has attained in the luxury market has, however, left a few luxury brands unnoticed while others are yet to emerge and be recognized in the market. Some of these brands operate in the domestic market, and are perceived as local despite the effort of getting into the international level. With the effort and contribution of the Chinese government, the luxury market in China is likely to grow excellently.
What are Luxury goods?
Luxury goods refer to the products that consumers buy as accessories. They are non-necessities. Luxury products go beyond the range of people's survival and developmental needs. These products are unique, rare and exotic.
In the Chinese consumer’s concept, luxury is synonymous with greed, overindulgence, and waste. From the economic point of view, it is essentially high-end luxury customer behavior. From the view point of social sense,it refers to personal taste and quality of life.
Economics is defined as the luxury goods that are growing much faster than its revenue in demand for the goods. It covers a wide range, such as top grade car, brand clothing, iPod, and diamond and so on.
Who are consumers of luxury products in China?
According to data analysis of foreign luxury goods in China, there are four different luxury customers. They are:
- Purchase of luxury goods in China, most young people under the age of 40, while in developed countries, this market is dominated by a middle-aged and elderly people of 40-70 years old;
- The Chinese people, the majority was concentrated in the luxury clothing, perfumes, watches and other personal items, while in the United States and Europe, housing, cars, family travel is the luxury desired;
- The Chinese men that accounted for a significant portion of buyers, while in Japan, the main force of luxury goods is their twenties and thirties, single women. Currently, the top fashion brands women consumers are growing fast, for the past two years this number has increased from 30% to 40%.
- The unit of China luxury market shopping is a major feature of many large companies to buy luxury goods sent to customers, business partners and government officials.
The topic of research
The topic is research on the development of luxury market in China. The market survey and marketing strategies are main points. The research was conducted to investigate the effectiveness of the luxury market in China. This research will also look into the competitors of China on luxury goods that is Europe and the United States of America.
The research will explore the influences and benefits that have been associated with luxury business in China. This will be concluded by the analysis of luxury product and market in China.
The general objective of this study was to examine patterns and market trends of luxury goods in China.
Although the origin of all times has been a luxury, but with China accession to WTO and China rapid economic growth, coupled with a substantial increase in the number of luxury consumers, the world's top (fashion) goods into China have accelerated their pace, greatly facilitated the China luxury market, but its potential is still huge room for growth, including apparel consumption of luxury goods that is a considerable proportion. Reality and economic development urgently requires further research in the theory. The specific objectives of the study were;
- Study the brands and products originality, and loyalty of the Chinese consumers.
- Summarizing the theory of consumers’ behavior on the basis of the luxury apparel consumers’ behavior analysis.
- Use of relevant marketing and management theory to establish more complete conceptual framework for marketing management of luxury goods, clothing that would provide better understanding of luxury marketing and management related aspects, including brand planning, product line management , customer communication management, channel management, service management.
1.What is the current status of luxury market in China? What are the luxury goods that are sold within the local market?
2.What factors have led to the up rise and development of luxury goods in China? What behaviors are associated with the Chinese consumers that develop and improve luxury business in China?
3.Are marketing strategies laid for luxury businesses effective in China?
China has a good and mature market that can establish the local luxury market. However, business people have not realized strategies that will enable development of the luxury market to attract Chinese consumers in China.
Justification of the study
Chinese business initiatives and researches have discovered that China has an effective huge top- luxury market. However, for various reasons, many Chinese entrepreneurs have not explored the luxury market. Chinese entrepreneurs cannot properly establish their brands. Therefore, the investigation status of luxury apparel product, and analysis of consumer psychology and consumer demand, systematic study of foreign luxury goods business marketing models to study problems of the Chinese companies, guidance and help to foreign companies and Chinese companies effectively marketing luxury clothing items, and development of the luxury apparel brands, has are of important and urgent practical significance.
Currently Chinese luxury brand apparel comes mainly from Europe, United States, Japan and other developed countries. China luxury apparel market is attracting many Western luxury brands in the eye. Unfortunately, the absence of local luxury goods like Chinese clothing has caused many Chinese consumers with sufficient savings buy foreign products that are in abundance in the market. China is yet to attract the attention of the local consumers to perpetuate the local buying and selling of the luxury products. In many ways competition has been intensified in the market and the pressure has been laid on the consumers.
In this paper, a large number of findings are based on thorough market research. According to the National Bureau of Statistics, the State Customs Department, the World Luxury Association, Ministry of Commerce, the China Brand Strategy Promotion Association, China National Garment Association, China Textile Industry Association, China industry research network, luxury apparel industry domestic and international magazines and newspapers related to the basis for a variety of information. Professional and public research institutions also provide a large number of informative guidelines, accurate information and statistical data, based on the global luxury apparel market. Luxury apparel comes from Chinese product development background, clothing luxury development status, development of the international luxury apparel and luxury foreign brand apparel companies’ in-depth analysis on this basis, the proposed Chinese clothing luxury marketing strategies.
In theory, this paper based on the principle of economics, to supplement and improve the price – the-demand curve of the theory. This paper aims at establishment of the "luxury consumption" model. The model is built on strong social and commercial supply with consumer demand on the consistent basis. Findings are expected to be useful because they will assist in the improvement of business relations between two countries. The study also helped the researcher gain knowledge and overcome challenges.
It was important to research on the study to find out whether effective management practices were put in place in the process of business relations. It was also important to undertake the study to research the issue of culture in relation to luxury business in China. The study also helped to assess what has promoted to be the growth of the luxury business in China and Europe.
Significance of the study
It was important to carry out the study so as to learn the marketing strategies should be used in the luxury market in China. In this research, a person can be informed on the challenges of the luxury business in China. In addition, business people can get enlightened on the luxury business. The study is also expected to help Chinese in identifying needs of strategies improvement that will help to make the overall business relations between consumers and business sellers better. In this regard, it is important to consider this study as it will enlighten the manufacturers on the wants and needs of the consumers so as make products that are relevant to the Chinese consumers.
Purpose of the study
This study is purposed to determine and understand factors that have contributed to effective development of luxury business in China and Europe. Consequently, the study is expected to make relevant recommendations that would enhance further development of the luxury market and in the end promote luxury business in China to international levels. The study will explore various management and marketing practices that have been put in place by the Chinese business people, which will be contrasted to the European marketing strategies. The study will help to assess knowledge, attitudes and practices with business as the key issue. In attempt to understand the significance of various marketing strategies, various observations will be considered and analyzed in this paper. The study recommends some marketing strategies that should be followed in order to improve luxury business in China and develop the luxury market to international level.
Limitations of the study in terms of reliability and validity
In today’s China much more surveys pay attention to validity but not reliability. In fact, reliability is much more important than validity. There is lack of systematic theory. At present, the domestic luxury market is not systematic. Some studies aim at forum summit in the form, and the subject is fragmented, far from meeting requirements of the rapid development of the luxury market. Chinese luxury goods less targeted academic research, the key is to focus on the macro perspective, focusing on the overall marketing of luxury goods, and lack of specific marketing research; according to the author knowledge, clothing and other luxury goods research is lacking.
In this research, there is a lot of issues to be reported about. In accordance with the author's research of the query results, there have been found some professional institutions of research, and very little academic research specifically. Studies focusing on stereotypes often lack quantitative research.
Most of the researches done has no reliable conclusions. That is, conclusions of the research are often characterized by lack of facts and data. Hence, the market research loses its significance due to the lack of concrete evidence and support. Researchers should ensure that they increase reliability although it may take long for one to be perfect and efficient enough. Aspects including content, words, and format enhance good research reliability.
MARKETING STRATEGIES IN CHINA
Marketing is one of the most significant parts that concern success of business. For a person to raise and have a successful business, it is fundamental to have beneficial marketing strategies (Quelch p. 3 2010). In this context, this part of the paper will discuss the strategies employed by the Chinese business persons that are in the luxury market. In addition, the marketing strategies in China have also played a significant role in improving customers’ relations. That is thorough the advertisement and marketing operation, the clients have had chances of interacting with the business people behind their favorite brands. As a result, this has improved the sales in this business. Through marketing business people have had a chance to work on business virtues such as reliability and trust.
Most of the luxury businesses in China are finding a way out to improve their marketing strategies. That is due to the increase in the luxury market in China, competition has increased remarkably. As a result, most of the business people have had to work on their marketing strategies in order to improve on their businesses and have profitable growth.
There are several factors that have led to the changing of the marketing strategies in China. The most determining factor in the marketing strategy is the types of customers in China. The Chinese consumers have brought in a significant challenge to the business growth in China. So far, different business people have had to use different strategies to attract their clients. On the other hand, harsh economic times have also affected those types of the marketing strategies in China.
The Chinese market trends have continuously been studied, and research has proven that the consumers in China are not informed of the luxury brands in the market. At least some of the consumers are not aware enough of various brands that are on sale in the market. In this context, the consumers have encouraged and practiced a lot of brand loyalty. Hence, it has become the role of the business people to keep their clients informed of the brands in the market. The business people have then changed their marketing strategies to this effect not only to create awareness of their brands but also to promote their brands in the global market (Debnam and Svinos p. 18 2007).
According to Booz and Co (p2. 2011), Chinese business people have realized the potential of the market and have come up with various ways and strategies to attract their clients to their business. Most of the Chinese business people have adapted use of the internet marketing as a key strategy to win the clients attention (Chevalier and Lu p. 13 2011). The use of the internet marketing has enhanced the growth of business in the luxury market. The use of the internet marketing strategies has been enhanced due to the upcoming use of computers. That is most of the multinational companies have used internet, and have in return grown remarkably fast in this market. On the other market, Chinese consumers are familiar with the internet access as it is the easiest way to find the preferred product.
The common methods being used in the marketing of the luxury goods in China include:
- Media advertising including television and radio advertising
- The use of luxury events and shows that are crowned with exhibition of the luxury products.
- Use of word of mouth, especially by loyal consumers
- The use of technology and the internet facilities
Today the internet has become adopted by different sectors in the business world. China is one of the countries that have recorded a high rate of growth in the use of the internet facilities. In addition, the Chinese consumers of luxury goods are well acquainted with the internet. In this regard, it has become important for the entrepreneurs in China to associate their marketing strategies with technology. This aspect has led to the rise in the use of technology in this area. Most of the businesses in the luxury market have opened websites which can be easily accessed by their customers. The high speed of the internet has also made this strategy reliable and particularly efficient, as the clients can do online shopping; they endeavor to buy products of their choice (Alon p. 72 2003). It has been the prime marketing strategy that has been used to attract both local and international customers (Thomson p.6 2008).
The use of the internet and e-commencing in China has also been coupled up with the use of large electronic equipments and modern advertisements. The branding of the luxury goods has mostly used the electronic appliances in expanding the brand awareness amongst the Chinese market, for instance, the use of large LCD screens in restaurants and other public setups.
Media advertising including television and radio advertising
Media advertising is one of the old and traditional means used in China as marketing strategies. Although, advertising id commonly used, most of the promoters have modified media advertising to suit the needs of enhancing publicity. Apart from the ways of publicizing and marketing, advertising has also been a way of communication. The use of media has also been well associated with the use and application of the local elements such as use of local language. Renowned brands, such as Louis Vuitton, have used advertising to promote its products (Chevalier and Lu p. 150 2011).
Use of word of mouth especially by loyal consumers
The word of mouth is a method that is widely used but it is not reliable. It is often reliable only for the brands that are well known in the market. However, this strategy has worked for quite a long time in China. Whereby products in the market speak for themselves as the quality of the products is excellent. It has also been an effective way of enhancing public relations.
The use of luxury events and shows that are crowned with exhibition of the luxury products
In China, luxury markets have associated their sales and promotions with many exhibitions. The business personnel have arranged for shows centered and focused on their products. For instance, people operating fashion industry need to have fashion shows that exhibit the latest designs coming up to the market. One of such fashion industries is NE.TIGER fashions. In these exhibitions they are also able to capture the window shoppers, and thus, increase the number of their clients.
According to Debnam and Svinos (p. 18 2007), the luxury market in China is one of the fiercest markets in the world due to the continuous growth of the luxury business in China. In this regard, Chinese business persons have ensured that they have the latest ways of advertising their brands and products to their consumer. However, despite the saturation of the market, Chinese business people have not retired or retrieved luxury business in their market. Instead, each person has re-strategized his/her means and ways of making brands known in the market.
It is clear that China is becoming one of the best market places where every business person would like to start running a business. The Chinese market has shown a remarkable growth from the latter years in 1990s till nowadays. Today it is one of the countries in the Asian Pacific that is aspiring to become the second largest luxury goods market in the world, with consumers that are growing everyday. The consumers that come to buy luxury products in China are not only Chinese clients, but also the international consumers from all over the world. In this regard, the Chinese market has overflowing luxury business that is growing everyday. As a result, the Chinese business persons and people who have joined the luxury market in China have come up with many brands that are competing for the same market.
The Chinese luxury market has had a significant influx of foreign brands in the recent past. This is due to the increase of consumers within the borders of China. In addition, the market in China is today filled with many luxury businesses competing for the same clients (Anestis et.al p.2 2009). Increase of foreign luxury goods in the local market has, hence, led to high competition for customers. The luxury business people have then realized the importance of enhancing brand loyalty in China. China market potential is likely to be controlled by foreign giants if local companies do not improve their brand performance. Therefore, development of China luxury brand is essential to the growth of the economy.
Definition of brand loyalty
Brand loyalty refers to preference of a customer to a certain product or service. It refers to the situation where a customer always goes back to buy a product from the same source, he/she bought the previous product (Hoyer and Macinnis p. 258 2009). In this case, the choice of product is always based on the manufacturer of the product. Customers that have such a tendency believe in the manufacturer of the product. That is amongst all products in the market, the product chosen is usually considered to be the best one. As a result, the customer pledges to be loyal and devoted to buying products from the same manufacturer repeatedly. Brand loyal customers take time to taste the product. Once satisfied, the client purchases the same product continually. Such clients are not tied up by price factors, and they tend to advocate the product to other people.
Brand loyalty is then a subject that is worth putting efforts on by the company or business. The marketing department should strategize in such a way that the company can maintain its consumers within its borders. That is the product should be presentable and appealing. Above all, it is beneficial that the product meets the customers’ demands and needs. The company should employ effective marketing strategies that will motivate and influence the customer to buy the product and hence, remain loyal (Kabiraj and Shanmugan p. 2011).
Development of brand loyalty in China
Despite the fact that China manufactures luxury goods, the sale of China luxury products has surged since 1990. In the recent past many multinational companies have entered the China market and established their business within it. The Chinese consumers not only buy luxury products due to the price range, but they follow what is unique and different from all other markets (Epsilon International p.3 2011). Surveys in China reveal that Chinese people have an average habit of buying luxury goods. Most of the people who buy luxury goods prefer to buy products that are branded. However, a few other people still buy jewelry at the stores (Debnam and Svinos p.13 2007).
Further statistics have shown that Chinese economy is continually growing. That is due to the continual growth of the economy today Chinese rich people are buying imported goods. Chinese people in essence regard having luxury goods as a way of raising a person’s status. The status of the luxury brands in China is continually growing. That is the luxury market in China has considerably grown in the past 15 years (China Luxury p. 25 2007). However, the market in China has been affected by people who have continually introduced fake products into the market. Nonetheless, introduction of the fake products has enhanced publicity of the original products in the market. This is so far the main challenge that businesses in China have as the fake products are gaining more publicity at a fast rate. In this regard, the brand loyalty in China has been adversely affected. Hence, brand loyalty in China is still considerably low.
Chinese market is saturated with luxury products from within and international companies. Hence, it may be hard for a person to remember a certain brand name. Further studies by Debnam and Svinos (p.13 2007) highlight that the Chinese do not have adequate knowledge on the brands they have in the market. As a result, luxury companies go an extra mile to ensure that they inform their local clients about luxury products in the local markets.
There are many strategies employed which can be used to enhance brand loyalty in China. Chinese companies have slowly changed strategy to enhance brand loyalty and brand performance. As suggested by Collins and Block (p. 254 2007), what a person has to do is change the perception of the branding and products. This way a business person will not have to change pricing of the product, and will still have a new look of the product which can be attractive to consumers. Involving China celebrities will also go a long way in enhancing brand loyalty. In addition, these celebrities will enhance the input of the Chinese culture which is more appreciable to the Chinese people compared to using western styles enhancing brand loyalty.
Brand loyalty in Europe
Brand loyalty in Europe so far has been well exploited. European companies have fully explored the potential and opportunity that comes with brand loyalty. In Europe, brand management companies ensure that they enhance brand loyalty by improving clarity, vision and strength that come with the brand name. For instance, Euro brand management takes care of branding footwear companies in Europe. The company has ensured that each brand name of a shoe is unique and attractive to the client. In addition, the brand name has clarity on the product for sale.
Development of brand loyalty in Europe
In Europe, brand loyalty is a stepping stone to improve business revenues. Many companies are taking brand loyalty as an opportunity to improve their businesses. In Europe business people have discovered that customers return to the same place where they bought the first product. A survey done on teenagers buying trends reveal that most of the young ladies look out for new products in the market. They maximize online sources and catalogues. Hence, companies that have done a good presentation of their brands tend to get a lot of clients. On the other hand, male teenagers return to the old stores where they last bought their stuff. That is young male clients will often return to the previous seller. While males have a trend of maintaining a brand in shoes and clothes, ladies browse for the latest brands in the market.
Other statistics report that some companies in Europe have maximized on customer relations to maintain their brand names in the market. Car companies in Europe give their clients free tours to the manufacturing plants. Thus clients may directly interact with the car makers. Once client has bought a car, he or she will not easily forget experience. Hence, such a client is likely to go back for another car next season. European companies have discovered the effect of doing direct marketing where a company has direct communication with a client. In this case, some companies have already diverted from the use of media in marketing to field work and one-on-one marketing strategy (Christopher p.55 1996).
Comparison of Europe and China in the luxury market
There is a major difference between Europe and China reaction to brand awareness and loyalty. As Europe has early realized all necessity of brand loyalty, China is gradually adapting the new strategy. However, China market is generally challenging compared to European one. In comparison with Europe, China market is loaded with many luxury products. As a result, Chinese clients may take more time before adapting to the local brand name. However, most of the Chinese consumers still go for the international brands for the sake of maintaining high status and reputation. In addition, mentality of buying particular brands due to status is also a challenge to the local companies. Unlike Europe, Chinese are more attracted to the western brands than the local ones. However, Chinese business people have prospects that will improve as they enhance publicity of the products brand loyalty.
Today luxury business has many brand names that are flooded in the market. Many businesses have come with different brand names that will suite the business having been launched in the market (Pieters & Wedel, 2001). Most of the luxury business people in China endeavor to have a brand that will have an iconic image. That is the brand name will not only be known for a moment but will be remembered for a long time. However, there are some that miss out the point and end up with brand names that are not effective in the market or hardly known. With the stiff competition, such brands lose their competitive advantages and may collapse. In this regard, this paper will discuss brand originality.
Brand originality refers to the uniqueness of a brand name in its market domain. A brand name is required to be original and different from the other brand. If the brand name is compared to the other competitor brands, it should have a unique touch and sense of the brand. In this regard, businesses and companies shave to be keen to ensure that the brands which are used on their products have an effect on the buyers and consumers. The brand name has to speak of a certain expectation or experience, which a consumer will have after using the product (Philips p. 1 2005).
Brand originality is a theory that is yet to be known and used. Most business people have not comprehended the significance of having an original brand name. Hence, most people pick on the brand names that are already in the market and change them. As a result, the brand name does not have a lasting impact in the market. It is beneficial the marketing personnel of a company to pay attention to it while making a brand name that will build a lasting effect in the market.
Brand originality in the China market
International business has entered China since 1970. Form the time international business has got access to the Chinese market; many other companies of luxury products have joined the market. Business people and multinational companies endeavoring to do business in China have a major challenge. While doing business in these places is worth the profit, the logistics of launching a branded product in China is demanding. Most of the consumers in China buy products from the international companies. However, some Chinese consumers still have a preference to their own brands. That is the consumers in China are loyal to the original brands.
According to (Keillor p. 95 2007), several products from the West have been changed to fit the Chinese market hence, changing the original brand name. This has been done by many business people that have realized the economic strain in the market. As a result, entrepreneurs have opted to change the brand name to another brand name that can be easily understood by the Chinese people to improve on sales. For instance, the brand name BMW for vehicles has been successfully changed, in China the sellers of the BMW use another brand name Boa-ma, which is translated in Chinese Language as a horse.
The copied products often find easy sale, once they have been introduced to the market. However in the end, these products will loose the touch of the people due to the lack of originality. Such is the scenario in China. The Chinese luxury goods manufacturers should realize the benefit of making original products. The main advantage of having produced an original product is that its brand name will always be remembered by consumers. This is because Chinese luxury consumers look for authenticity in the luxury goods. Hence, most of these clients would rather pay more than buy a counterfeit product (Sheumaker and Wajda p. 186 ).
According to Chevalier and Mazzalovo (p. 233 ), originality of the luxury products is enhanced by the creativity and innovativeness of the manufacturer. The advantage of having original products is that the products will have a high aesthetic value that will attract consumers. Such a product is then more recognizable and impressive compared to the counterfeits. This is the same picture that is seen in the China luxury market. While the counterfeits loose market easily, most people are realizing significance of original products.
Brand and product originality in EuropeThe market in Europe plays an important role in raising the economic standards of the people and European countries at large. The luxury market has been regarded as a great contributor to the European countries economy. That is mainly France, Italy, and Spain. In this regard, these countries have raised production of the luxury goods within their industries. In this region, manufacturers ensure that products made are unique and of good quality.
To enhance originality of the luxury products in these countries, makers of the luxury goods have ensured that they incorporate cultural effects on the products such as handbags, jewelry, and fashion clothes to enhance beauty of the products. They also consider the likes and preferences of the consumers while making the products. In addition, makers of the luxury goods also included traditional trends of the 18th and 19th century that added an exceptional touch to originality, especially for jewelry and watches made in Italy (Jewelry and watches p. 1 2011). As a result, originality of the products in these countries is exceptional, and economy is continually growing. Hence, luxury industry is constantly growing.
The European countries which are participating in the making of luxury goods also influence each other to not only make original products but also bring out brands that are different from the other brands in the market. However, while producing these brands marketing personnel and manufacturers are to ensure that they maintain all standards of making the goods in the market. According to reports by Costa (2011), manufacturers and sellers of the luxury brands were urged to ensure that their brands and products were above the other brands in the markets. In this context, the European brands are likely to grow about 12 percent by the year 2015 (Silverman p. 2 2006).
Finally yet importantly, branding is an aspect that has a significant part to play in the development of the business. It is one of the points that business people and companies should pay attention to while seeking for a brand name. The brand name chosen should be original and not easy to imitate. In addition, business people should also consider market segments that will attract clients fast before the counterfeits come up.
LUXURY PRODUCTS COST IN CHINA
The cost of luxury goods
The cost of luxury products has been increased in China. Most of the buyers of these luxury products are often Chinese wealthy people. Due to the high demand, and preference of the Chinese clients, luxury products in the country have continually been increasing. Despite the fact that luxury goods are expensive in China, Chinese consumers are still continually buying the luxury goods in China. That is Chinese consumers have a self-driven force that enhances them to continually buy the luxury goods in China. Chinese consumers are fond of buying the luxury goods in the country (Kapferer and Bastien p. 14 2009). The driving force of these consumers has stirred up the interest of many people to study the behavior of the Chinese consumers. This unique behavior of the Chinese consumers has played a significant role in the growth of the Chinese economy.
Chinese consumers continually show their wish to buy luxury goods. As it would be most obvious that only the high class and rich people would buy such products Chinese upper-middle class people have shown interest in the luxury products. In this context, pricing of these products may not fall easily. Thus, there is high pricing of these goods in the Chinese market. According to Atsmon, Dixit, and Wu (p. 2 2011), most of the households in China will be having the most expensive luxury products in their homesteads while most of the buyers rush to buy jewelry, fashion clothing, handbags, and luxurious cars.
According to other studies and reports done by Chevalier, Lu, and Toledano (p. 63 2009), people of the middle class are rapidly coming up with endeavors to become recognized in the society. As a result, these people are striving to buy luxury products even with high pricing of goods. In this case, counterfeit products purchase does not count.
Cost of luxury goods in Europe and America
Business people have realized the demand in the Chinese market and have in turn capitalized in it. The Chinese market is currently having many luxury goods that are branded from Europe. That is there are some luxury products which are sourced from the European countries. The products from Europe include jewelry, perfumes, vehicles, and liquor amongst other luxurious goods (Debman and Svinos p.3 2007). There are other people who go for products from the country of origin. Belk (p. 103 2010) highlights that buyers in China continually move to Europe and developed countries in search for the old brands that clients have been buying in the past. In this context, the European market has a high demand of products compared to the other markets. The demand of these products by Chinese people is not restricted by the cost of the products.
A recent report on luxury goods in China states that luxury goods in Europe have increased considerably. That is luxury products in Europe are more expensive compared to the prices that are in China. However, the Chinese consumer is likely to stick to the brand despite the rise in price (Belk p. 167 2010). The Chinese customers that are still loyal to their brands buying the luxury goods from Europe. While the economy in Europe was dragging behind and pulling down, it is sale of the luxury products that enhanced growth of the economy in Europe. The main reason as to why the cost of luxury goods in Europe is high is because of the high pricing of products by manufacturers. For instance, a handbag by the label of Gucci is sold to the retailers for 200 dollars. That means that the retailer sells a handbag to a buyer at a higher amount so as to gain a profit or bear the loss. For this reason, buyers in Europe are pulling off from buying the products, while Chinese buyers are constantly coming for the product.
Other products, which have had a rise in price are jewelry. The King of jewelers is a Paris based jewel shop. At this jewel store, the price of a gold ring has risen by 11 percent. European price increase has been rumored to rise because of the depreciation of the euro. That is due to the depreciation of the Euro, European sellers may end up getting constant losses. As a result, hiking of prices is to suffice the expected loss while the euro appreciates again. Nonetheless, Chinese consumers are continually supporting the European market by their significant contribution to the economy by buying the products despite the rising in price (Okonkwo p. 73 2007). On the other hand, European consumers take time to think of what to buy before shopping.
Cost of China luxury goods.
According to the reports on the cost of luxury goods in China, the price has risen rapidly since 2010. Currently the prices have risen to about 7.73 percent, which was about 6.4 percent in the previous year. These are products that include accessories and cosmetics. These have risen up to 16.6 percent and 14.4 percent respectively. Out of these hikes in prices, a yatch is one of the luxury goods that has had a high rise recently. Its rise in price has been rated at 24.6 percent people in China. It means that Chinese consumers prefer to buy products that are expensive to maintain brand loyalty. Most buyers in China buy these products for the sake of prestige, and more do so for the high status. That is according to the Chinese consumers having a brand of a certain luxury product symbolizes a certain class. Hence, the Chinese would go for the expensive product so as to demonstrate wealth.
The discussion raised by Degen (p.5 2009) is that up to 50 percent of the Chinese customers of luxury products have their own brands. For instance, Chinese consumers would spend up to 280 dollars on hair products alone. Other statistics reveal that 22 percent of the men purchasing luxury products in China buy Rolex watches at least every 6 months. These figures show the need to buy luxury products from the Western countriesis higher in China compared to buying products from its own local market that is despite the high price of these products. Other surveys reveal that the cost of handbags is also likely to rise from 20 euros to 400 euros (Tungate p. 28 2009).
Report by Garner and Chan (p. 218 2005) shows that the price of products such as the watches, wines, electronics, fashion products, and suitcases have a higher price in China compared to the price in the other places such as Hong Kong, France, and the United States of America. It is said that by the year 2012, the Chinese market on the luxury products will have reached about 14 billion USD. This is mainly due to the pricing of the goods by different sellers. That is every business person in the luxury product has his or her own price. As a result, the tax payment has also increased considerably.
Comparison of differences between Chinese and European development in the significance of luxury goods.
Sales of luxury products in both Europe and China are expensive. The sales in China are expensive due to the demand of products, in Europe the goods are highly priced because of additional costs made by the Government. As a result, the cost of goods in Europe is high. In this regard, there have been cases of goods that have been imported but are counterfeits. That is these are sold to customers as originals though at a cheaper price but are counterfeits. These include spare parts and a few accessories including jewelry (Cavalli p. 2 2011).
In the past, sale of luxury goods was only done by Western counties that are European and American states. As time went by, luxury goods were introduced into the China market. The business did well in China as it was introduced to Hong Kong, Taiwan, and South Korea. From these countries business of luxury goods expanded into China and India. In China, luxury products were adopted and bought by rich people who took the products for status sake.
The introduction of the luxury business in China led to increase of customers to about 2.5 million that enlarged the business significantly. While the European and American market was growing at a rate of 10 percent annually, the Chinese market grew and Chinese consumers adopted their own style of buying luxury products. In addition, the Chinese appreciate the foreign products more than the local products. While the Chinese market was constantly growing, the European market that started the luxury business began to drop due to the high cost of the luxurious goods which most clients shied off in Europe (Bellaiche, Mei-Pochtler & Hanisch, 2010). Nonetheless, the Chinese consumers are still faithful to the European brands.
Ways the cost of luxury goods reduced the rate of development of the luxury market in China
Despite the fact that Chinese industry is said to have high chances of growing to become the largest luxury industry in the global market, Chinese business people are yet to prepare the grounds for their clients. The industry success is mainly determined by the price of the products. That is to say those business people need to find an average way of determining the price of the luxury products in China. Most of the Chinese products are rated to be of a high price compared to the other neighboring countries.
It is often beneficial for manufacturers to bear in mind all the consumers types that are in the market. That is in times of production manufacturers should make different products that can be afforded by the different consumers in the market. In this regard, there are other factors that have led to rise of the Chinese luxury goods price including the cost of products marketing hence, causing consumers to shy away from the China luxury products and buy foreign brands.
The rise in the prices of the luxury goods in China has caused many of the luxury consumers to divert their attention to the outside market. This is because the prices of the same goods in the other markets are about half the same price. However, Chinese manufacturers and business people are also tied up by taxes and duties they pay to the Chinese authorities. Most of the manufacturers would complain of high taxes hence, increasing the cost of production. On the other hand, the employment of people who can run businesses in China is extremely high. Such are the factors that press the manufacturers in China to keep their prices high. In this context, buying of luxury goods in China is left for the rich people. In addition, there are other costs that a businessperson in China has to bear in mind. This is also one of the reasons why there are counterfeit luxury products in China. This is the main reason because making of the counterfeit products is much less compared to the cost of making the original products thus, hindering development in China (Croll and Croll p. 325 2006).
Development and maintenance costs have also contributed considerably to rise of the Chinese market. In order for the Chinese businesspeople to be sure of staying in the market for a longer time, they need to ensure of using attractive marketing strategies. Thus, costs of advertising and promotions in China are remarkably high. These are all costs that are chiefly targeted towards the making of a reputable brand that will boost the business to better levels (Ernst & Young p. 3 2005).
The effects the luxury products prices rising in the market have in turn led to the slow development of the market in China. The cost of branding combined with the high taxing has not given businesses in China an optimum chance to move forward at a high rate. Nonetheless, Chinese are still optimistic that by 2015, Chinese market will have risen to being the largest luxury market in the world market.
QUALITY OF LUXURY PRODUCTS
Definition of quality
Quality refers to completeness of a product by a manufacturer to the customer’s use. Products considered of good quality when they meet requirements of the consumers, and thus, administer to the needs of the clients as desired (Devillers and Jeansoulin p. 256 2006). In this context, the quality of any product determines other factors that can affect it while selling in the market. In conjunction with the quality of the product, there are likes and dislikes of the client. Every product has its own market segment in which it may flourish well. Thus, it is beneficial for an individual to recognize the wants and needs of the consumer while considering the quality of a product.
While it is essential for the producers and the manufacturers of luxury goods to consider quality, most clients in the luxury market are also keen and careful on the quality of the items. That is most of the wealthy consumers buy luxury goods while putting quality first. Chinese consumers have long been known to go for the western brands mainly because of the aesthetic value and quality despite pricing of the products. Surveys done by KPMG reveal those consumers throughout the world have a bias towards the western brands. However, some would prefer having one brand while others would have several brands as a way to exhibit their wealth.
Quality standard of luxury goods in China
Most of the Chinese consumers have not been careful about the quality of products they buy (Zinzius p. 13 2004). In the past, these consumers had the school of thought that all the western brands are of better quality compared to the local ones. Chinese luxury products were considered to be of poor quality (Brahm p. 50. As a result, Chinese consumers always bought western brands. However, today the quality of the luxury goods in China has increased considerably. The Chinese government has put up a new law that all luxury products should be manufactured to the expected standard.
Chinese Government established a protocol that ensures quality of all luxury products in China. Establishment of these rules also affected the import of luxury goods from other Western countries. These new regulations played a significant role in the improvement of quality in the luxury products by the Chinese manufacturers. It also reduced the rate of the counterfeit goods that were being sold in the market. As a result, the improvement of these products quality also affected the pricing of the luxury goods in China.
What is perception of luxury products by Chinese clients?
According to discoveries of Saxon (p. 223 2002), Chinese market has counterfeited products. Saxon reports that there are more people in China that can afford luxury products because of the rise and increase of the fake luxury goods. In this regard, fake products are likely to increase as a demand of the luxury products increases. However, Chinese consumers are also informed about the fake products.
To develop quality product in China, it is beneficial for the manufacturers to consider coming up with their own original products. Like manufacturers in Japan and Europe, Chinese people should also incorporate Chinese traditional styles and cultures (Tennant p. These can be a good source of inputting and enhancing beauty of the products such as handbags and jewelry. In addition, it is a good way of improving originality as they will be taking their own cultures which are unique in their own surrounding. Such a practice will also reduce chances of fake goods in China.
Quality standard of luxury goods in Europe
Europe has so far been known as one of the continents that have maintained a high standard of quality in terms of the luxury goods production. In Europe manufacturers of the luxury products including fashion jewelry, and the automotive industry have incorporated their culture into their making of the luxury products (Berg and Clifford p. 62 1999). As a result, luxury products that come from Europe are always unique and original.
For instance, European countries were exceptional in making dresses and fashion clothes. In the past fashion makers would produce fabric using hair(readily available) that would be used to make ball dresses for the ladies. This technique was later adopted when they began making uniforms. However, the makers of the dresses continually improved their quality. This is because the quality improved; they could sell clothes at better prices. In the end, they began making knit wear which was sold well (Franck p. 141 2001).
Quality of luxury products affects the market trends in Europe and China
China receives a significant amount of international products and is continually becoming the center of business. There are several reasons that have enhanced growth of foreign market in China. Chinese consumers have come to a point where they appreciate foreign products because of quality, diversity, and reputation. Packaging of the luxury products is attractive hence, attracting more customers in China. As a result, foreign products have been of better reputation in China than the local products. Local companies have since been forced to improve their branding in order to make the sale better in the market. The influx of foreign products in the market has in turn made the local products loose market in China.
The counterfeiting of the brand names completely changed the market. Almost all the luxury products in China have a counterfeit in the market. Unfortunately, the counterfeited products are circulating outside China into the world market. Original products have been left for the rich people, while the majority who cannot afford the original brands buy the counterfeited. People of low class can also have luxury products that resemble reputable western branded products but at a cheaper price.
By the year 1990, luxury brand names in China were growing at a fast rate. That is the changing of brand names have led to a high competition in the market. Chinese market was loaded with many brands that were counterfeited. These included all the luxury goods and equipment. Hence, each original brand from Western countries was counterfeited in Chinese language. The changing of brand originality in China affected sales of the original brands in the Chinese market. Most of the counterfeited products had been priced lower than the original brands (Croll & Croll p. 45 2002). In the end, the market trend by the consumers shifts considerably as the quality of the counterfeited products is not the best one.
RESEARCH AND METHODOLOGY
This chapter presents study findings and provides a discussion of the same findings whenever appropriate. The chapter also presents and interprets findings of the study conducted to understand the role, effectiveness and importance of the Chinese consumers and strategies that are being used by lux
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