Hermès’ China Brand Shang Xia To Launch Next Week: Watch For Jing Daily’s Exclusive Coverage

Since word first broke that Hermès was planning a “Created in China” standalone luxury brand focused on the Chinese market last winter, Shang Xia, Jing Daily has kept a close eye on the brand’s development. Though details have been scarce, we’ve already established that the first Shang Xia boutique will open in Shanghai with a ribbon-cutting ceremony planned for September 16. Next week, be sure to check out Jing Daily’s exclusive coverage of the launch event, coming right after the event ends.

Until then, here is our previous coverage of Shang Xia, the first-ever Made in China luxury brand supported by a major global luxury house:

5 Things We Know About Hèrmes’ New China Brand, Shang Xia
While Hèrmes is behind Shang Xia, the brand itself was started from scratch with the Chinese market fully in mind. Headed by creative director Jiang Qionger, everything from the design to the materials, manufacture, marketing and management will be local. As Florian Craen, Hermès managing director in north Asia, recently told the FT, Shang Xia truly is its own brand: “It is a Chinese brand, developed in China with the Chinese team, based on Chinese craftsmanship and broadly made in China. We don’t want any confusion.”
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Will We Soon See “Real Luxury Localization” In China?
We often look at luxury brand localization in China, a trend that has become more noticeable as ”post-80s” consumers (those born in the post-economic-reform period of the 1980s and more likely than their parents to spend rather than save) have become a force to be reckoned with. With China projected to have 65 million potential luxury consumers by 2020 and set to become the world’s largest single luxury market by 2015, luxury brands know they can’t afford to ignore the demands of Chinese luxury shoppers, who are younger and less brand-loyal than their counterparts in Japan or developed Western countries.
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Hermès To Back New Brand, Shang Xia, In China: Will It Turn Off Chinese Luxury Buyers?
Women’s Wear Daily reported last week that French luxury house Hermes plans to support the launch of a new luxury handbag brand, Shang Xia, in China this coming spring. According to reports confirmed by French newspaper La Tribune, Hermes’ involvement in the launch of Shang Xia wil mark the first time Hermes has built a brand from the ground up, and the company’s products will be designed, manufactured and sold entirely in China.

All of this seems to make sense, since China is now the world’s second-largest luxury market and the world’s most populous country. But is this concept doomed to fail?

http://www.jingdaily.com/

Human Resources in China: “Accept what you’ve got and model them into what you expect them to be”

I hear a lot of people complaining about things that seem to be quite common in Chinese employees.

1. Not saying the truth / Or failing to deliver what they feel are bad news
This sentence sounds quite familiar to me by now: “Lying is not an issue. It is accepted and they do not even think they are doing something wrong”.
Or the “Truth Vs Courtesy” dilemma, a different dimension to the same problem that I read about in the book  ”Business Leadership in China” by Frank T. Gallo. It describes how employees often do not want to deliver bad news that may “hurt you”, “make you unhappy” or “make you lose face”.

2. Looking for a scapegoat
It seems a lot of managers believe that when a mistake is made, you need to find who is responsible and give an “exemplary punishment””.

Those are obviously behavioral patterns that you would not like in your organization…So the tip of the day could be something like:
“Accept what you’ve got and model them into what you expect them to be”

Or at least that is what entrepreneur German Torrado tries to do when he takes his new employees through their “in-job training”.

1.When it comes to saying the truth he tells me:
“Here you must acknowledge that an employee may not tell you the truth but still be loyal. Having said that, you really need to work on that, an eradicate that behavior because they may fail to tell you the truth on something unimportant today, but it may be something critical tomorrow”

“Once you identify an issue that has been hidden from you, you need to keep your cool and then deliver the message: “a director needs to be informed in order to be able to solve the issues that come up, and my expectation is that you will inform me to help me solve them””

2. And his tip for “scapegoat” syndrome:
“As part of my new managers induction, I always make a special effort to share my views/experience on how to work as a team and how to lead teams. I know middle management has been told that, when something goes wrong you need to look for the person responsible and give an exemplary punishment. That is not how I want my managers to work, so I put a lot of effort on showing them how to deal with that type of work situation.”

http://www.foreignentrepreneursinchina.com/

China’s Internet Retailers Want You to Trust Them

More than 1,000 suppliers, publishers, and Internet retailers, including Dangdang.com, Microsoft, Aigo, Wyeth, Lock & Lock, Commercial Press, and the People’s Literature Publishing House, have jointly published an “Internet Retailing Honesty Declaration” in China.

Under the declaration, Dangdang.com and its suppliers promise that following the basic principles of integrity, security, and responsibility, they will provide quality products and services to customers. The declaration calls for the authenticity of goods, honest advertising, complete after-sales services, and no leakages of registration information of users.

Li Guoqing, joint president of Dangdang.com, told local media that the honesty declaration is a self-discipline declaration promoted by Dangdang.com along with its suppliers. The company consistently adheres to the principles of no selling of fake goods and no fraud in online shopping, aiming to provide a safe Internet shopping environment for customers in China. (ChinaTechNews)

When companies do this sort of thing in the U.S., it usually means that they are afraid of government intervention. Afraid of being regulated, industries will preemptively engage in a bit of self-regulation (sometimes real, sometimes bullshit). When the government finally decides to check out consumer complaints, industry can respond with “we already took care of this problem, so you needn’t bother.”

China is different. It is doubtful that this move had anything at all to do with government regulations, which will happen here irrespective of some honesty pledge. That being said, I’m sure folks in the government felt a nice warm feeling when they were told about this little PR stunt. Sounds so harmonious, you know.

Here’s the deal. Online retail is growing by leaps and bounds here, but it has expanded so fast that a lot of questionable practices are being tolerated. Consumer complaints are mounting, and the reputations of enterprises are at stake, directly and indirectly. No one wants to see a loss of trust with respect to online transactions – it took a long time for people here to adopt the new tech in the first place.

I don’t think consumers are going to care one way or another about this honesty pledge. Frankly, I don’t see much value to this in the first place, although I assume a PR guy could explain how these things actually help enterprises (keep reading for one possible explanation).

What it does show, however, is that some folks out there in Net Commerce Land are sufficiently concerned about the problems associated with identity theft, counterfeit goods, privacy concerns, and outright fraud. That suggests to me that there is a widespread problem that is, in some ways, getting worse.

It also begs the question whether more firms will actually do something substantive about it. I suspect that at least some of the companies that signed that honesty pledge already have internal measures in place to protect their customers (the pledge is one way to advertise these measures), and they want to make sure that they are not automatically grouped together with the scoundrels out there. Whether more firms will follow suit remains to be seen.

http://www.chinahearsay.com/

Product Name Makes No Sense? Probably a Trademark Issue

Greg Anderson at the ChinaBizGov blog has a great little trademark find from his area of expertise, China’s auto industry:

China Car Times reports that the new Chevrolet Volt was unveiled at an event in Shanghai today, though it won’t be going on sale until sometime in 2011.

I’m always curious to know how the names of foreign products are Sinicized for sale in the Chinese market. In this case, GM has picked the Chinese name 沃蓝达 (wo lan da), a name apparently intended to sound somewhat like “volt”. (Incidentally that’s the same 沃 used in Wal-Mart in China: 沃尔玛.)

I wondered why they didn’t simply call it “volt” in Chinese. I mean, they do have electricity there, and it’s also measured in volts. So I looked it up.

The word “volt”, meaning a measurement of electricity, is translated as 伏特 (fu te), which sounds exactly like the Chinese translation of Ford Motors, “福特” (fu te).

Excellent example of how product names and trademarks intersect in China. You’d probably be surprised how often that strange brand or product name you see was actually the second, third, or 14th choice of the brand owner. Why settle for the crappy name? All the “good” ones were already taken.

Now consider the complexity of multi-jurisdictional trademark practice, as illustrated in that Volt example. In a perfect world (as envisioned by a trademark lawyer), all product/brand names would be cleared in all jurisdictions, for all languages, prior to any sort of rollout/PR/usage of that name.

Sounds simple, right? Choose a few possible names, farm the searches out to your global trademark counsel, and choose the best one that has been cleared everywhere.

Well, I can think of several reasons why real life doesn’t work that way:

1. Budget — Many firms (not GM, but smaller companies) simply don’t have the budget to obtain global clearances for all product names.1 They have to prioritize markets, and then they clear the name in additional jurisdictions as they move into those markets. If a conflict arises, they use an alternative name. This end result is what GM is doing with the Volt.

2. Preference — Let’s say that the U.S. is by far your number one market, and the name “Volt” can be used there. Even if you find out that the name is not available in China, it might be worth it to go ahead anyway, knowing that an alternative will have to be used in China, and perhaps in other countries. Your preference for “Volt” in the U.S. is so strong that it trumps trademark conflicts in less important markets.

3. Timing — Some industries have very short product development cycles. Getting something on the market fast is key to success, and waiting for several years (potentially) to clean up a trademark conflict is simply impossible. If a conflict arises, a quick decision to either abandon the name, or pay to license/assign the mark, must be taken.

These are only a few reasons. Remember that we are talking about multiple jurisdictions, each with their own local rules. Moreover, each industry has its own quirks related to product lifecycles, advertising restrictions, and name preferences.

The number of factors is quite intimidating, and companies must also make sure that all the right people are “in the loop” when such decisions are being made. This can be quite challenging when it’s a multinational, with individuals responsible for branding stationed worldwide, many of them speaking different languages.

So the next time you see a bizarre brand name, keep in mind that there’s a good chance it’s the fault of some trademark lawyer.
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1.By the way, searches can get really expensive. Not only are they performed based on the product/service in question, or related items, but separate searches should be done for alternative languages. The different permutations can add up quickly.[↩]
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http://www.chinahearsay.com/

Shanzhai Saturday: Dawn of a New Era?

Shanzhai (山寨): Chinese imitation and pirated brands and goods, particularly electronics.

At first, this shanzhai shoe phone discussed on the Cloned in China blog looks like just another example of trademark counterfeiting:

Generic Phone Inside, Trademark Infringement Outside

Impossible is nothing, so now we have this Adidas shoe phone, another game the Shanzhai players did with these worlds most famous brands. When we don’t take it to the seriousness that concerns the law, we feel it’s kind of funny. The phone looks like a sport short from the front size and even the back is also made to look like the sole of a shoe. But after opening it, its charm fades completely. It’s a just an ordinary clamshell phone, though the Adidas logo could be seem on the phone’s End Call and Answer Call buttons.Compared to the phone’s design, its others specs are not even worth being mentioned.

Not so fast. In the world of fake stuff, there is a wide range of IP infringement going on out there. You’ve got your trademark infringement on products like shoes, cigarettes, and luxury items, and in another camp there are the patent infringers who rip off designs and technology. Let’s skip copyright for the moment.

So that “Adidas” phone is an example of trademark infringement, and as the blogger mentions, the phone innards are nothing special. This is a pretty cheap knockoff, I guess.

But if you’re going to slap a counterfeit trademark on an electronic device, at some point an entrepreneurial shanzhai firm that is already cranking out fake iPads or Nokia mobiles is going to wonder what sort of price they can get with a “double shanzhai” product. I could see, for example, a fake iPhone that looks like a Ferrari from the back. How about a shanzhai Lenovo touchscreen netbook that looks like a Gucci or Prada bag (with counterfeit trademark, of course) from the outside?

We’re already halfway there, folks.

http://www.chinahearsay.com/

The top five China sourcing mistakes: Number 3 – Completing your product development in China

In the next of our series on common sourcing mistakes we look at Western companies who choose to complete their product development in China.

For many inventors and manufacturers it can be tempting to ask factories to support their product development process through design suggestions, prototyping and engineering drawing support. This has the benefit of a) being cheap, and b) involving the factory in your new product from the start to help them shape the end outcome.

In short this should be avoided at all costs! Over the years we have seen many projects get stuck in ‘sampling limbo’, with some projects taking up to two years to move to production, owing to constant design tweaks and changes. Factories don’t make any money from the sampling process, so over time this will erode goodwill in your project and the factory will find other priorities.

Ensure you approach your factory with finished drawings, completed prototypes and are in situation where you’re ready to start full production. This will ensure the factory treats you seriously and gives your project precedence over the many other new product development projects they are approached with every day.

(A small plug for our business – China Works have a UK based design and prototyping team, which we set-up in response to the above issue. If we can help with your project please get in touch!)

http://www.china-works.co.uk/blog/

The Basics On Doing Business In China.

Beijinger Magazine recently did a really nice article on our blog,entitled, “Blogging the Law.” The article is mostly an interview with me and it nicely distills the basics for doing business in China.

On the business side, it first addresses China’s current climate for foreign businesses:

How would you describe the government’s present attitude towards foreign investment?

China’s attitude towards foreign investment ebbs and flows. If I were to describe China’s attitude towards foreign investment right now in one word, it would be “neutral.” If your project is going to contribute good jobs for China and you are going to go in correctly, which means you are following the various laws, then your chances of securing the proper approvals are extremely high. If you think you can just waltz in because you are bringing in 100 mediocre jobs, you will likely fail.

It then discusses China joint ventures and why they tend to be so problematic:

Why are joint ventures so troublesome?

We are not fans of joint ventures in China, or anywhere for that matter, because the local party almost always ends up holding a much better hand and on top of that, it’s their country. In mostinstances, everything that the potential joint venture parties seek to do can be accomplished just as well without doing a joint venture. The American company goes to China and comes back talking “joint venture” but when that same company goes to England they come back talking about “establishing a long term relationship” or “doing deals together.” In most instances, they should be talking this way about China too. I love the expression, “same bed, different dreams.” We have been involved with some joint ventures that have worked beautifully and truly stood the test of time, but those are rare.

It moves on to the (limited) role of guanxi for foreigners doing business in China:

Guanxi (relationships) is a much talked about, much written about subject. How big of a role does it really play?

Shockingly little. I have met many people who have real power in China but virtually none of them really do rely on their relationships with people to take care of business. Our lead China lawyer, Steve Dickinson, has been living in China and doing business there about half his life. His spoken and written Mandarin are better than your average educated Chinese person. Steve knows a ton of people in China, yet he would never claim to have pull there nor would he ever advocate taking a shortcut because of pull. I cannot tell you how many times I have heard of or seen a Western company believe it did not need to follow the rules because it had sufficient pull to get away with doing things outside of the lines, only to face major issues for having operated outside of the law. The problem with guanxi is that there is always going to be someone higher up than your contact and that person higher up may at some point call you to account for your failure to follow the laws to the letter. Also, and I have seen this happen more times than I can count, your contact may be removed and then the person who takes your contacts place may remove you as an example of how things will operate under the new regime.

Ok, so it doesn’t meet your standards….so what?

“Sorry it is not the same as the sample.  We hope that you’ll accept it anyway.”

“Your QC is too strict.  No one can expect to be 100%.”

“This is still within tolerance levels.”  (No tolerance levels were ever given.)

All three of these comments were said to me this last week in discussions about active projects in China.  All three of the suppliers then moved to the dreaded show-down level of negotiations: “We won’t make it again.  You can accept this standard or cancel (part of) your order.”

I’m not sure how this type of brinkmanship helps establish long-term relationships or encourages buyer-confidence—which is what every Chinese supplier I’ve every worked with has told me is their goal.  I’m also not sure how anyone would deal with this if they were not in China with the ability to sit down with the factory and have face to face discussions about the issues.

Here’s what we did in each of the three cases.

1. “Please accept it any way.” This was the weakest of the three positions and really more of a pleading than a demand.  The factory knew and admitted that they we wrong and were hopping more than demanding that we would help them out here.  Now of course there are some things that we really can do to help out.  Sometimes the colors aren’t exactly right, sometimes there are other nonessential components that can be less than 100% and the product will be still meet the overall standards demanded.  But sometimes, as in this case, the fact that production was significantly different than the sample components was completely unacceptable.  This is both a rather important component and a costly piece—I understand why they don’t want to do it over again.

So when we didn’t agree with their request and rejected the product they had no other option but to force the issue and they went straight to “Fine, if you won’t cooperate with us, then we won’t do it all.  Either accept the product as is or cancel your order.”

Chinese Hipsters Shopping for Indie Designer Brands Online

Today I was catching up with a friend of enovate, indie photographer Chihmin, to see where he shops online and what items he has purchased recently. He strongly recommended a designer brand online store called Nothing.cn, which features youth focused elements like childhood toys and simple details that are often overlooked by most in China’s fast-paced super-consumer life.

“I bought a white t-shirt with a green airplane graphic. I enjoy simple things with meaningful designs, the green plane reminds me of a small amusement park that I used to go to when I was a child.” Chihmin said.

With the rapid growth of China’s online shopping market, indie designers can better communicate with consumers while directly selling their products online. Some indie designer stores have even become profitable in the past five years on Taobao. Rip is an indie clothing brand that was created by two young girls from Beijing in October 2006. By 2008 they reached 1 million sales. By 2010, the team has rapidly grown from 2 to 45 people and has over 300,000 followers. We have also seen more indie designer brands starting their own online shopping sites recently. 7D focuses on providing an alternative platform (other than Taobao) for young indie designers to sell their products in China.

Why is the Chinese youth starting to purchase indie designer brands?

Desire to stand out.
In order to avoid wearing the same clothes as everyone else, buying indie designer clothing is definitely an effective way to stand out from the masses. enovate’s  super-intern George Lin who studies design at Zhejiang University of Science & Technology, mentioned that a lot of his hipster friends shop for indie brands on Yoho.cn. He says:

“Design majors put unique designs and daring styles as high priorities when buying clothes.”

On Douban, the Indie Brand group KEIICHI has almost 1000 followers. Other indie designer groups like Nengmao, Dongliang have a large amount of followers as well.

Celebrity and Media Influence
More and more celebrities are also starting to wear local indie designer brands. Top actress Zhou Xun picked up indie designer brand YE’S while shooting for a newspaper cover. Fan Bingbing wore indie designer Laurence Xu’s ready to wear piece while walking on the red carpet of the recent Cannes Film Festival, causing thousands of Chinese netizens to discuss it on BBSs. Amazed by the combination of modern style and ancient Chinese history, they displayed pride in that Chinese indie designer’s talent.

For Chinese youth, shopping from indie designer brands allow them to stand out and further explore their personal style and character. For brands, it is the best time to work with indie designers to develop apparel lines that focus on youth trends and youth subcultures.

http://enovatechina.com/blog/chinese-hipsters-shopping-for-indie-designer-brands-online/

China shipping terms – what do they mean?

We’re often asked by customers what the different shipping terms mean, so here is a quick guide to the main terms you might come across:

Bill of Lading: Bill of lading are contracts between the owner of goods and the carrier. The customer needs an original or a copy as proof of ownership to take possession of the goods

Cost and freight: Cost & Freight to a named overseas port of import. Under this term, the seller quotes a price for the goods that include the cost of transportation to the named point of debarkation. The cost of insurance is left to the buyers account.

Cost, insurance and freight: Cost, Insurance and freight to a named overseas port of import.. Under this term the seller quotes a price ofor the goods (including insurance)

Ex-works: A term of sale in which for the quoted price, the seller mearly makes the goods available to the buyer at the sellers “named place”of business. This places the greatest responsibility on the buyer abd minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included

Free on Board (FOB): Common price term used in international trade. The seller is responsible for the cost of goods is to the point of loading it onto the ship or aircraft. The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods have been so delivered

Freight forwarder: An independent business which handles export shipments for compensation. At the request of the shipper, the forwarder makes the actual arrangements and provides the necessary services for expediting the shipment to its overseas destination.

The forwarder takes care of all documentation needed to move the shipment from origin to destination, making up and assembling the necessary documentation for submission to the bank in the exporter’s name. The forwarder arranges for cargo insurance, makes the necessary overseas communications, and advises the shipper on overseas requirements of marking and labelling

Packing list: A shipping document issued by shipper to carrier, Customs and consignee serving the purposes of identifying detail information of package count, products count, measurement of each package, weight of each package, etc.

http://www.china-works.co.uk/blog/