U.S. Ambassador Jon Huntsman, left, and Zhejiang 
Provincial Governor Lu Zushan, right, exchange 
gifts during a meeting. (AP Photo/Eugene Hoshiko, Pool)

How Brands Have Adjusted After the Demise of Gift Giving in China

Long seen as the epitome of success in China, Western luxury brands have often been held up as the way to market abroad and an example of good social media optimisation that other, lesser brands need to follow.

But while brands such as Burberry, L’Oréal and Jaguar are still popular as status symbols in the country, recent events have made dents in their China bottom lines.

The anti-corruption policies of the Chinese government introduced over the last couple of years had a number of knock on effects, most notably for the wide number of brands that provide high end, luxury goods to the mainland. For a long while, these were counted as popular gifts for business leaders and politicians in the country and a good example is the home grown brand Baijiu which has been harder hit than most.

Buijiu is a liquor company and producing just the kind of gift that Chinese officials liked to give each other prior to the crackdown on corruption. According to the Jing Daily:

The slide in sales of expensive bottles can be contributed to the fact the segment has traditionally been dependent on “gifting” among Chinese officials and the hard-drinking banquet culture—both of which dried up quickly after the launch of Beijing’s anti-corruption efforts.” 

Whilst the Baijiu brand suffered with an initial two to three per cent fall in sales during 2013, Baijiu consequently made the decision to move away from a primarily luxury status and target a more mass consumer market rather than historically successful high end one.

Cartier in ChinaThis is a move that Western brands may well like to take on board. With marketing opportunities such as social media beginning to move away from the Tier 1 and 2 cities to the urban and suburban outreaches with a broader demographic coming on board, it makes sense to widen appeal.

Of course, luxury brands have more to worry about than perhaps the government’s current stance on who is giving a gift to whom. For instance, in January this year, Burberry incurred the wrath of many of its fans when it included The Fu Chinese symbol on a New Year scarf. The symbol brought over 3,000 negative comments on social media along with complaints that it looked fake.

Not only that, there was a suggestion that the company positioned the symbol incorrectly as Fu is usually shown upside down on flags during New Year, hailing the start of new prosperity. Indeed, the Wall Street Journal said recently:

They also say Burberry incorrectly positioned the character, which is typically displayed on banners and good-luck charms upside-down during Chinese New Year, a direction that’s used to signify that “fu,” or prosperity, has arrived.” 

The truth is that many luxury brands operating in China believe that the anti-corruption crackdown by the government is a passing phase and that they still have enough young, affluent netizens who are interested in the status quality of their products. For lesser brands, even those that produce products that are ideal for gifts but don’t have the ‘luxury’ kudos, it’s always been the case that they need to take a more mass market approach.

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