As many corporations struggle to stay afloat as the recession continues to drag on. Many companies are looking to expand into new markets in an attempt to capture a new audience. Their new focus is now on developing countries such as India, China, and Korea.
China is the largest new consumer market. Affluent Chinese spent over 9.4 billion on luxury goods in 2009, coming second to only Japan. In addition, the per capita GDP is growing at a rapid rate and is expected to reach $3400 dollars this year. All this meaning that China is a huge untapped market for all merchandise price points. Many companies are trying to create lower-priced merchandise for the ever-expanding middle class.
Many brands are working hard to try and capture this market. One luxury brand that is currently working to do this is Hermes. They created a separate brand called Shang Xia, which created a blend of traditional Chinese craftsmanship and contemporary design for their merchandise. It includes everything from hand-sewn cashmere to fine china. WWD describes it the products as elegant and ethereal. “The goal for Shang Xia is to show the world the strong tradition of China which is a tradition of thousands of years” Hermes CEO Patrick Thomas stated.
Shang Xia means ‘topsy turvey’ in Mandarin. The materials used will be local materials all assembled by local artisans. This has a huge appeal to Chinese consumers because many are increasingly exploring their roots, craft and culture. This new brand is specifically being tailored for the Chinese market as a luxury brand made in China for Chinese.
Shang Xia Furniture
Shang Xia Tea Set
Another brand which striving to make in-roads into the Chinese consumer market is GM. They have recently paired with SAIC-GM-Wuling Automotive Co. They created the Baojun or ‘Treasured Horse’ line of cars to capture growth at the low-end of the Chinese market. This new brand will compete with domestic makers such as Geely, Chery and BYD. The price of this cars has not been announced but it is estimated that the Baojun brand Sail car will be about 56,800 yuan or $8,563 USD.
The reason why GM has made this move is because China has become the largest single market for GM. It is estimated that out of the 5 millions unit sold in China, GM captures about one third of that.
Baojun 'Treasured Horse' Logo
Baojun Sedan
The last brand that has been created to target the Chinese customer is Denizen Denim created by Levi’s. The brand is said to be built around the needs of the new emerging middle class and is all about giving them jeans at affordable price points and up-to-date fits and finishes. Levi’s is aiming to price its Denizen brand in the range of $40-$55 and it will be expensive than the Signature brand.
The Denizen brand is designed for 18 to 28-year-olds who seek high-quality jeanswear and other fashion essentials at affordable prices. The product collection – including a variety of jeans, tops and accessories – complements active lifestyles and empowers consumers to express their aspirations, individuality and attitudes. They have chosen young people from China, Korea and India to be brand ambassadors for Denizen, in an effort to show how Denizen allows young people to express their individuality.
Pair of Denizen Jeans
Brand Ambassadors for Denizen
These co-branding ventures really show the potential that the Chinese market possess especially now as the American economy remains stagnant. These companies really need to find new markets to keep making money. As China’s GDP grows, their consumer consumption will continue to grow.