Spanish Luxury Market Courting Chinese Tourist-Shoppers
May 23, 2011 Filed under Community, Yu Shanshan
China is one of Cartier's top global markets (Image: Cartier)
One of the more interesting features about Cartier’s new store in Madrid has nothing to do with its design or inventory, but rather its Mandarin-speaking staff. According to Spain’s largest Chinese-language newspaper Ouhua, in order to better serve the increasing number of mainland Chinese tourist-shoppers that are heading to Madrid every year, the new Cartier boutique is aggressively hiring Mandarin-speaking salespeople and increasing its Chinese-language signage.
Speaking to a Spanish-born, ethnic Chinese staff member, Nico Wan Daying, Ouhua noted that European luxury brands, which now count Chinese tourist-shoppers among their most important customers, look for employees who understand brand history and pedigree as well as Chinese buying behavior and psychology.
As Olivier Gay, general manager of Cartier Spain, said this week, the rising importance of the Chinese luxury market, and growing spending power of Chinese consumers, has made Chinese spenders “the major consumer base” in the global luxury sector. When in the planning stages for new stores, Olivier said, Cartier now considers how best to cater to Chinese shoppers, which is a major factor in the priority the company now places on hiring bilingual sales staff. This is part of a greater trend that we’ve seen gaining strength throughout major luxury markets like France, the UK, North America and Japan in the last decade, with major retailers in New York, Paris and Tokyo increasingly putting a premium on Mandarin-speaking staff as Taiwanese, then mainland Chinese, tourist-shoppers started to supplant the Japanese and Korean travelers who preceded them.
Cartier’s new store in Madrid is only the latest example of a business in Spain looking to court the Chinese, but it reflects the expanding business relationship between the two countries. Earlier this month, the FT reported that the Chinese airline and logistics group HNA paid €432 million (US$620 million) for a 20 percent stake in Spain’s NH Hoteles. The new strategic partnership aims at setting up a joint venture to develop hotels in China.
As for Cartier, it’s not hard to see why the company is trying harder to appeal to Chinese tourist-shoppers. The brand now operates boutiques in 41 first- and second-tier Chinese cities, and as Jing Daily wrote last year, Cartier plans to double its Chinese boutiques within the next four to five years. Considering some of China’s wealthier luxury consumers, who often prefer to do the bulk of their high-end shopping in Europe or Hong Kong to avoid China’s stiff and controversial luxury taxes, view local luxury boutiques more as “showrooms” than anything, Cartier’s moves to accommodate outbound Chinese travelers are a smart move. With Chinese tourists expected to become the world’s second-largest market by 2020, the once-dominant Japanese tourist-shoppers expected to cut back on overseas travel this year in the wake of that country’s devastating earthquake, Chinese tourists may be the luxury industry’s “cash cow” in the years ahead. Brands that move fast now to cater to this group will undoubtedly benefit in the years ahead.
China “Laws” Are Local And Don’t You Forget It.
August 12, 2010 Filed under Yu Shanshan
By Steve Dickinson, from “neighboring”Qingdao
On August 4, 2010, the Dalian Labor and Social Security Bureau (大连人力资源和社会保障局) posted on its website a new list of requirements for foreign nationals seeking employment in Chinese companies based in Dalian. The new requirements mandate that foreign individuals must prove that the registered capital of their employer is greater than 3.0 million RMB (about USD $440,000). This new requirement applies without distinction between foreign owned (WFOE) and Chinese owned companies. By the strict reading, even the founder of a WFOE would not be permitted to hire himself if the registered capital of his WFOE is less than the minimum. In the same way, a small Chinese research and development lab in Dalian would be prohibited from hiring foreign workers under this new requirement. It was this latter example that caused me to become aware of this new requirement.
When we contacted the staff at the Dalian Human Resources Bureau, they told us there is no supporting policy, rule or regulation for this new requirement; it is based merely on the oral instructions of the bureau chief and the only documentation is what the Bureau has posted on its website. When we asked about the requirement’s application to employment by an owner of a WFOE or employment by a small research and development company, the staff indicated that they fully intend to follow the requirements strictly and will refuse to allow any foreign employment in any company that does not meet the minimum capital requirement, regardless of the status of the company. When we commented on how this policy goes counter to Dalian’s stated goal to become a business outsourcing and software development center, the staff indicated that they don’t think about such things; they just do what their supervisor tells them to do.
Clearly this new rule is contrary to Chinese law. If enforced in the manner proposed by the staff of the Labor Bureau, it will have a negative impact on many small technology businesses in Dalian, both domestic and foreign owned, many of whom my firm represents due to Dalian’s closeness to my base in Qingdao. Frankly, this requirement seems so irrational I cannot even guess at the reason behind it. It is clearly bad for all Chinese companies, WFOE and domestic. No one is being protected, and everyone involved is being hurt.
Though I believe that this requirement will not be imitated by other cities, the issue is uncertain. Dalian has previously been considered to be a very open city to foreign workers. If Dalian does this, there is no reason to expect other cities will not follow suit. However, since the requirement is completely irrational, it is impossible say what will happen elsewhere.
The imposition of a threshold based on minimum capital does, however, illustrate that Chinese government authorities still do not understand the requirements of high tech companies operating in the research and consulting sector. We continually face the problem that Chinese offiicials judge companies solely on the size of their capital investment. Consulting and research companies often have very low capitalization since their resource is their staff and not their physical assets. Government officials often delay or even refuse to approve a consulting/research WFOE because the capital is low. This recent requirement by Dalian seems to be in that line. A manufacturing company with 3 million RMB in registered capital is a rather small operation. A consulting/research company with the same capitalization would be quite large.
However, none of the above explains why foreign workers are being targeted with this requirement (I do not call it a rule since it has no legal basis), so I still cannot think of any basis. No Chinese lawyer or official with whom I have discussed this matter has been able to provide any explanation either. The attitude here in Qingdao is: The requirement is clearly illegal. Good. Perhaps it will convince more people to invest in Qingdao. “We don’t behave that way down here.”
Other people have asked me: will the Dalian bureau really be able to get away with this? The answer is: yes. The Labor Bureau can pretty much do whatever it wants in their regulation of foreign workers and it is not unusual at all for local labor bureaus to have their own special requirements. Foreign workers have no power, so protests from the foreign workers have no impact. It is only in the case where an organized protest by Chinese companies is made that there would be changes. To date, this has not happened, since small Chinese companies do not make extensive use of foreign workers. Small WFOEs are more likely to make such use, but they have little power and are usually ignored by the labor bureau. This sort of arbitrary change in long established rules is a fact of life in China and adds to the uncertainty of doing business here.
The key takeaway from this is that now, more than ever, one has to be ever mindful of the differing requirements and even “attitude” of China’s cities before determining where to try to locate one’s business.
Qingdao anyone?
10 Reasons Why Companies Fail. Localized
August 3, 2010 Filed under Yu Shanshan
Over the last month or so, I have spoken to a half dozen or so people leading firms (large and small) who have hit the proverbial wall. Wits are at an end, the bottom line isn’t looking good, and a process of deciding what the “next step” should be in underway.
Some, particularly those in the relevant regional chambers of commerce, would say that China is getting too difficult to work with while others would say that the business plans were flawed to begin with… and while reading the the mass email from Newman Communications entitled Top 10 Reasons Why Changes Fail and how to move BEYOND THE WALL OF RESISTANCE, I found that their top 10 could be localized into a China context (in italics).
10. Some leaders don’t know how to lead change. In China, some leaders don’t know how to lead across borders, industries, cultures, and time zones.
9. Leaders assume that change is easy. Leaders assume China is one BIG market, and while it may be easy, there are far too many who feel it is.. that through a single connection, finding a “hidden” source, or be the “first” one there, that there is a first mover advantage into virgin territory.
8. The leaders believe that a good idea will win every time and that employees and other stakeholders will be so struck by their leader’s brilliance that they will support whatever goofy idea they come up with. I could not have said it better
7. A good leader can force people to change. In China, there are all kinds of strategies for fomenting change, and few who understand that they are the ones who will be forced to change.
6. How before Why. How big and how fast before how.
5. They ignore the context. Right on – See my previous post on that.
4. Leaders don’t understand resistance so either they ignore it, or they present mind-numbing PowerPoint shows. No different in China. Books are sold on how innocent western firms are conned into painting their dolls with lead paint, and executives who normally would be 86ed manage know that selling the new hook really isn’t all that difficult back home because the China dream is still overpowering the common sense of many executives at HQ.
3. Leaders go into the game without game. In China, lacking a game isn’t a death nail, but acting like you got game when you don’t can be.
2. The organization is immune to change. Companies that don’t remain on top of things in China fail.
1. Leaders believe that none of the other items on this last really matter. When blinded by how far China has come, sometimes it is difficult to see the real “China” for what it is… and at that point, even common logic will confuse.
