DGLovesChina

What can we learn from the last Dolce & Gabbana PR disaster in China

Global luxury brands are trying very hard to conquer the Chinese market, fit in the local culture and engage with the consumers and their ever-changing behaviours. While some brands appear to be succeeding in creating a real conversation with their audience, some others are struggling to understand the local culture.

Gucci and Alessandro Michele’s story of success

The 'A Magazine Curated By' art exhibit in Beijing featured favourites of Gucci creative director Alessandro Michele. This room showcased a "Cabinet of Curiosities," featuring several high jewellery themed art pieces. (Courtesy of jingdaily.com)

The ‘A Magazine Curated By’ art exhibit in Beijing featured favourites of Gucci creative director Alessandro Michele. This room showcased a “Cabinet of Curiosities,” featuring several high jewellery themed art pieces. (Courtesy of jingdaily.com)

A successful example comes from Gucci, that fuelled the expression of its brand identity in a slightly traditional way, by curating an art exhibition in Beijing’s art district 798, together with the high-end fashion publication A Magazine Curated By. Luxury fashion houses are no strangers to the art world, and this is becoming increasingly so in China.  When Alessandro Michele took the role of Gucci’s creative director in 2015, he gave the brand a more artistic, makeover. He was also responsible for the Chinese-inspired Gucci Tian pattern as well as Gucci Gram, an online collaboration with emerging contemporary artists from around the world. Last year, the Gucci Gram Tian campaign spotlighted photographers and illustrators in China, including the late Beijing-based photographer Ren Hang (R.I.P.) and Guangzhou-based artist Cao Fei. In 2015, Ren helped Gucci shoot a series of photos that were exhibited online with many other talented photographers and visual artists around the world. The brand said Ren’s photograph was successful in communicating the essence of the collection by combining human bodies, natural views and objects of desire “in the most deliciously confusing way.” While Gucci showed the capability to understand the local mood, other brands have failed. Most notably Victoria’s Secret and Dolce & Gabbana.

Ren Hang for Gucci. Image courtesy of mrsoundandvision.com

Ren Hang for Gucci. Image courtesy of mrsoundandvision.com

Victoria’s Secret and their tacky idea of China

Supermodels Kendall Jenner with phoenix wings (R), Elsa Hosk with a dragon wrap (C), and Adriana Lima with embroidered stiletto boots (L) in the recent Victoria's Secret Fashion Show in Paris. Image courtesy of jingdaily.com

Supermodels Kendall Jenner with phoenix wings (R), Elsa Hosk with a dragon wrap (C), and Adriana Lima with embroidered stiletto boots (L) in the recent Victoria’s Secret Fashion Show in Paris. Image courtesy of jingdaily.com

In last year’s annual Victoria’s Secret Fashion Show, the brand’s additional attempts to woo Chinese consumers through dragon-themed outfits fell flat on China’s internet. Several of the lingerie-clad models were sporting Chinese elements on their elaborate outfits, including Elsa Hosk’s dragon wrap, Adriana Lima’s embroidered stiletto boots, and Kendall Jenner’s phoenix wings, among others. Right after the Victoria’s Secret show was broadcast online to a global audience, it led to heated discussions on China’s social media sites as most people failed to find Chinese traditional beauty in the outfits. On WeChat, many bloggers were less harsh about the presentation of Chinese culture. This wasn’t the first time (and probably not the last) a foreign brand has tried to impress Chinese consumers through making Chinese cultural references with shocking or displeasing products. Chinese New Year seems always the best time of the year to come up with Chinese-cliché-fuelled products.

Twitter mockeries on a screenshot from the ad. Image courtesy of newnownext.com

Twitter mockeries on a screenshot from the ad. Image courtesy of newnownext.com

It’s funny (although not surprising, I would say) how the Kardashian is recently becoming a global phenomenon of PR dramas and cultural failures, following her starring in a controversial Pepsi ad that completely trivialised Black Lives Matter. (Video here)

Dolce & Gabbana and their stubborn idiocy

Dolce & Gabbana 2016 Spring Campaign

Dolce & Gabbana 2016 Spring Campaign

Differently from Gucci, Dolce & Gabbana decided to take on a more “aggressive” communication approach. Last year, Dolce & Gabbana caused a stir by sending its Asian models down the runway dressed as stereotypical “Chinese tourists” wearing qipaos and carrying cameras or a mobile phone to reference their propensity for taking photos. Not satisfied with it, D&G again casted models of Asian descent as Chinese tourists for their 2016 spring campaign ads. “The Chinese” are seen throughout the images reading Sicilian travel books, taking selfies with “locals” as they are so described on the brand’s Facebook and carrying shopping bags.

Dolce & Gabbana 2016 Spring Campaign

Dolce & Gabbana 2016 Spring Campaign

This year, Dolce & Gabbana they double the disaster. The controversy stems from a series of photos tagged DGLovesChina posted on the brand’s official account on Chinese social network Weibo. Shot by photography team Morelli Brothers, the collection of photos shows several models wearing high-end fashion gowns pose themselves in Beijing’s centuries-old hutongs and famous tourist attractions such as Tiananmen Square, next to ordinary people such as tourists as well as taxi and pedicab drivers.The marketing campaign is part of the brand’s attempt to localise itself to cater to Chinese consumers. D&G has launched similar campaigns in Hong Kong and Japan, in which models were seen against relatively fancier backgrounds with skyscrapers and flashing neon billboards.

The most controversial shot from DGLovesChina campaign

The most controversial shot from DGLovesChina campaign

While the intention was to attempt shorten the distance between the general people and fashion (maybe, I don’t really know what they were trying to do there), the final outcome just reflects the marketing team outdated and stereotypical view of China.

DGLovesChina

DGLovesChina

The campaign didn’t click with the target audience, and actually triggered a huge debate in Chinese social media on whether D&G intentionally stereotyped China by choosing outdated street views as background instead of advanced modern areas such as the financial district in the city. Many of the comments on the Chinese social media platform Weibo labeled the photo collection as “offensive.” Comments on Weibo span from “What you love is not China, but Chinese people’s money!” and “It almost looks like North Korea! This is definitely not what China looks like now!”.

DGLovesChina

DGLovesChina

The spontaneous and informal style of the smiling photographs may have clashed with the Chinese concept of “face,“ especially since foreigners are involved. By “exposing” a side of China that doesn’t feature its postive traits as seen in big international events like the Beijing Olympics, Dolce & Gabbana may have inadvertently embarrassed its hosts. Dolce & Gabbana has since taken the photos down, but it has not provided any comment or clarification.

DGLovesChina

DGLovesChina

Dolce & Gabbana are real veterans of PR disasters in China. In 2012 the Dolce & Gabbana store in Hong Kong had released a policy forbidding Hong Kong residents from taking photos inside or outside its flagship store, purportedly in order to protect its “intellectual property.” But residents were enraged after learning that mainland Chinese and foreign tourists were excluded from the photo ban. Insanity ensued, with more than 1,000 protestors shutting down Canton Street, taking blatant photos of the store and forcing it to close early.

DGLovesChina

DGLovesChina

Conclusion

There’s a level of ignorance that continues to pervade the fashion industry as a whole; and, particularly in Dolce & Gabbana, there seems to be no end to their outdated and stereotypical view of Asian culture. As the Chinese market is now one of the most important segments for these brands, many are going to need to rethink their Western perspective of Orientalism or stereotyped approach to Chinese culture. For many Chinese customers, if a brand cannot show an appropriate understanding of Chinese culture in its approach to this market, it is better just not to approach it at all. Global brands should start rely more on talent that shows a strong understanding of the local culture instead of insisting in this paternalistic and neo-colonialist approach.

Read more:

How Chinese Consumers Reacted to Dragons on the Runway at the Victoria’s Secret Fashion Show

Pepsi Pulls Ad Accused of Trivializing Black Lives Matter

Remembering Ren Hang: How the Late Photographer Left His Mark on Art and Luxury in China

Gucci Takes Its Chinese Fans Beyond Fashion and into the Creative World of Alessandro Michele

Dolce & Gabbana Officially Apologizes To Hong Kong For That Photo-Banning Incident

DOLCE & GABBANA’S SPRING COLLECTION INCLUDED A MISGUIDED TRIBUTE TO CHINESE TOURISTS

DOLCE & GABBANA’S BUSY SPRING CAMPAIGN STARS CHINESE ‘TOURISTS’ AND SELFIE-TAKING ‘LOCALS’

Image courtesy of mckynsey.com

多元品牌和精致生活品牌在中国的崛起

在北京,好像每个人都开着一间古着店(复古店,vintage shop)。不论是鼓楼商圈里来自美国的复古牛仔,乡村摇滚风古着店,还是更加欧式的三里屯House Of Willow, 各式各样的古着精品店如雨后春笋一般出现在北京城里。总的来说古着还是个很小众的市场。它只对特定的人群有吸引力,不一定适合所有人。这些店铺通常会利用电商平台以弥补实体店在市场营销方面的欠缺,而非追求实际销售量的增长。他们的微信平台更像是展示生活方式的博客,你所看到的内容都是关于古着爱好者的生活。

(For the original English version of this article The rise of multi-label and lifestyle brands in China click here)

Beijing's pioneer vintage shop: Mega Mega Vintage

北京的先锋古着店:Mega Mega Vintage Beijing’s pioneer vintage shop: Mega Mega Vintage

主流奢侈 vs 小众奢侈

如今在中国,建立于实际需求上的消费越来越多。以往只有高端品牌的商品能激发起本地消费者的购买欲。但现在,他们明显更倾向于将自己的钱花在日常用品上。零售商们已经注意到了这种趋势,他们开始通过补充服务和互补品牌使自己的产品与服务形成互相连通的系统。当路易威登和香奈儿刚进入中国市场时,他们吸引了巨大的关注,这也导致了太多的仿品出现在了大街上,真假难辨。这时没有受到仿制品困扰,也不太可能让购买者与人撞包的小众奢侈品牌,因其独一无二,少量流通性,而逐渐吸引人们的关注。

现在,大多数的中国年轻人与进口奢侈品和进口时尚的关系仍处在“蜜月期”。短期内,复古或复古风时尚仍旧会是主要受到前卫人群关注的缝隙市场。但这进一步证实了由于中国中产阶级的财力增长,消费者市场也经历着巨大的重组。一部分购买力强劲的消费者慢慢开始追求个性化和独特的个人标签,他们从喜爱流行的主流奢侈品牌转而偏爱能表达自己独特性格的品牌。

Alter, Shanghai. Image courtesy of neocha.com

Alter,上海。图片来源于neocha.com Alter, Shanghai. Image courtesy of neocha.com

这个趋势使得多品牌商店在中国飞速地发展

到上海工作以来,贝果成了我生活中的一部分。我跟同事最喜欢的午餐地之一就是新天地里刚开张的一家贝果餐厅,叫做”Spread The Bagel”。除了那些让人惊叹的美味贝果外,这餐厅的位置也特别——租用了名为”Alter”的零售空间的部分区域。贝果与”Alter”里其他来自欧洲的小众商品和谐地共存于同一个多品牌店内。

RET的一份报告指出,自1996年第一间多品牌店在上海开张,至2009年间,中国的多品牌店经历了非常缓慢的增长。直到2010年,多品牌店才开始飞速扩张并逐步进入了二、三线城市。2010-2013年之间新开设的多品牌店总数为过去14年总和的4倍。本土多品牌店占据所有多品牌店55.6%的市场份额。不同于像大公司一样运营的外资店,本土店通常是小规模的独立商店,主要集中在北京,上海,广州,杭州和香港。目前,多品牌店共覆盖到183个地区及829个奢侈品牌。有些本土店为了能更多地在二、三线城市开店而开始连锁扩张。2/3的本土多品牌店建立了电商平台。较低的运营成本及更高的品牌曝光率等O2O的主要优势使北京,上海的部分商店开始用微信进行客户服务及销售。据说线上销售能占到总销售额的一成。因主要消费群体的更加年轻,更具自我表现力,大多数多品牌商店都售卖居于中低价位的时尚,前卫的商品。

Dior exhibition in Shanghai, 2014. Image courtesy of haberdasherstandard.com

2014年上海迪奥展。图片来源于haberdasherstandard.com Dior exhibition in Shanghai, 2014. Image courtesy of haberdasherstandard.com

艺术及品牌越来越多地寻求跨界合作

在世界范围内,奢侈品与艺术的界限日渐模糊。但这变化在中国尤为迅速,商业领域和社区空间变得越来越难以区分。我之前已经谈过中国的购物中心如何机智地转型成生活方式中心,举办活动甚至是艺术展览。充分地利用精英艺术在中国的影响力,这对于品牌,尤其是奢侈品牌来说是大有裨益的。当代艺术已成为主流。却并不是每个观看艺术展的人都会购买艺术品,他们其实更享受那样的艺术现场所带来的娱乐性。

当品牌店铺或地产商举办活动时,通常会耗费巨资邀请明星出席。二线明星的出场费甚至可以达到100万人民币,尤其是在圣诞节或元旦这种对于商业地产来说的黄金时段。不过现在艺术界人士变得像是品牌代言人, 例如瑞士策展人Hans Ulrich Obrist就成为了Brioni活动的标志人物。新世界发展有限公司的助理总经理Judy Lam就曾谈起“新博物馆型的购物中心”并介绍了该品牌打造“购物艺术中心”的愿景。不仅仅在香港,还有许多中国大陆的奥特莱斯,新世界集团积极地将艺术带到了大众面前。这意味着不仅能通过商场来展示艺术品,还让世界级的展览进驻了多元融合的展览空间,例如2014年在上海某商场举办的“印象派大师 – 克劳德·莫奈”展。

从相反的角度来说,在举办或赞助展览时,品牌也能接触到博物馆和画廊的VIP关系网。这些机构可以通过独家开幕式来增加品牌曝光。许多奢侈品牌赞助的中国展览在著名博物馆和画廊内举办,将艺术,品牌,产品有机地融合在一起。品牌展可以将艺术品和奢侈品平等地展出,例如近期上海民生现代美术馆举办的古驰Gucci“NoLonger/Not Yet”(已然/未然)展;或者展品本身就成为了艺术品,例如迪奥邀请杰出的中国艺术家为”Lady Dior as Seen By”展设计展品,从新角度诠释经典的Lady Dior手袋。其他例子还有北京尤伦斯当代艺术中心的葆蝶家”Art of Collaboration”展,2014年迪奥上海展以及2015年17位女性艺术家重新诠释迪奥小姐香氛的北京展。奢侈品与艺术的跨界合作会在品牌历史,价值观,中国市场策略与展览真正结合时达到最佳效果。当这些元素可以互相调和,就能找到非常有趣的品牌联合方式,让双方都接触到更多的品牌目标受众。

"Dutch Design X" at Four Seasons Hotel in Beijing. Image courtesy of ubigallery.com

北京四季酒店荷兰设计X”。图片来源于ubigallery.com “Dutch Design X” at Four Seasons Hotel in Beijing

酒店行业与奢侈零售业的联姻

艺术社群并不只与购物中心互相勾搭。奢华艺术酒店同样在中国迅速地崛起,但似乎现在没有艺术品就无法吸引超精英阶层的关注。人们逐渐开始认可奢侈品也是艺术的一种表现形式。长久以来,手表和珠宝都是拍卖会的主线,但在以中国为中心的拍卖会场,皮革制品也开始慢慢走上舞台。顶级手包可以吸引到入门级中国收藏家进入拍卖现场,并且更容易拍出。参加拍卖并不会伤害拍品的品牌形象,反而能帮助他们建立起其商品是可投资的增值产品的大众认知。

在中国艰难经营的高端酒店行业和奢侈品零售业可以通过战略合作来共同提升消费者眼中的品牌形象。这种合作关系使顾客们可以从个人角度更充分地体验品牌,而非仅仅是观赏他们在商店里,屏幕上的静态陈列。在当今中国社会,品牌联系很大程度上决定了一个人的社会阶层。这样的合作模式可以帮助客户确立社会地位,彰显个人品味。给客户提供这类体验的同时能从另一个角度帮助酒店确保市场份额,并促进销售。

Image courtesy of mckynsey.com

图片来源于mckynsey.com Image courtesy of mckynsey.com

独特的炫耀体验

不同行业背景的品牌合作可以很好地改变或弥补大众对于其产品的固有看法。例如苹果在中国发售智能手表,与爱马仕的合作地将其成功转型为高端品牌,满足了高收入客户群的需求,给原先极客的产品加入了些时尚的风味。

这种合作对于制造独特的用户体验非常有帮助,而且用户可以将体验通过视频,照片,自拍甚至是直播的方式分享出去。这类体验是当今中国最重要的“社会货币”。品牌的成功需建立在给予客户独特的炫耀体验上。大家会认为当两个品牌联合举办活动发布的新产品或产品系列是限量版,更加珍贵。奢华体验正昭示着中国富有阶级的新社会状态。随着不断革新的财富定义,品牌需要通过更多方式让自己的客户感到“富有”。

(The article was translated from the original English version by Stella Jiang, you can reach her at jianghuanzhi@163.com)

 阅读更多:

Art and luxury in China brands reach potential new customers on a higher level

Rising stars on China’s retail scene homegrown multi-brand stores

Fast-fashion revved retail

Multi-brand stores of the Mainland

Style check why multi-brand sellers are key future China

China luxury market transforming

Interview with luxury vintage shop House of Willows co-founder talks classic style culture in China

Second-hand auto sales poised to accelerate in China’s maturing luxury market

Naked Hub in Fuxing Lu, Shanghai. (image courtesy of http://www.nakedhub.com/en/hub/fuxing-lu)

3 reasons why coworking is booming in China and what’s next?

According to real estate services firm Jones Lang Lasalle, by the end of 2016 there were over 500 coworking sites in Shanghai and Beijing alone, compared to just a few in the end of 2015. As the sharing economy takes root in China with increasing vigour, a growing number of Chinese customers are shifting to a collaborative consumption lifestyle, resulting in a huge boom of co-working spaces in recent years with thousands of operators emerging. Generally speaking this is a mindset change: from owning something to renting something. Since this ‘new’ mindset is not totally a new thing in China, coming from a collectivist economy, it’s easy to imagine how fast these ideas of sharing economy are being embraced in China.

Naked Hub in Fuxing Lu, Shanghai. (image courtesy of http://www.nakedhub.com/en/hub/fuxing-lu)

Naked Hub in Fuxing Lu, Shanghai. (image courtesy of http://www.nakedhub.com/en/hub/fuxing-lu)

1- China’s change follows the global trend

Shrinking office space is now common in the professional world. The average for all companies for square feet per worker in 2017 is projected to be under 14 sqm, compared to 16.4 sqm in 2012, and 20.9 sqm in 2010, according to CoreNet Global. And since those reports were released, the trend has steadily continued upwards.

WeWork’s incredible growth, proves just how popular shared and flexible office spaces have become. Especially in China, as growing companies compete in rapidly changing markets, leases have been getting shorter and shorter for years: young businesses that need to be nimble in order to succeed, don’t want to be stuck in a years-long lease if their  hope is to scale up and move elsewhere. On the other hand, even some Fortune 500’s have opted to move some of their employees into coworking offices, to expose them to innovation especially for beta-phase business units.

Wework Weihai Lu, Shanghai.Wework Weihai Lu, Shanghai.

2- Rice farming led to collectivist thinking in China

For centuries, the cooperation required to plant, tend and harvest rice grown paddy-style made those born in southern China think more communally, especially if compared to those born in northern China, where the primary crop was easier-to-farm wheat. Rice farmers form cooperative labor exchanges, and the irrigation systems create commons dilemmas that villagers have to solve—things like dredging the common canals and coordinating common flooding times. According to a study, ancient farming practices may shape the thinking of modern descendants living in a sprawling, crowded city.

Brown rice terraces view in Southern China

Brown rice terraces view in Southern China

3- Many Chinese started their life in a forced-to-share environment

During China’s more hardcore collectivist years from the 50s up until early 90s, housing was centrally planned, and families were usually assigned to live in tube-shaped apartments, that can still be seen around China. The so-called tube-shaped apartment building (or 筒子楼 Tongzilou) is a building with a corridor running through the main structure with rooms on both sides of it. Usually there are over ten families living on one floor and each family lives in one room. Some rooms are used as kitchen shared by three or four families and the toilet is also shared. This kind of building with long corridor, bathroom and toilet are all public houses. Numerous Chinese people started their family life in the tube-shaped apartment buildings. Famously, the movie In the heat of the sun 阳光灿烂的日子 shows the life of Beijing youths who grew up in these kind of buildings (here are some photos from tube-shaped apartments and here is a very extensive research on the lifestyle in these tube-shaped apartments).

After the economic reform, But due to imbalanced development between regions in China, an irreversible trend of large populations crowding into major cities under high- speed urbanisation made the housing problem caused by the unprecedented residential demand obvious and prominent, expanding the shared living phenomenon. Qunzu 群租 (group-oriented leasing) became such a common thing in first tier cities (where ordinary housing is almost unaffordable), that the word became one of the 171 neologisms released by the Ministry of Education of China in 2007. Qunzu is identified by a large number of tenants living together with a low rental price, and it happens in residential building that were’t planned to be shared. In this situation, the larger room is always divided into several separate rooms by gypsum board partitions, and each has simple decoration and is equipped with basic furniture, similar to student dormitories in Chinese colleges, equipped with bunk beds to accommodate more people. Qunzu conglomerates of self-built housing turned into slums, also called urban villages 城农村.

Tube-shaped apartments in Shanghai Putuo

Tube-shaped apartments in Shanghai Putuo

How coworking spaces are evolving

Around the coworking nucleus, coworking spaces will have a retail coffee shop, tap room, and café. And later will evolve to include a health club, spa, residences, dry cleaning, and even more retail options so members get an immersive experience and the management won’t be totally dependent on membership dues to pay expenses. Members could potentially live, work, and socialise without commute times, weather hassles, or expensive taxis.

To give workers an edge over a home office, the coffee shop, or even a corporate office, many of the smaller independent coworking spaces have already begun creating online and offline communities, having people to reach out and use co-working and co-working environment not just when they are in the physical space, but also online.

 The Collective, an innovative building concept that offers a next-generation co-living environment. (image courtesy of http://popupcity.net/co-living-a-new-metropolitan-way-of-life/)

The Collective, an innovative building concept that offers a next-generation co-living environment. (image courtesy of http://popupcity.net/co-living-a-new-metropolitan-way-of-life/)

Is a new concept of coliving the next big thing in China?

The sharing economy has normalised sharing our cars with strangers through Uber, our homes with tourists through Airbnb, our workspaces through co-working office spaces through companies like WeWork, and now, our everyday lives, thanks to new “co-living” concepts.

College education in China makes interprovincial movement much easier for young people, making them an essential part of work- and house-hunting groups in cities. Many social changes such as the declining affordability of home ownership as well as delayed marriage and childbearing make house sharing a popular residential choice for young people. From baby boomers to millennials, people are increasingly looking for compact, mixed-use communities with reliable, convenient transit systems.

Student-style accommodation with communal facilities could help solve the housing crisis and regenerate urban centres around the country. I expect the raise of something between student accommodation and a hotel. A space that could offer tenants serviced rooms in shared apartments with communal lounges, kitchens and bathrooms. Something designed to be safe and at an affordable price, but for rent rather than purchase. Young people today interpret their quality of life differently to a generation before. They want to live in the middle of the action, seek a more sociable lifestyle, close to cultural life and amenities. And they’re happier actually living in a smaller unit to do that. They are not as absorbed by the need to own property. Didi Chuxing, Mobike and rental car services like the upcoming LYNK & CO, but even subscription based video services are all good examples of how Generation Y is choosing to do away with belongings. They are all about experiences and there’s a future for work and living spaces to catch up with this whole co-movement.

Traffic congestion in China

Why car-sharing is about to explode in China

Disruptive changes in the car-sharing landscape are to be expected from the Chinese market, pushed by an increasing demand for connected vehicles and by the impellent emergency of pollution and cars congestion. On one side, according to estimates from Goldman Sachs, people born between 1980 and 1990 made up roughly 30% of China’s total population in 2015. They are more urban, more affluent almost all digital natives. These connected consumers are now turning their attention to the country’s car market, demanding connected cars at far higher rates than elsewhere. On the other, Chinese officials are seeking to harness the flood of private cars on urban streets. But the effort required seems like some that only the legendary ruler Yu the Great, who tamed raging floodwaters, could do.

Traffic congestion in China

Traffic congestion in China

Driving a car in China is getting harder

The number of local car plates grew by 150% from 2004 to 2015, to over 5 million vehicles. In that same period, roads for driving expanded by only 58%. These numbers don’t include cars with out-of-town plates. Yu the Great’s wisdom in channeling floodwaters instead of trying to block them may hold lessons for modern Chinese authorities as well. In fact the efforts to restrict vehicle registration and use in Beijing and Shanghai have been met by public outcry. Nowadays, driving a private car in Beijing is a privilege for those lucky enough to win a car plate in the local lottery. Authorities said clearly that they will start charging congestion fees. Cars with out-of-town plates are restricted in access to elevated ring roads in Shanghai (where counts for 30% of the 4 million total cars), and limits on where and when they can drive are very strict in Beijing. In Shanghai, local car plates are given out through auctions at prices of more than 80 thousands RMB and soon to participate in auctions. Bidders who don’t have Shanghai permanent residency, will be required to show proof of residency, and an active personal tax payments in the city for the past three years. Soon a (relatively) clean driving record will be mandatory too.

Chinese leading car-for-hire app Didi

Chinese leading car-for-hire app Didi

The movement toward car-sharing services

A common back-door solution is to technically rent someone else’s unused car plate while waiting for one’s luck to change in auctions or lotteries. The other way around is to buy an electric car. As part of government efforts to clean up the air, green vehicles come with the promise of semi-automatic free car plates in both Shanghai and Beijing. In a creative attempt to ease the pain without killing the patient, the central government has proposed that closed apartment complexes open up throughways to increase capillary roads in big cities, but the idea has met resistance from those communities. But this would only help delaying the problems. To try to go a bit deeper in the solution (and to save their own business), carmakers are teaming up with car-sharing operators to give people alternatives to mass transit without having to give up the experience of motoring.

Globally, urban residents appear to be losing interest in owning their own cars. In urban areas, cars simply aren’t a requirement, and public transport and ride-sharing apps can easily fulfil their needs. Millennials face affordability issues; some live with their parents or in shared households and put off home ownership for this reason. The movement toward car-sharing and ride-sharing services will be driven in large part by the dramatic reductions in transportation costs that are expected with connected cars. Meanwhile, in China – where members of the growing middle class still dream about owning their own cars – new drivers already expect highly sophisticated levels of connectivity and services in the cars they buy.

Chinese car-hailing apps

Chinese car-hailing apps

Car-sharing scenarios in China

Car-sharing, one of the fastest growing urban mobility innovations worldwide, did not reach China until 2009, but is quickly becoming more mainstream in Chinese cities. Estimates from the United States, say that one car-sharing vehicle is able to replace 6 to 23 cars. According to a recent market research report, car-sharing in China is expected to grow by about 80% annually for the next five years, with total vehicles reaching 16,000 by 2018 if the government continues offering strong support to the industry. Though this number is small compared to the more than 120 million cars owned in the country, it creates an important foundation for China’s car-sharing industry.

There are multiple challenges facing the car-sharing industry in China, first of all the cultural preference towards car ownership that’s still prevalent in China compared to other countries. It may take time for local governments to develop operational policies that suits Chinese cities. Some have supported electric vehicle car-sharing programs, but most local governments are generally unaware of the potentials for sustainable transport solution that car-sharing can have. As the industry evolves, support from city governments through policies such as dedicated parking for shared vehicles and exemption to vehicle license restrictions will be vital to the industry’s growth. If more governments can provide an accommodating policy environment, the rise of car-sharing programs in China could be part of a strategy to make cities more sustainable and liveable while minimising car ownership.

Chinese guy on a Mobike. Keep reading to find out more about this disruptive bike-sharing startup

Chinese guy on a Mobike. Keep reading to find out more about this disruptive bike-sharing startup

The rise of station-based car-sharing in China

Car-sharing is still an emerging industry in China. In 2012 there were only two car-sharing operators, with a total of 39 vehicles in Chinese cities. In 2016 this has grown to a total of one thousand vehicles within 5 active operators in Beijing, Hangzhou, Wuhan, Shenzhen and Changsha. The composition of these operators in China has also evolved: from domestic independent start-ups to a mix of municipal governments and foreign and domestic vehicle manufactures. Among the independent operators, Eduo Auto and Evnet are more established, while Weigongjiao and E-car receive government support and operate only electric vehicles. 微公交 Weigongjiao, which means “mini-bus,” creatively uses vending-machine-like parking garages with electric vehicle charging infrastructure. Finally, Car2Go is the first car-sharing program supported by a foreign OEM in China. Smartly launched in Shenzhen, the only of the first tier Chinese city where driving is a priority, in February 2014, it is operated by the international Car2Share. It’s currently piloting its first project.

Car2go North America infographic

Car2go North America infographic

The emergence of private peer-to-peer car-sharing

Peer-to-peer car-sharing has recently seen its birth in China, though it has been operating in North America for more than a decade. These type of companies provide platforms for members to rent vehicles owned by other members in the network. Peer-to-peer car-sharing has been regarded as the next revolution in the car rental industry, as it can cheaply mobilise unused resources to provide vehicle access across a wide area. Two of the most notable Peer-to-peer companies in China are PPZuche and ATzuche. PPZuche has been growing by 50% per month since its launch in Beijing in 2015. It now operates in Shanghai, Shenzhen, and Guangzhou with over 20,000 members. ATzuche began operations in Shanghai in 2016, and has already received attention due to its comprehensive service package, innovative vehicle tracking, and remote keyless entry device that can plug directly into cars without any vehicle modification. Still, these companies face questions regarding the liability of vehicle owners and the legitimacy of renting personal vehicles for commercial use. They operate in the belief that both central and local governments will soon adapt their policy due to the benefits that their services provide in terms of reduction of both traffic congestion and pollution.

While Toyota decided to invest in Uber, other major car brands decided to partner up with other peer-to-peer operators or launch subscription based sub-brands.

General Motors' Maven App

General Motors’ Maven App

Brands investments to adjust their business models

  • General Motors’ investment in Yi Wei Xing Technology Co. General Motors decided to invest in kickstarting its car-sharing business through an affiliation with a Chinese technology company to explore new mobility in the world’s biggest car market. General Motors’ investment in Yi Wei Xing Technology Co. builds upon its launch of Maven, its U.S. peer-to-peer car-sharing brand. Yi Wei Xing’s product, Feezu, a cloud-based platform for car rental and car sharing, will be the Chinese counterpart of Maven. In North America, General Motors also partnered up with Lyft, a US car-for-hire operator (competitor of Uber), as in the words of its own vice president for strategy and global portfolio planning, they are switching their business model from selling cars by the number to “selling them by vehicle miles.” GM has developed a subscription plan to give Lyft drivers access to GM-made cars at affordable prices. General Motors also released a statement saying that an ideal pattern for environmental use of vehicles would be a combination of car sharing and vehicle electrification, as well as autonomous driving and Internet connected autos. So far GM’s Lyft has no involvement in China’s current car-sharing economy, which is dominated by domestic operators Didi and Yidao and whose market for has proven particularly tough for foreign car-for-hire operators (see Uber).
  • Ford Internet-assisted trial parking program. According to Baidu, more than 30% of traffic in big Chinese cities is generated by futile searches for parking spots. At the 2016 Mobile World Congress in Shanghai, Ford launched an Internet-assisted trial parking program in Shanghai for its employees. It allows users to call for valet services to park cars or to remotely check on the availability of nearby parking spots and “unlock” no-parking barriers via a smartphone or Ford’s SYNC in-vehicle infotainment system.
  • Baidu’s CarLife connectivity platform. Two of the country’s largest tech companies, Baidu and Alibaba, are already pushing hard to develop their own platforms for connected cars. Baidu, has secured Volkswagen, General Motors, Audi, BMW, Mercedes-Benz, Ford, and Hyundai, as well as China’s own BYD, to use its CarLife connectivity platform, which, like Apple’s CarPlay or Android Auto, enables cars’ internal infotainment systems to connect with smartphones. Baidu is also working on a telematics service for cars, called MyCar, that would monitor car- and traffic-related data, which will also aid the company in its ongoing effort to develop an autonomous vehicle. At the same time, American leader in connected vehicle technologies Airbiquity, announced a partnership with Baidu, to provide connected car Internet services to the Chinese automotive market.
  • Alibaba-SAIC’s RX5 Internet car. Alibaba, in partnership with Chinese automaker SAIC, unveiled the RX5, a so-called Internet car, in 2016. The car’s features include Alibaba’s Alipay payments service, allowing drivers to pay for parking spaces, fill up with gas, or buy coffee. In addition, it offers three LED screens and space for as many as four detachable 360-degree cameras to record video and take photos, a smart rearview mirror, support for voice controls, and an onboard “intelligent” mapping system. Meanwhile, France’s PSA, which makes Peugeots and Citroëns, will equip some of its cars with a Wi-Fi hotspot in collaboration with Alibaba, and offer an app to remotely check the vehicle’s location and fuel levels.
  • Huawei’s agreement with Dongfeng and Changan. Dongfeng and Changan, two Chinese domestic automakers, signed agreements in 2014 with telecom giant Huawei Technologies, establishing technological cooperation on vehicle connectivity and autonomous driving.
  • Audi partnership with Tencent. Audi announced plans to work with Tencent, which operates the country’s hugely popular messaging service WeChat, to allow location sharing in vehicles.
  • China Mobile and Deutsche Telekom have also signed a deal to create a platform for Internet-connected cars in China.
  • Volvo-Geely launched Lynk & Co. Last but not least, Chinese owned Volvo released in Berlin Autoshow its own connected-car sub-brand. Working in cooperation with its own mother-company Geely, they launched Lynk & Co. This new brand will feature a subscription based sale model combined with a peer-to-peer functionality to target fast-fashion educated urban youth.
Lynk & Co, model 01

Lynk & Co, model 01

Conclusions

So far only few companies in the automotive industry – or any other – have managed to make customers subscribe to lifetime services. Consider the struggles of music streamer Spotify to shift its users to a subscription model; to date, just 30 percent have done so. If you wish to establish connected services as a source of revenue, you must learn to sell not the technologies themselves but a premium experience. The key is to study from companies like Apple on how to use digital services to maintain premium pricing in the market. Think in particular about cloud-based services that can create stickiness: migrating their data to another provider could be painful enough to make customers hesitate. Core mobility services might be complemented with services like “Siri”, learning from the behaviour of drivers. Users would have to start “training” their cars all over again if they switched brands.

The growth of connected cars and autonomous vehicle technologies makes the Chinese market even more critical. The country’s automakers and suppliers already seem to have a distinct advantage over their foreign competitors, thanks to a virtuous circle of connected consumers, advanced technologies, and supportive government. In 2015 in fact, the Chinese State Council announced its 10 years plan, calling it “Made in China 2025,” with the goal of transforming the country into an innovation hub in a variety of sectors, including the auto industry. China may take the lead in the worldwide race to build connected cars.

Read more:

Connected car report 2016: Opportunities, risk, and turmoil on the road to autonomous vehicles

Owning a car in China is getting harder and harder

Car sharing grows in China as an alternative to vehicle ownership

GM sets sights on China car sharing with new venture

Mobike

Mobike

Ps: let’s not forget about the two-wheeled Mobike!

A more radical solution to both traffic and pollution came in late 2015 from the former Uber Shanghai General Manager, who has shifted from four wheels to two with his own startup, Mobike. Mobike is a bike sharing network where users grab a ride through an app. Mobike already expanded to Beijing and secured a US$10 million round of funding from Panda Capital. The bike-lending service costs just US$0.15 per hour, along with a US$45 security deposit. To hitch a ride, a user opens the app, uses his or her phone to scan the QR code on the bike, and then that unlocks the bike’s smart lock and begins the timer on the Uber-esque ride. Since Mobike doesn’t use a parking station on the street, unlike some city-run bike-sharing schemes, the bikes can be parked anywhere with the app-controlled smart lock. The design of the bike itself has successfully attracted the young audience, and has become some sort of a fashion icon, with stylish Mobike riders being featured on different street fashion blogs.

Find out more about it here:

[Tested]: The Mobike

Mobike launches 1RMB bike rental in Shanghai

Image courtesy of mckynsey.com

The rise of multi-label and lifestyle brands in China

In Beijing, it seems that everyone is opening up a vintage shop. From the American, retro-cowboy, rockabilly vintage of the shops in Gulou, to the more European vintage of Sanlitun’s House of Willow, there are so many different vintage boutiques that have mushroomed around the city. Vintage is still a niche market in general. It still has a concentrated appeal—it’s not for everyone. These shops complement their brick-and-mortar shops with E-commerce platforms that serve more for marketing purposes than actual sales. These WeChat platform are more like style blogs where everything it’s about lifestyle.

Beijing's pioneer vintage shop: Mega Mega Vintage

Beijing’s pioneer vintage shop: Mega Mega Vintage

Mainstream luxury vs niche luxury

Consumption in China is becoming more and more driven by genuine demand. Until recently, products that have been arousing interest among local consumers were those in the high-end brand segment. But now, their buying interests are clearly turning towards the items that they use in everyday life. This trend has been noticed by retail players, that started developing their products and services into interconnected systems with different complementary services and brands. Back when Louis Vuitton and Chanel entered the Chinese market, they catered a huge focus. As a consequence, so much imitation came out on the streets that nowadays you don’t know what’s real and what is not. That’s where the appeal of niche luxury came in. Because it’s one of a kind, or there are very few pieces in circulation, there’s no imitation and less chance of clashing with somebody who has the same bag.

Currently, with most younger Chinese still in something of a “honeymoon” period in regards to imported luxury and fashion, vintage or vintage-inspired fashion will likely remain a niche populated mostly by the avant-garde for the time being. However, this testifies how the consumer market is now undergoing tremendous restructuring, as Chinese middle class gain more purchasing power. A portion of these strong consumers has started to pursue individualistic and distinctive labels, with their interest gradually shifting from popular mainstream luxury brands to those that express unique personalities.

Alter, Shanghai. Image courtesy of neocha.com

Alter, Shanghai. Image courtesy of neocha.com

This trend has led multi-brand stores to rapidly crop up in China

After I moved to Shanghai for work, I have been eating a lot of bagels. In fact, one of the favorite lunch spots of me and my colleagues is this recently opened bagel restaurant called Spread The Bagel, in Xintiandi. Apart from the amazing bagels, the location turned out to be quite interesting itself. The founder is in fact renting a portion of the retail space of Alter, a Chinese multi-brand store that imports a bunch of niche brands from Europe.

According to a report by RET, multi-brand stores in China experienced an extended phase of slow growth from 1996—when the first store opened in Shanghai—to 2009. In 2010, multi-brand stores entered a phase of furious growth and have been gradually expanding to the second- and third-tier cities. The number of new multi-brand stores opened between 2010 and 2013 is four times the sum of the past 14 years. Homegrown multi-brand stores now account for 55.6 percent of all multi-brand stores. Different from foreign-invested stores, which operate as large corporations, homegrown stores are primarily small-scale and independent ones that are geographically concentrated in Beijing, Shanghai, Guangzhou, Hangzhou, and Hong Kong. Presently, there are a total of 183 locations, covering 829 luxury brands. Some of the homegrown stores have begun chain expansion and to seek a presence in second- and third-tier cities. Two-thirds of the homegrown multi-brand stores have established an e-commerce platform. With lower operating cost and increased visibility as O2O’s main advantages, some of the leading stores in Beijing and Shanghai have been using WeChat for customer service and sales. Online sales reportedly account for 10 percent of total sales. Most multi-brand stores carry trendy, edgy products and fall on the mid- to low-priced sides, as their main consumer groups are usually younger and more expressive.

Dior exhibition in Shanghai, 2014. Image courtesy of haberdasherstandard.com

Dior exhibition in Shanghai, 2014. Image courtesy of haberdasherstandard.com

Art and brands are increasingly finding ways to collaborate

The line between luxury and art is blurring across the world, but it’s doing so especially quickly in China, where it’s getting more and more difficult to draw a clear line between the commercial realm and the community space. I already talked on how smart shopping malls in China are reinventing themselves as lifestyle centers, hosting events, and even art exhibitions. There are many benefits for brands, especially luxury brands, that tap into the influence of the elite art world in China. Contemporary art has arrived in the mainstream. And not every art fair visitor comes to actually buy art but often rather enjoys the entertainment aspect that the art scene offers.

When brands or real estates host events, it’s normal for them to pay lots of cash for celebrity appearances. Prices can reach one million RMB for tier two celebrities on special events like Christmas or New Year’s Eve (also in Asia hottest moments of the year for commercial real estates). But now art world people have turned into testimonials for brands, such as the Swiss curator Hans Ulrich Obrist, who became a face for a Brioni campaign. Judy Lam, the Assistant General Manager of K11, spoke about “The Mall as New Museum” and introduced the brand’s “art mall” vision. Not only in Hong Kong, but also with several outlets in Mainland China, K11 Concepts is very active in bringing art to a mass audience. This is achieved not only by presenting artworks in the mall itself, but also by commissioning world-class exhibitions for the integrated exhibition spaces, such as “Master of Impressionism – Claude Monet” in their Shanghai mall in 2014.

But it works also the other way around. When holding or sponsoring exhibitions, brands can reach museums’ and galleries’ VIP networks. These organizations help exposing the brand through exclusive openings. Many luxury brand-sponsored China exhibitions at prestigious museums and galleries merge art, branding, and the products themselves. In the case of branded exhibitions, the luxury products are placed alongside art in an equal setting as in Gucci’s recent “No Longer / Not Yet”exhibition at the Minsheng Art Museum in Shanghai, or the items become art themselves—such as when Dior had prominent Chinese artists design their own interpretation of the classic Lady Dior handbag for its “Lady Dior as Seen By” exhibition. Other examples include Bottega Veneta’s “Art of Collaboration” exhibition at UCCA in Beijing, Dior’s Shanghai exhibition in 2014 and Beijing exhibition in 2015 featuring the Miss Dior fragrance reinterpreted by 17 female artists. Luxury and art collaborations “work best when there is a true connection between the exhibition and the brand’s history, values, and marketing strategy in China. If these things are aligned, it becomes possible to find very interesting ways of co-branding that allow both parties to reach a larger audience.

"Dutch Design X" at Four Seasons Hotel in Beijing. Image courtesy of ubigallery.com

“Dutch Design X” at Four Seasons Hotel in Beijing. Image courtesy of ubigallery.com

The marriage between hospitality and luxury retail

The art community is not only flirting with shopping malls. Luxury art hotels have been rapidly popping up across China so quickly that fine art is almost a requirement for a new property to gain the attention of the ultra-elite. The idea that luxury can be a form of art in itself is gaining traction. While watches and jewelry have long been auction staples, leather goods are now entering the global auction scene, with China serving as the epicenter for the action. Top handbags are easier to sell and help to attract entry-level Chinese collectors to the auction scene. The auctions also don’t hurt the image of the luxury brands being sold, helping to solidify their status as investment pieces that will appreciate in value.

In China’s struggling high-end hospitality and luxury retail industries, a little strategic partnering with a luxury brand can be everything when it comes to elevating both brands in the eyes of the Chinese consumer. These partnerships allow guests to ‘experience’ the brands personally—as opposed to simply seeing them static on display in a store, or online. In today’s society in China where social class is very much defined by brand association, these collaborations have become a very popular means of defining ones own social status, and a personal statement of taste. One other result of these guest experiences is that they help secure market share and may boost sales for the hotels.

Image courtesy of mckynsey.com

Image courtesy of mckynsey.com

The unique show-off experience

Collaborations between brands with different industry backgrounds can very well help them to compensate and adjust the way their products are perceived. For example when releasing their smart watch in China, Apple made the effort to focus on meeting the demands of wealthy consumers by partnering with top luxury brands like Hermès to boost its status as a high-end brand, and put a fashion twist on what was so far a geek product.

These collaborations are especially useful to create unique experiences that customers can share in the form of videos, photos, selfies or live broadcasts. These type of experiences are the most important “social currency” in China these days. For brands to succeed, they need to give consumers unique ‘show-off’ experiences. When two brands join their forces to host an event, reveal a product or a collection it is more likely to be or to be perceived as a one off thing, or a limited edition product etc. Luxury experiences are becoming the new status for the wealthy in China. With an evolving perspective of what denotes wealth, brands need to find more ways to make consumers feel ‘rich.’

Read more:

Art and luxury in China brands reach potential new customers on a higher level

Rising stars on China’s retail scene homegrown multi-brand stores

Fast-fashion revved retail

Multi-brand stores of the Mainland

Style check why multi-brand sellers are key future China

China luxury market transforming

Interview with luxury vintage shop House of Willows co-founder talks classic style culture in China

Second-hand auto sales poised to accelerate in China’s maturing luxury market