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Luxury branding in today’s China: case studies of global consistency and local adaptation strategies of luxury fashion brands

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Luxury branding in today’s China: case studies of global consistency and local adaptation strategies of luxury fashion brands

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LUXURY BRANDING IN TODAY’S CHINA:
CASE STUDIES OF GLOBAL CONSISTENCY AND LOCAL ADAPTATION
STRATEGIES OF LUXURY FASHION BRANDS
by
Yumeng Wei

A Thesis Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
MASTER OF ARTS
(STRATEGIC PUBLIC RELATIONS)
May 2015

Copyright 2015 Yumeng Wei

i
TABLE OF CONTENTS

Introduction: The Definition of Luxury.....................................................................................1
Chapter One: China’s Luxury Landscape..................................................................................3
I. Chinese Consumers’ Passion for Luxury..........................................................3
II. Leading Brands in the Field of Luxury PR.......................................................5
Chapter Two: Global Consistency – The PR Strategy Adopted by The Majority of Leading
Luxury Brands in China...................................................................................10
I. The Prevailing Trend.......................................................................................10
II. Case Study #1: Dior’s Global Consistency Strategy.......................................11
III. Rationale behind the Trend..........................................................................21
IV. Limitations of the Strategy...........................................................................23
Chapter Three: The Challenge – The Market Slowdown in Recent Years (2013-2014).......24
I. The Chinese Government’s Crackdown on Excessive Spending...................24
II. Losing Business to Overseas Locations........................................................25
III. Consumers’ Evolving Behaviors and Tastes.................................................26
IV. Competition from Home-grown Luxury Brands..........................................27
Chapter Four: Exploring New Solutions – Adoption of a Localized PR Strategy.................30
I. Case Study #2: Burberry’s Localization Strategy...........................................30
II. Case Study #3: Gucci’s Localization Strategy................................................40
Chapter Five: Case Comparison – Burberry VS. Gucci..........................................................49
I. Paid Media – Print Ad Visual Analysis..........................................................49
II. Earned Media – Sentiment Analysis...............................................................51
III. Shared Media – Social Media Influence Analysis........................................54
IV. Owned Media – Official Website Function Analysis ..................................56
Chapter Six: Suggestions for Luxury Brands in China – Find a Balance Between
Global and Local Priorities................................................................................59
I. Stay True to the Core Value and Tap into Cultural Heritage..........................60
II. Switch Focus to Females and Younger Generations....................................61
III. Integrate Chinese Elements into Communications.......................................64
IV. Seize the Opportunity on e-Luxury Market and Use it as a Weapon against
Counterfeiting ..............................................................................................68

Notes..............................................................................................................................................72
Bibliography.................................................................................................................................78
ii
LIST OF FIGURES

Figure 1: China Urban Residents Disposable Income Per Capita..................................................4
Figure 2: 2013 China Domestic Luxury Spend - Top 5 Brands by Category in Alphabetic
Order................................................................................................................................5
Figure 3: Bomoda Index Research Methodology...........................................................................9
Figure 4: Number of Ads Placed in Mainstream Fashion & Lifestyle Magazines.......................16
Figure 5: Breakdown of Dior’s Advertising Positions In Mainstream Fashion & Lifestyle
Magazines......................................................................................................................17
Figure 6: Breakdown of Dior’s Weibo Content............................................................................21
Figure 7: Print Ad Placement in Vogue China: Burberry vs. Gucci.............................................49
Figure 8: Sentiment Analysis of Burberry and Gucci Mentions on Luxe.co...............................53
Figure 9: Number of Weibo Followers and Posts as of January 17, 2015...................................54
Figure 10: Update Frequency and Audience Reach (7/1/2014-12/31/2014)................................54
Figure 11: Functionalities and Services Available on Official Website.......................................56
Figure 12: Average Weibo “Shares”, “Comments” and “Likes” by Category – Burberry..........67
Figure 13: Average Weibo “Shares”, “Comments” and “Likes” by Category – Gucci...............67
Figure 14: Most Popular Posts on Burberry Weibo page (7/1/2014-12/31/2014)........................68
Figure 15: Most Popular Posts on Gucci Weibo page (7/1/2014-12/31/2014).............................68
Figure 16: The Number of Products on Tmall that might be Counterfeits...................................70
1
INTRODUCTION: THE DEFINITION OF LUXURY
Originally, the word “luxury” derives from the Latin word “Luxus,” which means “excess,”
“indulgence,” “pomp” and “magnificence.”
The concept of luxury has assumed various forms since the beginning of civilization.
According to Paurav Shukla, Professor of Luxury Brand Marketing at the Glasgow Caledonian
University, the social role that luxury products play in ancient empires was equally important as
it is in modern societies.
1
At that time, the consumption of luxuries was only limited to the elite
classes because of their possession of wealth.
However, with the progression of democracy, different categories of products have been
created within the luxury market, known as “affordable luxury” or “mass luxury.”

These types of
luxuries specifically targeted the middle class. As the lines between expensive versus affordable
luxury products have become blurred, the definition of luxury has become more difficult to
articulate.
Due to its complexity, researchers have not yet arrived at a unified academic definition of
luxury. Many attempts have been made from multiple perspectives to define it. Among all of the
definitions, the most representative one is that luxuries are those types of articles of consumption
with the characteristics of uniqueness, rarity and preciousness that exceed the needs of survival,
as posited by Wolfgang Reitzle, German economist and former Chairman of the AG Group.
2
As far as the author is concerned, a luxury product essentially means an expensive and
sometimes exclusive good that provides pleasure and that creates a sense of belonging among a
certain elite group. The author thinks that in today's society a passion for luxury goods has
become not only an economic phenomenon but also a psychological desire to demonstrate social
status and personal taste.
2
A luxury brand refers to a certain brand that is associated with high-price or refined quality.
Other features of luxury brands include that they are very sensitive to the recovery and
contraction of the market, to high margins of profit, and, above all, to the value of the brand.
3

In luxury products, especially in fashion realm, branding is a more important attribute than
it is in other areas. Luxury consumers’ attention is concentrated especially on the brand’s
perceived value, which is the fundamental element that identifies luxury goods.
Today, the market for luxury goods in China is still in development, but has the potential to
become, without a doubt, the largest prospective market in the world. Meanwhile, its
characteristic political and economic climate and digitally savvy consumers present unique
challenges to old-fashioned foreign luxury brands that seek to secure their slice of the giant pie.
This thesis explores major luxury brands’ public relations strategies in China. It will
examine how major luxury brands have appealed to Chinese customers and acclimatized
themselves to the ever-changing market environment in China. The author will then expand the
discussion by focusing only on the fashion segment of the luxury industry. Statistics, observation
and interviews with industry experts suggest that currently the most prevailing trend among
luxury fashion brands is maintaining a globally consistent branding strategy. However, to better
adapt to the unique cultural dynamics in China, an increasing number of brands are
implementing locally customized public relations efforts. The paper will analyze respective
strategies through detailed case studies and propose recommendations to luxury brands on how
to exploit the Chinese luxury market in the most effective way.

3
CHAPTER ONE: CHINA’S LUXURY LANDSCAPE
I. Chinese Consumers’ Passion for Luxury
The Chinese people’s passion for luxury originated during ancient times when rare and
expensive goods were considered as status symbols by emperors, nobles and dignitaries. Instead
of garments and accessories, the ancient Chinese preferred artistic decorative crafts such as
paintings, bronzes, porcelain and jade. However, after the establishment of the New China in
1949, the pursuit of luxury goods was denounced by the Maoists as feudal and capitalist and was
repelled by mainstream society. It was only after the late 1970s when the central Government
carried out the “Reform and Opening Up Policy” that modern Chinese people finally
re-embraced the consumption of luxury. Hosting a fashion show in 1979, the French brand Pierre
Cardin was considered the first foreign luxury brand to enter the Chinese market. At that time, as
a result of low income levels, people’s consumption demand was highly concentrated on the
basic necessities of life and, thus, their ability to purchase luxury goods was simply unrealistic.
In recent decades, the Chinese economy experienced phenomenal explosive growth. The
affluent population, which has a lot more disposable income on hand, has emerged and grown
rapidly. Their significant spending power makes China the largest prospective luxury market in
the world.

4
Figure 1 China Urban Residents Disposable Income Per Capita (unit: RMB)

Source: National Bureau of Statistics of China.
4

In 2012, China overtook Japan and became the second largest world market for luxury
goods.
5
According to China Daily, Chinese consumers spent a total of $102 billion on luxury
items in 2013, which represents 47% of total global sales, compared to only 1% in 1998.
6

The western luxury industry has been eyeing the Chinese market ever since the early 90s.
Thus far, almost all the world’s top luxury brands have expanded their sales network to China. A
significant number of brands opened flagship stores in major cities such as Beijing, Shanghai and
Hong Kong. Major players on the global luxury market are also dominating the Chinese market
in terms of market share. World-class brands such as Louis Vuitton, Cartier, Chanel, Gucci and
Prada occupy the best store locations in most high-end shopping districts and malls.
10493
11759.5
13785.8
15780.76
17174.65
19109.44
21809.78
24564.72
26955.1
0
5000
10000
15000
20000
25000
30000
2005 2006 2007 2008 2009 2010 2011 2012 2013
5
Figure 2 2013 China Domestic Luxury Spend - Top 5 Brands by Category in Alphabetic Order
(Unit: RMB)

Women's Wear Men's Wear Leather Goods Shoes Accessories
1 Armani Armani Coach Gucci Gucci
2 Burberry Hugo Boss Gucci Louise Vuitton Dunhill
3 Chanel Burberry Hermes Prada Hermes
4 Dior Dunhill Louis Vuitton
Salvatore
Ferragamo
Louis Vuitton
5 MaxMara
Ermenegildo
Zegna
Prada Tod’s Mont Blanc
Domestic
Luxury Spend
6.1 billion 12.5 billion 16.4 billion 6.7 billion 7.8 billion
Top 5 Brands
Total Market
Share
≈65% ≈56% ≈58% ≈57% ≈39%
*Note: Market value is composed of sales at retail value; “Accessories” includes stationary, scarves,
sunglasses, etc.; “Leather goods” includes suitcases & handbags, and smaller items such as wallets;
Armani brand includes Giorgio Armani, Emporio Armani and Armani Collezioni.
*Source: Bain 2013 China Luxury Market Study.
7
II. Leading Brands in the Field of Luxury PR
Due to the absence of a universal evaluation standard, there are no authoritative rankings for
luxury brands’ public relations efforts in China. The author assesses luxury brands’ performance
based on the following two indicators used by trustworthy third-party research institutes.
6
1. The most sought-after brands
Digital Luxury Group (DLG) is the first international company to create luxury industry
market intelligence. Last year, DLG unveiled the World Luxury Index™ China 2013, a ranking
and analysis of the most sought-after luxury brands in China. The research was conducted in
partnership with Luxury Society, the world’s largest community of luxury executives. The
research encompasses 400 brands in six key segments including fashion brands, and analyzed
more than 680 million organic searches on Baidu (China’s top search engine) and Google.
According to the Index, which is based on data collected from Internet search engines, the
top 10 most popular brands being queried in China are as follows:
8
(1) Chanel
(2) Louis Vuitton
(3) Gucci
(4) Hermes
(5) Coach
(6) Prada
(7) Dior
(8) Burberry
(9) Giorgio Armani
(10) Versace
7
Among the above-mentioned brands, Giorgio Armani is the fastest-growing fashion brand,
having opened 17 new stores in 2013. Bags and wallets dominate the fashion market in China,
accounting for almost 90% of total interest. Celine’s “Luggage” handbag consolidates its iconic
status on the Mainland as the most popular handbag model, followed by Hermes’ Birkin and
Chanel’s 2.55.
2. Brands with the greatest impact among consumers
Bomoda Group, a U.S.-based business research company that specializes in the Chinese
fashion industry, developed an algorithm to evaluate 300 brands’ performance across three major
dimensions: brand awareness, brand engagement and consumer experience (see Figure 3 on p.9
for sample data points).
9
The 300 brands are categorized into seven segments: (1) Luxury; (2)
Accessible Luxury; (3) Contemporary; (4) High Street; (5) Beauty and Cosmetics; (6) Jewelry,
Watches and Accessories; and (7) Multi-brand Retailers. Its research data was gathered from
social media (Weibo), mainstream search engines (Baidu), online fashion media/websites, key
opinion leader mentions, mobile applications and e-commerce platforms.
According to the Bomoda Brand Index, the luxury fashion brands with the most significant
impact among Chinese consumers are as follows:
10
(1) Burberry
(2) Chanel
(3) Dior
8
(4) Gucci
(5) Giorgio Armani
(6) Hermes
(7) Valentino
(8) Balenciaga
(9) Givenchy
(10) Versace
The ranking above combines results from both “Luxury” and “Accessible Luxury”
categories.
i
The highly ranked companies on this list have either achieved excellence across all
three dimensions, as does Burberry (ranks in first place out of all 300 brands), or excelled at one
criterion, as does the French brand Balenciaga (outranks other brands in the “consumer
experience” dimension).

Consolidating data from both research institutes, the brands with the best public relations
performance in the Chinese market are (in alphabetical order) as follows: Burberry, Chanel,
Coach, Dior, Giorgio Armani, Gucci, and Hermes.

i

The Bomoda Index identifies Burberry as an accessible luxury brand, a designation with which the
author could not agree. The price range of Burberry products is approximately the same as that of Prada.
For instance, a small-sized Burberry Orchard handbag costs RMB 15,000, while the price of a Prada
Saffiano Lux is RMB 14,400. Burberry may be accessible in the sense that it constantly engages with
consumers, but in terms of pricing, it is without doubt a legitimate high-end luxury brand.
9
Figure 3 Bomoda Index Research Methodology

Source: 2014 Bomoda Brand Index

10
CHAPTER TWO: GLOBAL CONSISTENCY
– THE PR STRATEGY ADOPTED BY THE MAJORITY OF LEADING LUXURY
BRANDS IN CHINA
I. The Prevailing Trend
Currently, in emerging markets like China, though the consumer culture is very distinctive
from the brands’ mainstream western markets, the majority of luxury brands are still
implementing a globally unified PR strategy, according to Rachel Catanach, managing director
of the FleishmanHillard Hong Kong office. As a veteran public relations expert based in the Asia
Pacific for over a decade, Catanach has in-depth knowledge of the consumer mentality in the
Chinese market and extensive experience in luxury branding as she oversees the Burberry
account. She acknowledged in an interview with the author, “for a lot of luxury brands, a key
attribute, or [a] key strength of the brand is the global consistency.”
11
Lisa Li, the vice president
of the magazine Cosmopolitan China, echoed Catanach’s point of view from the perspective of
media, saying that most luxury brands place their emphasis on brands’ premium value and hope
to convey the message via various international outlets by creating a consistent high-end image.
12

Ever since their founding, luxury brands like Chanel, Louis Vuitton or Christian Dior have
invested significantly into establishing a unique brand identity to give people a reason to
willingly pay a premium for their products. For instance, to consumers all around the world,
either in New York or Shanghai, the name “Chanel” always means the same: French romance,
11
superior quality and classic design that can pass on from generation to generation. A woman who
wears Chanel is a woman who lives every minute of her life with grace and elegance.
These traditional luxury brands all follow the same strict code of conduct. From a
communication point of view, the code of conduct has been translated into a highly controlled
strategy where brands would focus on a select few key communication channels that allowed
them to form public impressions in the right way. Such consistency is a crucial attribute that
helps these high-end brands maintain their strength.
To better understand the global consistency strategy, the author selects Christian Dior as a
representative example to further study the rationale behind the trend.
II. Case Study #1: Dior’s Global Consistency Strategy
Founded by Christian Dior in 1947, the Dior brand has long been at the top of the fashion
pyramid. Its design carries on the heritage of French Haute Couture, utilizing the spiffy cutting
and the ornate detail to emphasize the beauty of body curves. To its consumers, it is synonymous
with feminine charms.
1. Dior’s performance in China
Dior entered the Chinese market in the late 1990s. The brand first laid a solid foundation
with its business attire collections targeting China’s business elites, especially those who have
experience living overseas. After obtaining a certain popularity and reputation in the market,
Dior expanded its product range and introduced its full line of accessories including shoes,
12
handbags, jewelry, watches, sunglasses and scarfs. Meanwhile, it gradually established its brand
image as an elegant, high-fashion, high-quality brand among a wider audience base, including
the emerging high-net-worth individuals and celebrities. In recent years, Dior has focused on
educating Chinese consumers about its Haute Couture heritage and design philosophy, making
the brand a cultural emblem. Dior is also seeking to satisfy Chinese consumers’ growing appetite
with its signature personalization and customization services.
Chinese consumers have responded well to Dior’s positioning as a brand “at the very high
end of the luxury market”.
13
Despite the overall economic slowdown last year, Dior has seen few
signs of shrinking demand among Chinese luxury shoppers.
According to Dior’s interim financial report release in February 2014, the fashion and
leather goods department’s sales had risen by 14%. The total revenue reached 758 million euro,
equals to approximately 970 million US dollars.
14
2. Branding tactics adopted by Dior
A. Global standardization of decoration and product assortment
Dior attaches great importance to consistency of its global image. Most notably, its flagship
stores worldwide maintain the same architectural and decorative style. These stores at the most
prominent locations serve as Dior’s visible positioning statement, reinforcing the brand’s luxury
status and unconsciously influencing consumers’ perception towards the brand.
13

Image 1 Dior New York flagship store
15

Image 2 Dior Hong Kong flagship store
16
Image 3 Dior Dubai flagship store
17
In addition, Dior insists on providing unified in-store product offerings, which is reflected
in its global advertising campaign. Accompanying each fashion show, Dior launches a campaign
on multiple platforms to promote the featured designs of the season. Months later, these new
ready-to-wear collections will be available for purchase at Dior stores worldwide.
The Dior 2015 spring/summer collection, as an example, was revealed during a show on
September 26, 2014. Dior has reserved spaces in the October issue of each country’s major
fashion magazines so that the print ad can run simultaneously with the new product launch.
14
The following are Dior’s print ad images in Cosmopolitan China, Vogue British and Vogue
Italia, respectively. Three ads use the same set of photographs featuring the same models
wearing the same outfits, which indicates that Dior’s main ready-to-wear product offerings are
consistent in China, Italy and the UK.

Image 4 Cosmopolitan China 2014 October issue

Image 5 Vogue British 2014 October issue

15

Image 6 Vogue Italia 2014 October issue
The same also applies to accessories. The featured handbag for 2015 spring/summer is the
Miss Dior Handbag in candy colors. Similarly, the new collection is being promoted in print ads
published across the world.

Image 7 Vogue China 2014 October issue Image 8 Vogue U.S. 2014 October issue
B. Large investment in traditional media advertising
Dior devotes a considerable amount of resources to traditional media advertising to gain
extensive exposure. With regard to the choice of medium, Dior avoids mass media such as
television, and instead prefers niche media whose readership matches Dior’s target audience. In
16
general, Dior places ads in high-fashion and lifestyle magazines to attract potential female
consumers and in the financial press to attract males.
Dior’s advertising placement
ii
is concentrated on several seasons. Luxury brands each year
hold two major fashion shows. One is the autumn/winter collection release in March, and another
is the spring/summer collection release in September. Therefore, to build momentum for the new
product launch across the world, Dior’s ads will certainly appear in each country’s
most-circulated fashion magazines’ March/April issues and September/October issues.
Additionally, December is also a key month for Dior’s holiday season promotion.
The author calculated Dior’s recent advertising placements in mainstream Chinese fashion
and lifestyle magazines, and did a comparison with two other luxury brands. The statistics show
that Dior’s ad pages exceed those of Gucci and Burberry combined.
Figure 4 Number of Ads Placed in Mainstream Fashion & Lifestyle Magazines
Brands
Number of Pages
September October November December Total
Dior 16 25 19 22 82
Gucci 10 13 10 9 42
Burberry 12 12 4 9 37
* Note: The most circulated fashion & lifestyle magazines here refer to Cosmopolitan, Elle,
Vogue, Harper's Bazaar, Self and Marie Claire.
* All issues were published in 2014
Moreover, Dior has very specific demands about where to place its ads. It only accepts the
most prominent positions to ensure high visibility, namely the cover gatefold, the first three

ii

Advertising placements in this thesis refer to the combination of hard sell advertisings, advertorials and
special format ads including cover gatefolds.

17
spreads and the back cover. Besides demonstrating to the readers its leading status in the industry,
Dior aims to create an impression that Dior is known by most people but can only be owned by a
few.
Figure 5 Breakdown of Dior’s Advertising Positions in Mainstream Fashion & Lifestyle
Magazines
Ad Format Number of Pages
Gatefold 60
1st Spread 6
2nd Spread 4
Back Cover 4
Advertorial 8
Total 82
C. Brand spokespersons with global influence
Dior is very protective of its brand image. When looking for brand ambassador candidates,
Dior only considers high-profile influencers who have a positive reputation on the global stage.
Here are some of the brand’s current spokespersons:
! Marion Cotillard for Lady Dior Handbag and Haute Couture;
! Jennifer Lawrence for Miss Dior Handbag;
! Charlize Theron for J’adore Perfume;
! Natalie Portman for Miss Dior Perfume;
! Jude Law for Dior Homme

18
All of these celebrities have one thing in common: they are well known among consumers
worldwide and are the perfect embodiment of the Dior spirit – elegant, artistic and charismatic.
Even in Asia, Dior still insists on using Sophie Marceau, a French actress beloved by Asian
consumers, as its endorser for a skincare product line specially made for the market.
On Chinese market-based digital platforms such as Weibo, Chinese celebrity-related content
only accounts for approximately 2% of its posts; foreign celebrities account for more than 9%
(see Figure 5 on p.21 for details).
With a presence in the Chinese market for almost 20 years, Dior has never used Chinese
celebrities as faces for the brand, primarily because they lack the international appeal that Dior
greatly values. In essence, the spokespersons are the representatives of the brand that the public
hears and sees. Their personality must match the brand’s identity, and they must have the power
to impact as many people as possible.
D. Storytelling: focus on heritage and cultural value
Dior understands that the purpose of luxury branding is not merely selling the product, but
to guide consumers to acknowledge the cultural significance behind it and to willingly pay for
the intangible value of the physical product. Thanks to the brand’s historic roots, Dior has
incredible stories to tell and the opportunity to thrive in a content-driven world.
Dior has held exhibitions of various themes in countries across the world. The Esprit Dior
exhibition in particular has drawn the most public attention. It is dedicated to the legendary
19
fashion designer Christian Dior and the 100 dresses that made his label the icon it is today. The
show came to China in 2013. Its latest stop was Tokyo, Japan.

Image 9 Posters for the Esprit Dior Exhibition (left: Shanghai; right: Tokyo)
18
The Le Petit Theatre Dior exhibition, which is currently on display in Beijing, is a tribute to
the meticulous craftsmanship of the House of Dior Haute Couture ateliers. Their talent is
thoroughly expressed in a collection of miniature dresses that resemble the original design in
every tiny detail. The purpose of the exhibition is to educate people about the time and efforts
invested in the making of Dior’s customized dresses, and to establish the impression that every
Dior dress is a piece of timeless artwork.
20

Image 10 Items on display at the Le Petit Theatre Dior Exhibition
19
Besides being the narrator of its own story, the brand also invites contemporary artists and
photographers to tell Dior’s story from their perspectives. The Lady Dior As Seen By exhibition
calls upon these talents to create an artwork inspired by the Lady Dior handbag. Each time the
exhibition opens in a new venue, the famed bag will have 50 brand new interpretations. The
travelling exhibition is still on tour.

Image 11 Lady Dior As Seen By Exhibition (left: São Paulo; right: Hong Kong)
20

21
Dior also utilizes storytelling to impact consumers’ perception about the brand on digital
platforms. The author collected Dior’s 190 Weibo posts published from July 1 to December 31,
2014 and developed a coding system to classify the content into seven major categories and 11
subcategories. Data shows that posts related to brand heritage, culture or arts accounts for 34%
of the overall content, more than any of the other categories, indicating Dior’s firm belief in the
power of storytelling.
Figure 6 Breakdown of Dior’s Weibo Content
Category Code No. of Posts Percentage
Products
Fashion A1 17 9%
Jewelry/Watch A2 14 7%
Cosmetics A3 24 13%
Promotional Events (runway shows, etc.) B 33 17%
Endorsement
Chinese celebrities C1 3 2%
Foreign celebrities C2 18 9%
Ad Campaign (commercials, videos, etc.) D 12 6%
Brand Heritage
Brand story E1 7 4%
Brand exhibitions E2 23 12%
Culture & Arts F 34 18%
Others 0 5 3%
III. Rationale behind the Trend
Historically speaking, the global consistency strategy has been common practice among
luxury brands in China ever since they first entered the market. During the first two decades after
China opened its doors to the world, the economy had been growing too fast for comfort and
consequently caused many problems. For instance, they emphasized growth rate and neglected
22
quality control in manufacturing. Compared to uncreative and low-quality “Made in China”
products, foreign brands are regarded by Chinese consumers as fashion-forward, tasteful and
trustworthy. Luxury brands did not see the urgent need to adapt to the local market environment,
and therefore copied the strategies that were proven effective in Western countries. In addition,
the majority of higher-ranking executives in luxury brands’ Chinese divisions are Westerners,
which is also a fact that influences their business development strategy.
However, the most significant rationale behind the trend lies in the following two aspects.
From a brand’s perspective, maintaining a consistent image helps consumers associate the
brand with its positioning as a luxury brand and its core value, thereby further gaining consumer
recognition. A big part of Dior’s success is driven by its high distinguishability. In other words,
its distinctive style of design endows the brand with its own “personality”. People cannot change
who they are as a person, and the same also applies to brands, especially luxury brands whose
survival depends on uniqueness. Consumers are willing to pay a high price for a Dior dress
because they identify themselves with what the brand stands for, and believe the dress, in return,
will empower them. The brand’s identity is the essential part that must remain unchanged no
matter when or where.
From the consumers’ perspective, their desire for self-recognition is another driving force
behind the global consistency strategy of luxury brands. As mentioned earlier in the introduction,
a luxury good can be defined as a status symbol that provides a psychological sense of belonging
to a certain elite group. When consumers travel from country to country, they know that carrying
23
a Lady Dior handbag will always be seen by others as a clear statement of great fashion taste,
and more importantly, of relatively higher social status. To some extent, consumers need global
consistency to satisfy their vanity.
IV. Limitations of the Strategy
Traditional luxury brands following a global consistency strategy are facing increasing
cultural challenges in establishing brand relevancy among younger Chinese consumers.
Emphasizing brand heritage and making the brand a status symbol effectively appeals to the
business elites and first-generation high-net-worth individuals. However, for the younger
generation, which is the new mainstream community of consumers, it is not a strategy that
resonates with them. Instead of demonstrating power and wealth, young people would rather buy
products that could express their individuality. As consumer needs are constantly changing and
becoming more diverse, the global consistency strategy will not always be a universal solution.

24
CHAPTER THREE: THE CHALLENGE
– THE MARKET SLOWDOWN IN RECENT YEARS (2013-2014)
From 2007 to 2012, many luxury brands enjoyed double-digit annual growth in the Chinese
market. However, the situation has changed significantly since 2013 due to an unfavorable
macroeconomic environment, and the growth slowdown is expected to continue through the next
few years. McKinsey & Company estimates that the growth rate of luxury sales in China is going
to drop to just 2.5 percent in 2014.
21
Luxury brands in China are facing challenges including:
I. The Chinese Government’s Crackdown on Excessive Spending
Gift-giving has long been an “unwritten social rule” throughout Chinese history.
Businessmen believe that giving expensive gifts to the right government officials could expedite
the approval process of new projects and gain favorable conditions for their business’s future
development. Government officials believe that subordinates who give expensive gifts to their
superiors could increase their chances of getting a promotion. Though bribery violates the law,
Chinese law enforcement, as one of the beneficiaries of such conduct, generally chooses to turn a
blind eye to the situation. However, things changed when President Xi Jinping took office in
November 2012. He signed a policy outlining 65 strict rules to crack down on corruption and
demand more transparent government spending.
22
The anti-corruption campaign has swept
across China and imposed a far-reaching impact on China’s luxury goods industry. Gift-giving
25
was one of the key drivers for luxury brands and used to make up approximately 25% of luxury
good sales in China in 2012.
23
Luxury goods sales increased by 20% in 2012. Hit by the
crackdown, 2013 saw an increase of just 2% from 2012.
24
Bain & Company surveyed 20 leading
luxury brands that are currently active in the Chinese market, and statistics show that the number
of newly opened stores in China by these brands decreased to around 100 in 2013 from roughly
150 in 2012.
25
II. Losing Business to Overseas Locations
The government crackdown on excessive spending not only agitated government officials,
but also struck a nerve with high-net-worth individuals. They began to worry about the stability
of the political situation, as well as the security of their assets in China. Such influence changed
their purchasing behavior. As a result, they decreased their spending activities in China and
increased their expenditure overseas for privacy and security reasons.
Meanwhile, luxury stores in China are also losing business to oversea locations due to the
increasing popularity of international traveling. Thanks to improved economic conditions,
nowadays many Chinese families can afford to travel abroad. Since China charges high import
tariffs on non-essential goods, buying luxury products in China is anything but cost-effective.
Savvy Chinese consumers, therefore, plan shopping-centric trips to countries that are home to
luxury brands such as Italy and France, and regions/countries with relatively lower import tariffs,
such as Hong Kong, South Korea and the U.S. The total amount of money that the Chinese are
26
spending on oversea trips has surged from $18 billion in 2002 to an estimated $154 billion in
2014.
26
In addition, the exceptional shopping experience and the stories they can tell afterwards
are other reasons attracting Chinese consumers to shop overseas. Buying a Dior handbag in the
brand’s flagship store in Paris holds a special emotional appeal for tourists, because it offers
them a sense of connection to the original inspirational source of the product, as well as a sense
of brand legitimacy.
In recent years, the “Daigou” phenomenon has impacted Chinese consumers’ purchasing
behavior in a way that could not be overlooked. “Daigou (代购)” in Chinese means “Buy things
on someone’s behalf”. A Chinese person overseas will purchase selected luxury goods for a
customer in China for a small service fee so that the customer can avoid China’s high import
tariffs on luxury goods. Technically, the person performing “Daigou” activities is an
unauthorized reseller, but currently it is nearly impossible to track them effectively. According to
research conducted by Bain & Company, around 60% of consumers surveyed have made luxury
purchases through “Daigou” channels.
27
It is now a business worth 15-20 billion U.S. dollars
with a nearly 33% annual growth rate.
28
III. Consumers’ Evolving Behaviors and Tastes
Primarily because of the improvement in the population’s overall education level, and partly
influenced by the anti-corruption campaign, Chinese consumers in the tier one and tier two
27
cities
iii
who used to enjoy displaying their wealth are now more discerning and sophisticated.
These consumers tend to be more concerned about the culture and history behind the brand
instead of blindly buying products with conspicuous logos. About 41% percent of respondents to
a survey conducted by McKinsey & Company agreed or strongly agreed that showing off luxury
goods conveys gaudy taste.
29
That may explain why low-key luxury brands like Bottega Veneta,
which is known for its no-logo design, continue to grow fast in China despite the overall market
slowdown.
Young consumers are now the primary buying force of luxury goods in China, particularly
those born in the ‘80s and ‘90s. The aforementioned McKinsey & Company research also
suggests that 73% of Chinese luxury consumers are under the age of 45; 45% are under 35.
30
As
the second generation of the country’s wealthy elites, this group has more exposure to luxury
brands compared to their parents and, therefore, have developed strong knowledge of brands’
cultural heritage and design style. They choose to shop at brands that suit their tastes and
personality. They are shifting their buying preferences from “mass luxury” to niche fashion and
self-expression.

iii

There is no standardized criterion to define city tiers in China. However, considering factors including
the population size, GDP per capita and urban infrastructure, it is commonly acknowledged that the top
tier incorporates Beijing, Shanghai, Guangzhou and Shenzhen. They are the most affluent areas and the
center of major economic activity. The second tier cities, in general, are provincial capitals and special
administrative regions. They represent some of the areas with the greatest growing potential.

28
IV. Competition from Home-grown Luxury Brands
Western luxury brands in China are also facing challenges from home-grown brands. For a
long time, “Made in China” has been synonymous with low quality and goods for the mass
market. The popularity of domestic luxury brands is limited to industries that have deep roots in
heritage and tradition, such as tea, jade, and silk.
However, the greatest business development opportunities for luxury brands are now in
China, with equal potential for every market player. Chinese consumers are taking a growing
interest in products that cater to Chinese national identities and local tastes. The best-selling
jewelry brand in China, for example, is Chow Tai Fook.
31
Its products successfully tap into the
Chinese love of gold both as a status symbol and as an investment item. Other examples include
NE Tiger and Shanghai Tang. These brands are good at incorporating the traditional Chinese
cheongsam design with modern cutting technologies to create dresses that flatter Chinese
women’s body shape. The patterns printed on their fine fabrics all originate from Chinese myths
and legends that are believed to bring good fortune. These brands are getting increasing attention
from Chinese luxury consumers because they are more familiar with Chinese consumers’ body
types, fashion preferences, and mentality.
29

Image 12 Chow Tai Fook
32

Image 13 Shanghai Tang
33
Image 14 NE Tiger
34

30
CHAPTER FOUR: EXPLORING NEW SOLUTIONS
– ADOPTION OF A LOCALIZED PR STRATEGY
The recent growth slowdown has caused most luxury brands to rethink their expansion
strategy in China in order to regain growth momentum. Merely maintaining a high-end global
brand image is not effective enough for the well-informed younger Chinese generation who
always looks for new ways to express themselves. Based on the premise of ensuring a unified
global brand image, an increasing number of luxury brands are seeking further breakthroughs by
localizing their PR strategy. According to Rachel Catanach, current innovations are primarily
focused on exploring new methods of distribution, communication, and marketing.
I. Case Study #2: Burberry’s Localization Strategy
Thomas Burberry founded his brand in 1856 as an outdoor apparel and army uniform
manufacturer. Thus, it is easy to understand why Burberry products excel at combining a modern
classic design with high-quality and useful features. In 1890, the brand launched its iconic trench
coat, which has become the most enduring design in fashion history. As a British national
treasure, Burberry was beloved by the royal family and the upper class.
In 1997, Rose Marie Bravo, then CEO, changed Burberry’s development strategy from
serving royalty and celebrities to satisfying customers of multiple social classes, and further
expanded to overseas markets, especially Asia. Burberry is among the first international luxury
brands to enter China, and has been a market leader for over 20 years.
31
1. Burberry’s performance in China
Burberry has maintained its steady growth in the Chinese market even under less favorable
macroeconomic conditions. Comparable sales growth in the Chinese mainland was 11%
throughout the fiscal year of 2013.
35
According to Pascal Perrier, Burberry’s CEO of the
Asia-Pacific region, approximately 30% of Burberry’s total retail/wholesale worldwide revenue
of the 2013 fiscal year came from Chinese customers.
36
Therefore, Burberry continues to invest
on and offline to ensure the best experience for Chinese customers.
The reason Burberry stays ahead of its competitors is that it is very sensitive to trends and
changes in the market. It employs a professional research team to track where the market is
going. Burberry was one of the first brands to target the younger consumer group as its core
customer base. It has been keenly aware of who is leading the future of the Chinese luxury
industry. The statistics prove that the average age range of luxury customers is 25 to 28 in China,
25 years younger than in the U.S.
37
Burberry officials also noticed that consumers of this age group are tech-dependent, and
therefore put a lot of effort into digital innovation. Burberry is acknowledged as a pioneer in
localized digital communication: it was named “Brand with the Highest Digital IQ” by the L2
think tank
38
and topped 300 brands on the Bomoda Index.

32
2. Branding tactics adopted by Burberry
A. Enhance brand experience by integrating cutting-edge technology
Burberry sees flagship stores as the platform through which to give customers the highest
possible luxury experience of the brand. The physical space can be built into a cultural hub and
entertainment landmark for customers to enjoy the most personalized and engaging luxury
shopping experience. Recently, Burberry deployed the innovative radio-frequency identification
(RFID) technology in its flagship store at Shanghai Jing’an Kerry Center.
39
The RFID chips
implanted into selected products will trigger multimedia content on mirrors that immediately turn
into screens to demonstrate information related to the item, making customers’ fitting experience
a unique private fashion show. Meanwhile, the 40 video screens and 130 speakers installed in the
store provide an interactive audiovisual experience that gives the younger customers a deeper
understanding of the brand’s history and tradition.
To accompany the grand opening of the Kerry Center flagship store, Burberry held a
Broadway-style event “Bring London to Shanghai” in a custom-built venue on the banks of the
Huangpu River. The stage setting was inspired by Burberry’s global flagship store, 121 Regent
Street. Burberry utilized technology to deliver a magical experience for fashion lovers in
Shanghai. Dancers wearing iconic Burberry clothing performed a specially choreographed
number in the air. British model Cara Delevingne flew over the audience with a Burberry
umbrella in hand, just as in the movie “Mary Poppins.” The show was accompanied by a score of
British music including exclusive tracks written for the event.

33

Image 15 “Bring London to Shanghai” campaign poster on Burberry official website
Perrier said, according to an earlier survey, that Shanghai residents spend more on luxury
shopping (over $1000 per purchase) than New Yorkers (over $500 per purchase).
40
Burberry
aims to demonstrate the brand’s DNA to its consumers in China through this flagship store in
Shanghai, making all Shanghai residents fall in love with Burberry.
The integration of digital initiatives into branding can also be seen in many other Burberry
events such as the Beijing 3D runway show. Through these efforts, Burberry hopes to elevate the
brand perception and drive customer loyalty, and attract Chinese consumers to its stores even
when they travel abroad.

34
B. Active presence on digital platforms
Burberry has also made impressive use of social media platforms to engage with the
younger generation. During the Kerry Center event, Burberry collaborated with WeChat to offer
a parallel social event experience. Followers were able to see previews of the show on WeChat
and interact with a series of London skylines by shaking, swiping or tapping their devices.
Burberry has set up official accounts on many major social platforms including Youku (a
video-sharing site), Sina Weibo and WeChat.
(1) “Most Influential Brand Account” on Sina Weibo
According to official statistics released by Sina, Burberry’s official Weibo account is the
most influential account in the luxury brands category.
41
It out-ranks other brands in many
categories including “daily influence index,” “number of daily new Weibo posts,” and “number
of daily reposts.”
In addition, Burberry is among the first luxury brands to establish a dedicated account on
Weibo to provide real-time customer service. Customers can simply write down their questions
or comments under any post on the Burberry Service Account Weibo page, and they will get
their answer usually within a couple of hours.
(2) Service account on WeChat
WeChat has overtaken SMS to become the most popular communication tool among
Chinese consumers. By the second quarter of 2014, the number of WeChat users has reached 438
35
million
42
and the market penetration rate has reached 65%.
43

Burberry launched on WeChat in August 2013. The Burberry WeChat platform is regularly
updated with exclusive brand content from Burberry campaigns, shows, and global events. The
account also serves as a customer service account, allowing WeChat users to make inquiries or
order customized personal fragrances and accessories. In addition, as mentioned before, WeChat
users who cannot be at the Burberry events can enjoy an immersive experience by interacting
with the account and by following show guests throughout their experience, gaining access to
exclusive imagery, audio and text messages.
(3) Flagship store on Tmall (on Taobao.com, China’s largest e-commerce platform)
Many old-fashioned luxury brands, including Dior, Channel, and Prada, are worried that too
much exposure on the Internet could do more damage than good to their brand image, therefore
declining to provide online purchasing services in China. However, as the luxury purchasing
behavior in China evolves and increasingly includes online buying, the 158-year-old British
brand understands that it has to be the first to dip its toes into the water.
Burberry’s store on Tmall.com was officially launched on April 23, marking the first ever
collaboration between an e-commerce platform and leading international luxury label.
44
The
store offers customers the opportunity to explore a tailored assortment of the brand’s product
categories for men and women including ready-to-wear, fragrances and cosmetics. However,
Burberry is very protective of its identity as a premium luxury brand. The high-end product line
36
Burberry Prorsum is still only available in selected physical stores. The Tmall.com store also
features visual content pages that share the brand's heritage with its visitors.

Image 16 The home page of Burberry Tmall store
The Burberry Tmall store shows how Burberry embraces technology in its business
operation. The store offers a dynamic and personalized luxury customer service experience,
accessible across all devices including mobile, tablet and desktop.
The purpose of opening the store is much more than driving sales. It is marketed as the
only online platform selling authentic Burberry products in China. Through collaboration with
Taobao, Burberry is able to optimize this cooperation to eliminate illegal activity and ensure the
best possible brand presentation in this environment. In the meantime, the online flagship store
37
can showcase the Burberry brand to people who live in cities where there is no brick-and-mortar
store available, therefore further expanding its brand awareness and enhancing market
penetration.
C. Long-term investment in Chinese market research to ensure dynamic evolution of store
portfolio and service
Burberry is dedicated to gathering the most up-to-date insights from market research to
optimize product assortment in stores in China. The purpose is to ensure the right brand
positioning in the market and to serve the Chinese customers better. Because Burberry’s core
customer base in China is relatively younger than consumers elsewhere, their taste is much more
fashion-forward. Therefore, Burberry would allocate more of its fashion pieces in stores in China
to satisfy their appetite.
45
To accommodate consumers who travel to destinations outside Asia, each year Burberry
collects worldwide store traffic data to pinpoint the stores that are visited the most frequently by
Chinese consumers. As a result, more Mandarin-speaking sales associates will transfer into those
stores to make sure the Chinese tourists could enjoy the best customer service wherever they
shop.
46

D. Smart use of Chinese elements in communications
Many Western luxury brands, including Burberry, seek to impress Chinese consumers by
incorporating Chinese elements in their product designs. Recently, in early 2015, Burberry
38
released a limited edition of cashmere check scarfs with a Chinese character“福” （means
“blessing”）embroidered on them. Once the collection was available in stores, it immediately
drew attention, and the scarfs sold out within a few weeks in Hong Kong.

Image 17 The Burberry Chinese New Year Collection
But Burberry did much more than that. To facilitate the release of the Chinese New Year
collection, Burberry launched a digital service on WeChat that allows users to customize their
own New Year envelope. In China, giving money as a gift is a New Year tradition. The money is
often sealed in a red or gold envelope that symbolizes good luck. Nowadays, out of convenience
and environmental reasons, younger generations prefer giving out New Year envelopes via the
WeChat Payment platform. Burberry is acutely aware of the new trend and makes smart use of it
in its promotional campaign. Benefiting from WeChat’s high market saturation level, Burberry is
able to significantly increase its visibility and enhance its brand recognition among a wide range
of audiences.
39

Image 18 The process of customizing a greeting envelope
E. Launch of campaigns to coincide with key Chinese festivals
Burberry engages in all festive opportunities to launch promotional campaigns. Besides
using Chinese-style designs to boost sales during the traditional Chinese Lunar New Year,
Burberry also promotes its festive collections during the Qixi festival, which is the Chinese
Valentine’s Day; and the Mid-Autumn Festival, which is the day for family reunion.
To keep up with the e-commerce trend, Burberry’s Tmall store also participates in the 11.11
(also known as the Single’s Day) shopping carnival. It is the largest online shopping sale in
China initiated by the Alibaba Group. In 2014, the event’s total sales revenue broke the record
and reached 57.1 billion RMB (approx. 9.2 billion USD) at the end of that day.
47
Burberry is the
first luxury brand to release a collection of products specially customized for the carnival.

40
II. Case study #3: Gucci’s Localization Strategy
Gucci, founded by Guccio Gucci in 1921 in Florence, is a typical representative of the
exquisite Italian style of living. The brand inherited the skills of local Tuscan artisans and created
a catalog of genuinely iconic trademarks including the interlocking double G logo, the penny
loafer, the bamboo-handled handbag and the classic velvet pantsuit. In the luxury market, Gucci
is without doubt a brand at the forefront and it has long been regarded as a symbol of elegance
and refinement in the eyes of consumers. During the tenure of former Gucci creative director
Tom Ford (1994-2004), Gucci successfully established its new image as a fashion-forward,
modern brand and penetrated mainstream culture like no other Italian label in history. In 1999,
Gucci formed a strategic alliance with the Kering group (the former PPR Group) and became a
multiple-brand fashion empire.
1. Gucci’s performance in China
Gucci entered China in 1996 during a time when the country was experiencing its fastest
economic development. The company took advantage of the favorable economic circumstances
and rapidly grabbed a considerable market share. However, in the last five years, Gucci has had
several crises in the Chinese market, and its sales performance has continued to decline.
Kering Group’s 2014 Q3 Report indicated that Gucci’s worldwide revenue declined by 1.9%
on a comparable basis.
48
The recessing market has been affecting Gucci’s financial performance
for several consecutive quarters, and Gucci is not expected to recover from the downward trend
41
anytime soon.
The economic slowdown is not the only factor that has led Gucci to the situation today.
According to Dr. Zhou Ting, director of the China Luxury Institute at the University of
International Economics and Business, Gucci’s brand value has declined in recent years because
it faces an enlarged gap between brand positioning and consumers’ perception.
49
The cause of the problem could be attributed to two primary reasons.
First of all, Gucci’s aggressive expansion goes against the scarcity principle that defines
luxury. To satisfy Chinese consumers’ increasing appetite for luxury, Gucci overemphasized its
improvement in sales volume and introduced a wide array of products to the market, including
relatively low-priced, poorly designed items. As a result, Gucci lost its core target audience
because high-end consumers no longer perceive Gucci products as one of the most prestigious
luxury brands. In addition, Gucci is facing serious counterfeiting problems in China. Its
popularity has made it one of the top five brands that have the most knock-offs circulating in the
market.
50
The prevalence of fake products is continuously diminishing Gucci’s brand value.
Unfortunately, Gucci has thus far not come up with a viable solution to tackle this problem.
Secondly, Gucci’s aggressive expansion has caused controversy and damaged its brand
image. Since 2011, Gucci has been facing accusations including violating employee rights and
neglecting customers’ after-sale service requests. In September, 2011, five former employees
who worked at a Gucci Shenzhen store resigned and issued an open letter to the company’s top
management, complaining about its “inhumane” working environment and referring to the
42
company as a “sweat shop.”
51
According to the letter, these employees were forced to work
unpaid overtime. An employee claimed that she had a miscarriage because she had to stand for
over ten hours every day, and the company’s harsh regulations prohibited her from eating or
drinking during breaks. Also, when an item was stolen from the store, all employees had to pay
an equal share to compensate for the loss even if the item was insured. In fact, this was the
second time in two years that Gucci employees publicly criticized their employer.
Customers are not very satisfied with the company either. In 2011, many complained that
Gucci refused to provide the after-sales service that they deserved, and they were treated badly.
They could not even find a valid customer service phone number to file a complaint about
product quality. Chinese customers felt that they were treated differently because such services
are available in Gucci stores in other countries.
So what went wrong? As far as the author is concerned, the underlying causes of these
branding crises could be the following:
A. Overconfidence in Gucci’s brand appeal
The market has played in Gucci’s favor ever since it entered China. Back in the 90s, the
newly prosperous Chinese consumers tended to blindly purchase the big-name brands to show
off wealth without thinking whether they were the best fit for them in terms of style. Gucci, as a
prestigious Italian luxury brand with conspicuous logos, became one of the most sought-after
brands. The sales performance was high even without making any client relationship
43
management efforts.
The situation, however, has changed in the last decade. Chinese consumers have evolved
and no longer see flaunting wealth as respectable. What they want now are more sophisticated
designs and better services. Depending on brand appeal alone is not sufficient enough for Gucci
to attract and retain consumers. However, Gucci is used to the status quo and has not considered
consumer rights as part of its business development strategy. It is in urgent need of an effective
consumer communications strategy.
B. Franchise control problem
Opening stores that are operated directly by the company is the best way through which to
ensure quality control, while franchising is the best channel to leverage local expertise to
establish brand presence in an unfamiliar market. Gucci adopts a distribution strategy that
combines the former and the latter.
Though Gucci requires its franchise operators to guarantee the same in-store appearance,
product presentation, and product mix regardless of where the store is located, it cannot always
control how the franchise stores are managed. They are the weak links in the management
process. The franchisees, in order to pursue good sales performance and a richer share of the
profit, may try to lower operating cost at the expense of employees. Employees working under
overwhelmingly stressful circumstances will eventually affect the overall morale in the
workplace, prompting disputes and complaints. Such discontent once made public will severely
44
hurt Gucci’s image as a reputable and trustworthy company.
C. Staff quality problem
In the Chinese luxury industry, the demand for a skilled workforce is increasing, though the
supply is limited. An insufficient pool of high-caliber sales associates presents a serious problem
for Gucci. Staffs who fail to provide professional service to address customers’ needs and
concerns not only drag Gucci’s sales down, but also negatively impact Gucci’s brand image
since the front-line employees give customers the most authentic impression about the brand.
Gucci should clearly place more importance on the screening and training of its brand
ambassadors.
2. Branding tactics adopted by Gucci
Gucci officials realize that being too aggressive in the constantly evolving Chinese market
is not sustainable. In the past three years, Gucci has been making consistent efforts to regain its
dominant status in this promising market. It carried out a series of measures to cater to the needs
and tastes of local customers, seeking the best solutions to resolve the disconnect between
consumer perception and brand value. Gucci is dedicated to rebranding itself as an iconic,
prestigious fashion leader that represents “confident sensuality”
52
. Meanwhile, the heritage of the
“Made in Italy” craftsmanship remains an essential part of its brand identity.
Listed below are some of Gucci’s recent rebranding tactics. Gucci depends on these efforts
to free itself from undesirable market performance as quickly as possible.
45
A. Store image makeover
In the past two years, Gucci stopped opening new stores, and instead it invested in
refurbishment of stores to recalibrate the image of its retail network.
53
The new store look
follows the concept of pure and implicit luxuriousness to reflect Gucci’s high-end positioning.
Gucci hopes to use these stores as its permanent advertising “billboard” to improve consumers’
perception of the brand.
B. Upgraded product lines
Gucci optimized its in-store product assortment by eliminating lower-priced products and
adding more high-end designs on display, such as leather goods and limited-edition collections.
Another notable change is that logos are less visible in Gucci’s new designs. The Kering Group’s
CEO Francois-Henri Pinault admitted that the sales of the products with the double G logo were
declining because Chinese consumers’ tastes are changing.
54
Instead, they prefer designs that are
more subtle and less extravagant, such as the Lady Lock and the Bamboo Shopper. In the
meantime, Gucci is hoping that these more discrete designs could serve as countermeasures for
the anti-corruption campaign.
46

Image 19

Lady Lock

Image 20 Bamboo Shopper
(The bamboo handle replaced the double G logo to become Gucci’s new signature)
C. Hired local talent to run Chinese operations
Gucci is the first luxury brand to name a Chinese native to run its China operations. In 2012,
Gucci moved its headquarters from Hong Kong to Shanghai, and appointed Carol Shen
(Xiangmei Shen), the former managing director at Estee Lauder, as its new Chinese chief
executive. Gucci’s CEO Patrizio di Marco explained that the company’s intention was to “better
guard the market in continental China” and to focus continuously on “the development and
consolidation of client relations”.
55

Only months after Shen took office, the anti-corruption campaign began and severely struck
all luxury brands including Gucci. Shen was not able to utilize her extensive experience in
cosmetics to help Gucci avert the negative sales trend in the luxury industry. She resigned her
position in January 2014.
But Gucci did not lose its faith in local Chinese talent. In October, in another attempt to
jumpstart China, Gucci named Merinda Yeung, its former Taiwan chief, as president of Gucci
47
Greater China. Yeung assumed a tougher mission of restoring growth in China’s
ultra-competitive luxury market.

D. Signed Chinese movie star Li Bingbing as global spokesperson
In 2012, Gucci signed Chinese actress Li Bingbing as its brand ambassador in the Asian
market. Her face dominated mainstream fashion magazines and billboards outside of Gucci
stores. Gucci headquarters decided to parlay her mainstream appeal and give her a global
contract last year. In addition to her original three fashion lines, watches, and jewelry, she now
represents eyewear and handbags. According to Gucci creative director Frida Giannini, this kind
of collaboration has never before been pursued in the brand’s history.
56

Image 21 Li Bingbing in Gucci handbag ad

48
E. Improve service quality
In response to customers’ complaints, Gucci added its service department’s contact
information on the official website, including a hotline number and an email address. Gucci also
opened an official WeChat account to provide one-on-one customer service to its followers. In
addition to receiving events info, product recommendations and brand stories, WeChat users can
use this account as a mobile locator to find the store that carries the product they want to
purchase.
G. Introduction of personalized made-to-measure service
To meet the needs of sophisticated customers and further elevate its exclusive brand image,
Gucci launched a men’s made-to-measure suit service in selected stores in Beijing, Shanghai and
Hong Kong. Professional tailors are available to provide customers with complete tailoring
service, from fabric selection and clothing design to fittings and the final product delivery. The
customer’s signature will also be sewn into the collar of the suit.

49
CHAPTER FIVE: CASE COMPARISON – BURBERRY VS. GUCCI
The author conducted the following primary research based on the “PESO” model
developed by Gini Dietrich
iv
to better understand what factors in communication have led to
Burberry and Gucci’s different market responses in China.
I. Paid Media – Print Ad Visual Analysis
The author selected two issues of Vogue China to perform a visual comparison of the two
brands’ print ad images. The purpose is to understand how both brands’ positioning messages are
reflected in their print media campaign.
1. Position and format
Figure 7 Print Ad Placement in Vogue China: Burberry vs. Gucci
Brand
Vogue China November Issue Vogue China December Issue
Position & Format Featured Product Position & Format Featured Product
Gucci 1st Spread
2015 Spring
Collection
4th Spread
(3rd Fashion Spread)
2015 Spring
Collection
Burberry
8th Spread
(5th Fashion Spread)
2015 Spring
Collection
8th Spread
(5th Fashion Spread)
Holiday
Collection
The first five spreads in a fashion magazine have the highest visibility. These expensive ad
spaces are reserved for prestigious brands qualified for the position. Apparently, Gucci buys the
premium position to reinforce its positioning as a trend leader in the luxury industry.

iv

Gini Dietrich is the founder and CEO of Arment Dietrich and the author of Spin Sucks. She is one of
the top-rated professionals in integrated marketing communications. Her PESO (paid, earned, shared,
and owned media) model is widely employed in the public relations industry as performance evaluation
metrics.
50

Image 22 Burberry ad in November issue Image 23 Burberry ad in December issue

Image 24 Gucci ad in November issue Image 25 Gucci ad in December issue

2. Models
The Burberry ads feature a group of models in their early 20s, showcasing that the brand is
focused on grabbing younger customers’ attention. Also, Burberry conveys the message that its
designs meet the needs of a more diverse customer group by featuring models of different
genders and races wearing similar outfits.
In contrast, the Gucci ads feature one single model wearing outfits made with the iconic
51
floral fabric. The handbag in the model’s hand completes the overall look. The choice of the
model reflects that Gucci is trying to attract mature female customers in their 30s who are
looking for sophisticated designs. The ads also highlight the versatility of the floral pattern,
which is suitable for both casual looks and professional dress codes. Gucci is intentionally
downplaying the logo in its design. Instead, it uses subtle details to demonstrate its Italian
craftsmanship origin, which could be seen from the softness of the leather handbag and the
bar-and-bit buckle design on the ankle boots.
3. Layout design
Burberry features white as the ad background color so as not to distract viewers’ attention
from the models. The models, who seem to be walking toward the viewers, fill the entire spread.
Such a layout creates a sense of movement and, thus, makes the image more dynamic.
The background color of both Gucci spreads is dark gold, the brand’s signature color that
represents implicit luxuriousness. The color takes the space of almost half a spread to enrich the
visual impact of the overall layout so that viewers can easily associate the brand with upper-scale
tastes.
II. Earned Media – Sentiment Analysis
Luxe.co (华丽志) is an online business media for fashion and lifestyle, with special
attention given to the intersection of fashion, finance and Internet. The website serves as a
comprehensive database for in-depth brand knowledge and market performance reviews.
52
Leveraging the phenomenal growth of online social media (primarily Weibo and WeChat),
Luxe.co has become the most authentic source of information for professionals, entrepreneurs,
investors, opinion leaders and high-end consumers who share a common interest in fashion and
lifestyle. The website now has 144,000 followers on Weibo.
The author conducted a sentiment analysis of Gucci and Burberry’s mentions on Luxe.co to
find out how Gucci is perceived by industry experts.
1. Methodology
The author first conducted an on-site search to collect all the articles that significantly
mentioned
v
Gucci or Burberry, and then filtered the dataset to include only articles published
during 2014.
The articles are categorized based on overall content. Positive articles are those announcing
a sales increase, new deals and positive market feedback; negative articles, including reputational
crisis, sales declines, and criticism from industry experts; neutral articles are the company’s
regular announcements and press releases.

v

The term “significant mention” in this thesis refers to being mentioned in three sentences or more.

53
2. Results
Figure 8 Sentiment Analysis of Burberry and Gucci Mentions on Luxe.co

Sentiment
Total Mentions
Positive Neutral Negative
Gucci 6 6 7 19
Burberry 14 7 1 22

Burberry enjoyed 22 significant mentions in the past year, including nine mentions in the
first half of the year and 13 mentions in the second half. Most of the mentions are positive or
neutral except one. A total of 14 articles prefer Burberry. Its overall brand image is very well
protected. Analysts of Luxe.co were primarily impressed by Burberry’s outstanding creativity in
the field of digital marketing, and expressed optimism about its sales performance in the Greater
China area.
Gucci was significantly mentioned in 19 articles in 2014, slightly fewer than Burberry.
However, Gucci has a total of seven negative mentions due to its unsatisfactory sales
performance. Gucci’s mentions are not as evenly distributed as Burberry’s. It was mentioned 15
times in the second half, but only four times in the first half. After the release of Gucci’s
1

2

1

5

4

6
6

2

1

8

5

0

Positive
Neutral
Negative
Positive
Neutral
Negative

First
Half
Second
Half

Gucci

Burberry

54
half-year earnings report in July, the analysts turned their focus to its struggle with the
unfavorable conditions in the Chinese luxury market, and mentioned “sales decline” and
“negative trend” multiple times in their market reviews. They applauded Gucci for cutting down
its exposure in the mass market, but also pointed out that Gucci may need to be more innovative
in order to achieve its rebranding goal.
III. Shared Media - Social Media Influence Analysis
1. Methodology
The author collected Gucci and Burberry’s Sina Weibo posts published between July 1
st
and
December 31
st
of 2014, and calculated the number of followers and the average number of
“shares”, “comments” and “likes” to compare both accounts’ level of influence and engagement.
2. Results
Figure 9 Number of Weibo Followers and Posts as of January 17, 2015
Brand Number of Followers Number of Posts First Post
Gucci 602180 2307 1/26/11
Burberry 927964 3289 2/1/11
Figure 10 Update Frequency and Audience Reach (7/1/2014-12/31/2014)
Brand
Number
of Posts
Update
Frequency
Average
Shares
Average
Comments
Average
Likes
Total
Shares
Total
Comments
Total
likes
Gucci 188 1.02/day 113.96 42.04 189.12 21310 7862 35366
Burberry 494 2.68/day 64.19 25.11 129.88 31711 12402 64162
Gucci and Burberry opened their official Sina Weibo accounts in early 2011 at
approximately the same time. Burberry has 325,784 more followers than Gucci and published
55
982 more Weibo posts.
The two brands’ accounts primarily serve as product promotional tools; therefore,
understandably the majority of the content consists of new product information. Both brands
attach official website links after each product promotion post. In addition, Burberry provides
Tmall purchasing links when the product is available on its Tmall store.
Posts published by both brands during the timeframe are all original. Based on the author’s
observations, Gucci rarely interacts with its followers in the comment section (but cannot
exclude the possibility that it communicates with followers and brand fans via Weibo private
messages). Burberry responds to product- or service-related inquiries more often. However,
Burberry does not reply directly in the official account’s comments section. Instead, it reposts the
inquiry on its official customer service account, making the answer available to other customers
who might have the same question.
Furthermore, in terms of content, nearly 29% of Gucci’s content is related to celebrity
endorsements, 70% of which are recommendations or demonstrations from Chinese celebrities.
Burberry, on the other hand, is more concentrated on delivering visually appealing multimedia
content, including campaign videos and exclusive behind-the-scene interviews, which accounts
for 25.5% of its total posts.
Gucci is counting on the local stars’ popularity among its Chinese demographic to drive its
brand influence. This tactic is clearly working because the statistics indicate that Gucci’s average
56
numbers of “shares,” “comments” and “likes” are higher than Burberry’s. However, because
Burberry posts two times more frequently than Gucci, it is able to reach more people on a daily
basis.
IV. Owned Media – Official Website Function Analysis
To further compare Gucci and Burberry’s media presence, the author selected both brands’
official websites as subjects of study and conducted an analysis of the functionalities and
services available online.
Figure 11 Functionalities and Services Available on Official Website
Brands
Product
Description
Purchase
Functionality
Customer Service
Store
Locator
Language
Online
Tailoring
Service
Appointment
Gucci Yes No
Phone-limited hours
Yes
Simplified Chinese
No
Email-limited hours English
Burberry Yes Yes
Phone-24/7
Yes
Simplified Chinese
Yes
Email-24/7 Traditional Chinese
Twitter English
Both brands have established official Chinese-language websites to serve the local market.
All content on the Burberry website is either written or translated in Chinese. However, on
Gucci’s website, certain parts of the content remains in English or even Italian (such as “World
of Gucci” and “Gucci Museo” indicated in Image 26 on p.57), which to some extent creates
barriers to effective communication with customers.
57

Image 26 Screenshot of Gucci Official Website
Burberry also provides a traditional Chinese version to accommodate consumers in Taiwan
and the Cantonese-speaking region, namely Hong Kong and Macau. Therefore, it is safe to say
that its official website’s audience reach is relatively broader than that of Gucci.
Image 27 Screenshot of Burberry Official Website
Moreover, in addition to introducing the brand’s different product lines, the Burberry
website serves as an e-commerce platform. Consumers can place orders on the website and have
the items delivered to them free of charge. Another smart and thoughtful detail on the website is
that when consumers are browsing a product, Burberry would recommend other items to match
58
the one on display (as indicated in Image 27 on p. 57). In such a case, not only can Burberry help
undecided customers make better fashion choices, but also drive overall sales.
Burberry’s online customer service is also more convenient than that of Gucci. It provides
24/7 customer service via a toll-free hotline and email, while Gucci only offers service with
limited office hours. The customers can also contact Burberry’s global service account via
Twitter. An online reservation system is also available for customers who require private
tailoring services, saving them a trip to the physical stores.

To summarize, both brands’ print ads reflect their positioning and have facilitated their goal
of delivering key messages to their target audience. Gucci is adept at leveraging local celebrities’
popularity to grow its own brand influence among social media users. But Burberry outpaces
Gucci in other aspects including audience reach, fan engagement level and online customer
service quality, which could shed light on why the industry is more optimistic about Burberry’s
market prospect in China than about Gucci.

59
CHAPTER SIX: SUGGESTIONS FOR LUXURY BRANDS IN CHINA
— FIND A BALANCE BETWEEN GLOBAL AND LOCAL PRIORITIES
Luxury brands in China primarily adopt a globally consistent branding strategy. Dior’s case
has proven that, if carried out properly, the strategy is still viable in the Chinese market and will
facilitate the preservation of a high-end brand image. The key to the strategy lies in exploiting
and elevating the brand’s core value, using the brand’s uniqueness and cultural heritage to attract
luxury consumers.
However, it is an indisputable fact that the external market environment and consumers’
tastes are constantly evolving. Luxury brands are experiencing a tough economic slowdown in
China and facing challenges imposed by the Chinese Government, consumers and competitors.
Many pioneering brands, including Burberry and Gucci, have started to implement various
localized branding efforts to reverse the downward trend in sales. The most noticeable changes
are tailoring product offerings to cater to local consumers’ preferences; building a presence in
youth-centric digital platforms; and creating shareable content with high relevancy to the
Chinese market. The local adaptation strategy is still in its experimental stage, but has already
shown signs of becoming the dominant approach in the near future.
Despite the challenges, the luxury industry’s prospects in China are still very promising.
Based on research findings by the Fortune Character Institute, China is forecast to become the
world’s largest luxury market by 2020.
57
To further optimize their branding strategy, the author
60
suggests that luxury brands in China implement a balanced strategy that draws on both
aforementioned strategies in order to ensure meeting both global and local business development
priorities.
I. Stay True to the Core Brand Value and Tap into Cultural Heritage
Luxury brands were built with a compelling story that cannot be reproduced or replicated.
This story is the brand’s competitive differentiator and the most powerful branding weapon.
According to a report released by the World Luxury Association, raw materials and
processing costs only account for 11% of a luxury product’s price, but the added brand value
alone accounts for 55%.
58
Tapping into this segment and marketing luxury product uniqueness to
consumers is critical to winning their patronage.
Luxury brands represent a privileged lifestyle that the middle and upper classes desire and
continuously pursue. But usually the consumers are also afraid that purchasing and flaunting
luxury goods are seen as superficial. Cultural events related to the theme of brand heritage, such
as exhibitions, are more historical and artistic than commercial. Visiting such events could
improve the brand’s status in the minds of consumers because they have the chance to see the
exquisiteness behind the brand and every available product. The reason that Dior manages to
cultivate a leading position in the industry no matter how the external environment changes is
that it has successfully marketed itself as a cultural symbol. Naturally, in consumers’ eyes,
possessing an item from Dior is a reflection of their taste and style.
61
Staying true to the brand’s core value and tapping into its unique cultural heritage are the
most sustainable ways for a luxury brand to maintain its appeal.
II. Switch Focus to Females and Younger Generations
The Chinese luxury market used to be male-dominated. As explained in Chapter Three,
Chinese businessmen routinely buy each other high-priced gifts to secure deals or gain favor
with government officials. However, significant changes have taken place since the
implementation of sweeping anti-corruption campaigns. Men are no longer China’s main
customers of luxury goods.
Over the past two decades, the females in China have become increasingly independent
financially and have contributed significantly to the consumption of luxury goods. In 1995,
female consumers’ luxury spending only accounted for 10% of the total sales of luxury goods. In
2013, this increased to more than 50%.
59
In addition, China has the youngest affluent population compared to anywhere else in the
world. These young consumers have a growing appetite for luxury, but their tastes are different
than the stereotypical middle-aged demographic historically associated with the purchase of
luxury goods.
To fully explore Chinese market potential, luxury brands should switch focus from males to
females and youths, and adjust their branding plans according to each group’s preferences.

62
1. Target female consumers
A. Product assortment
Different than male consumers who value functionality, female consumers are looking for
products that are exquisitely designed. Luxury brands should add more designer pieces to attract
their attention. Furthermore, creating eye-catching and prominent in-store displays, such as
color-coordinated product arrangements, could encourage female consumers to make impulsive
purchase decisions.
B. Content
Females are more responsive to content that is visually or emotionally appealing, for
instance, short films and thought-provoking stories. The brands could take advantage of the
insight and find a subtle way to place their products into storylines, creating shareable content to
increase its influence among prospective female consumers.
C. Communication channel
According to an Economist Intelligence Unit report, 69% of the female consumers in
Mainland China prefer shopping online.60 Besides making online purchase available on a
brand’s official website, luxury brands should step up efforts to communicate with female
consumers on other online and mobile channels, especially the emerging social shopping sites
including Nice and Meilishuo. Women like to share shopping experiences and fashion tips with
each other and do price comparisons before making purchase decisions. These websites perfectly
63
cater to female consumers’ needs and could be an effective platform on which to implant
soft-sell advertising and generate word-of-mouth patronage.
2. Target young consumers under the age of 40
A. Product assortment
Young Chinese consumers purchase luxury items to make a style statement and to showcase
who they really are as individuals. Other than adding trendier items, luxury brands should
provide diversified patterns and color combinations in their product offerings to increase the
choices for young consumers. Launching limited-edition collections is another way to attract
young consumers’ attention.
B. Content
To effectively engage with the younger generation, luxury brands must create authentic
content with high “shareability.” It could be reactive content that elicits high-arousal emotions,
because most people would like to be the bearers of good news rather than someone who creates
a negative atmosphere. In addition, it could be interactive content that enables people to create
something, or entertain themselves or be a part of a certain process; or it could be content that is
related to trendy topics and pop culture. The more creative and eye-catching, the more attention
it will get from young customers.

64
C. Communication channel
The younger generation is actively engaged in social media. According to statistics released
by the China Internet Network Information Center (CNNIC), 89.8% of Weibo users are under
the age of 40.61 More than half of them follow brands on social media while the global average
is approximately 38%.62 In addition to simply using Weibo as a product promotional tool,
luxury brands should use it to engage young consumers in a two-way conversation. The young
people are also highly engage with digital and mobile platforms. WeChat is the channel of
greatest potential, not only because 84.9% of overall WeChat users are under 40, but also as the
service that WeChat users receive is more direct, exclusive and private. These attributes align
with consumers’ preference for discretion and luxury brands’ intention to maintain a prestigious
brand image. Luxury brands should definitely put more efforts into building a strong presence on
WeChat.
III. Integrate Chinese Elements into Communications
The previous market response demonstrated in the Burberry case has proven that Western
luxury brands can stimulate Chinese customers’ patronage by incorporating Chinese cultural
elements in product designs. However, since an increasing number of brands are trying to exploit
this marketing ploy, the author thinks that sooner or later it will lose its appeal among Chinese
consumers. There are other ways to sustain brand relevance in the long run. The key is to find
local interest and integrate it into brand communication efforts. The following lists two
65
examples.
1. Give the iconic product a Chinese name to make it memorable
The Digital Luxury Group report mentioned in Chapter One that the language differences
are the most notable barrier between Chinese consumers and Western luxury brands. For
example, a brand is being searched in various ways such as by (1) its official Chinese name, (2)
its official name in its original language, (3) its non-official Chinese name and (4) other
nicknames. When developing communication strategies for the Chinese market, fashion brands
should figure out how they want to be remembered by consumers and develop from there. A
memorable and easy-to-understand Chinese name can help a brand or a product stand out from
intense competition.
The Celine “Luggage” tote could serve as a perfect example. The Chinese nickname “笑脸
包” (Smiley Face Bag) has made it easier for consumers to remember the product because the
name vividly describes the unique design of the bag. Besides the official nickname, the handbag
is also known by fashion editors and celebrities as “囧包”. The Chinese character 囧 is a widely
used internet meme that refers to an awkward facial expression. Its structure is also thought to
resemble the design (see Image 28 and Image 29 on p.66). The localized nicknames have played
a key role in the handbag’s overwhelming popularity (ranked #1 in the handbag category).
63

66

Image 28 The Chinese character “囧” Image 29 The Celine “Luggage” handbag

2. Engage Chinese celebrities and opinion leaders in online conversations
Luxury brands should pay considerable attention to fostering a stable relationship with
Chinese stars. By leveraging these celebrities’ high popularity, brands can reach a much wider
audience and engage more potential customers in the conversation. Statistics in the primary
research indicate that celebrity-related posts on Weibo could bring a sharp increase in “shares”,
“comments” and “likes”, approximately three times more than the average (as highlighted in
Figure 12 and Figure 13 on p.67).
A good brand endorser must have a positive public image, and his or her personality should
be in line with the brand’s identity. Brands should avoid using controversial figures whose image
could potentially damage the brand’s premium status.

67
Figure 12 Average Weibo “Shares”, “Comments” and “Likes” by Category – Burberry
Category Code Shares Comments Likes
Products
Fashion A1 46.34 18.84 104.48
Jewelry/Watch A2 22.9 12.9 66.1
Cosmetics A3 24.32 9.41 59.64
Promotional Events (runway shows, etc.)
B 57.72 14.38 92.29
Endorsement
Chinese celebrities C1 231.1 139.13 517.63
Foreign celebrities C2 37.74 17.7 99.96
Ad Campaign (commercials, videos, etc.) D 50.23 14.79 100.01
Brand Heritage
Brand story E1 78.94 16.61 124.89
Brand exhibitions E2 115.02 42.98 195.15
Culture & Arts F 15.26 3.06 41.51
Others 0 / / /
Average 64.19 25.11 129.88
Figure 13 Average Weibo “Shares”, “Comments” and “Likes” by Category – Gucci
Category Code Shares Comments Likes
Products
Fashion A1 41.94 13.49 85.16
Jewelry/Watch A2 43.15 14.92 99
Cosmetics A3 39 18 93
Promotional Events (runway shows, etc.)
B 48.56 22.56 112.56
Endorsement
Chinese celebrities C1 371.18 141.97 546.16
Foreign celebrities C2 81.75 29 186
Ad Campaign (commercials, videos, etc.) D 68.08 22.25 92.42
Brand Heritage
Brand story E1 37.3 13.7 68.1
Brand exhibitions E2 25 12 76
Culture & Arts F 38 12 53
Others 0 / / /
Average 113.96 42.04 189.12

68
Since the majority of social media users are people under 40, a good endorser should have a
solid fan base among consumers of this age group. Suitable candidates could be established
celebrities, namely Li Yuchun, Chen Kun and Liu Yifei; up-and-coming headline-grabbing stars
such as Li Yifeng; or well-known fashion icons and trendsetters including Liu Wen and other
high-fashion Chinese supermodels.
Figure 14 Most Popular Posts on Burberry Weibo Page (7/1/2014-12/31/2014)
Name Shares Comments Likes
Li Yuchun 1481 599 1809
Chen Kun 279 91 2166
Liu Yifei 899 709 1308
Figure 15 Most Popular Posts on Gucci Weibo Page (7/1/2014-12/31/2014)
Name Shares Comments Likes
Li Yuchun 3065 1153 2868
Li Yifeng 2034 688 2159
Li Yifeng 1881 678 1683
IV. Seize the Opportunity on e-Luxury Market and
Use It as a Weapon against Counterfeiting
Counterfeiting in China has long been a serious problem on e-commerce channels. Many
online sellers offer knockoffs under the disguise of “Daigou” and have largely diluted the market
share and brand value of luxury brands. Major luxury brands naturally despise counterfeiting, but
they have not yet come up with an effective measure to eradicate the practice. Louis Vuitton has
69
made several attempts to sue individual counterfeiters in court, but penalties for violations of
intellectual property laws in China are often too mild to carry any deterrent power.
The author thinks that luxury brands in China should establish their own e-commerce
presence to control the damage derived from counterfeiting. Many brands have expressed
concerns about online expansion at the expense of brick-and-mortar business development, as it
could compromise the high-quality shopping experience that luxury stores are known for,
therefore undermining brands’ premium image. But in the digital age, online marketing has
become a trend that can no longer be ignored. With new technologies emerging, now virtual
apparel fitting and real-time video-cam consulting could be easily implemented via online stores,
providing services of the same quality as in physical stores. In addition, the experience would be
more exclusive and relaxing for consumers.
Burberry’s experimental partnership with Tmall has proven that building an e-commerce
presence is an effective channel against counterfeiting. Burberry used to be one of the most
commonly faked brands on Taobao.com. Now, as indicated in Figure 12 (see p. 70), the number
of fake Burberry products on Tmall has been significantly reduced, far less than its competitors.
Digitalization is a process that all luxury brands need to undergo. They should stop being
too conservative and start exploring new ways to protect and maximize their brand value.

70
Figure 16 The Number of Products on Tmall that might be Counterfeits

Source: Exane BNP Paribas Analysis
64

In conclusion, both branding strategies, whether maintaining global consistency or
localization, are viable and have their own merits under current economic and cultural
circumstances. However, as an emerging luxury market, China is constantly evolving and still
has a long way to go before it becomes as mature and stable as the Western market. The smart
players in the luxury industry are those who stay sensitive to the market trends and optimize their
71
branding strategy accordingly to balance global and local priorities. All communication efforts
must be made in accordance with Chinese customers’ behaviors and their unique psychology of
consumption in order for Western companies to be more effective in their marketing and sales.

72
Notes

1. Paurav Shukla, “What is Luxury?” Paurav Shukla personal blog, accessed October 12,
2014, http://www.pauravshukla.com/what-is-luxury.

2. Wolfgang Reitzel, Shechi dailai fuzu [Luxus Schafft Wohlstand] (Beijing: Citic Press
2003), 9.

3. Michel Chevalier, Gerald Mazzalovo and Xiao Lu, Shechi pinpai guanli [Luxury Brand
Management] (Shanghai: Truth and Wisdom Press, 2008), 5-19.

4. National Bureau of Statistics of China, Urban Residents Disposable Income Per Capita,
accessed March 5, 2015. http://data.stats.gov.cn/workspace/index?m=hgnd.

5. “Bain & Company Finds That Chinese Shoppers Surpass United States As World’s Top
Luxury Goods Spender,” Bain & Company, Inc. press release, December 12, 2012,
http://www.bain.com/about/press/press-releases/bains-china-luxury-market-study-2012.aspx.

6. Chang Lyu, "China World's Biggest Luxury Consumer," China Daily, February 21,
2014, http://www.chinadaily.com.cn/business/2014-02/21/content_17298225.htm.

7. Bain & Company, Inc. “2013 China Luxury Market Study: Beginning of A New Era?”
December 17, 2013, 8.

8. Digital Luxury Group, SA, “The World Luxury Index
TM
China 2013: The Most Sought
After Luxury Brands,” June 2013, 28-30.

9. Bomoda Group, “Into China: 2014 Bomoda Brand Index,” September 2014, 13.

10. Ibid., 15-20

11. Rachel Catanach, interview by Yumeng Wei, FleishmanHillard Hong Kong office,
Hong Kong, July 22, 2014.

12. Lisa Li, text messages to author, March 10, 2015.

73
13. Astrid Wendlandt and Mathilde Gardin, "China Dior CEO Says No Sign of China
Slowdown," Reuters, September 28, 2012,
http://www.reuters.com/article/2012/09/28/us-dior-china-idUSBRE88R17X20120928.

14. Christian Dior Couture, Interim Financial Report, February 13, 2014, 4,
http://www.dior-finance.com/ManagedDocument/en-US/Dior-Interim-Financial-Report.pdf.

15. Richard Cadan, photograph of Dior Homme’s Flagship Store in New York, 2012,
http://www.thefashionisto.com/dior-homme-reopens-their-newly-renovated-flagship-store-in-ne
w-york-city/.

16. Photograph of Dior’s Falgship Store in Tsim Sha Tsui, Hong Kong,
http://butterboom.com/new-stores/dior-reopens-peking-road/.

17. Photograph of Dior’s Falgship Store in Dubai,
http://www.thedubaimall.com/en/shop/FashionGeneral/dior.aspx.

18. Dior official website, http://www.dior.com.

19. Ibid.

20. Ibid.

21. Nathalie Remy and Aimee Kim, “Winning Today’s Globe Hopping and Shopping
Chinese Luxury Consumers,” McKinsey & Company, June 2014, 1.

22. Lara Farrar, "China Crackdown could Hit Luxury," WWD 206, no. 114 (Dec 04, 2013):
1, http://search.proquest.com/docview/1465056866?accountid=14749.

23. Fung Business Intelligence Center, “Luxury Market in China: Huge Growth Potential
Ahead,” April 2013, 8.

24. Bain & Company, Inc. “2013 China Luxury Market Study: Beginning of A New Era?”
December 17, 2013, 2.

25. "China's Luxury Market Cools," China Today, April 5, 2014,
http://search.proquest.com/docview/1519576756?accountid=14749.

74
26. Nathalie Remy and Aimee Kim, “Winning Today’s Globe Hopping and Shopping
Chinese Luxury Consumers,” McKinsey & Company, June 2014, 1.

27. Bain & Company, Inc. “2013 China Luxury Market Study: Beginning of A New Era?”
December 17, 2013, 20.

28. Bomoda Group, “Into China: 2014 Bomoda Brand Index,” September 2014, 10.

29. Yuval Atsmon et al., “Understanding China’s Growing Love for Luxury,” McKinsey &
Company, March 2011, 20.

30. Ibid., 12

31. Digital Luxury Group, SA, “The World Luxury Index
TM
China 2013: The Most Sought
After Luxury Brands,” June 2013, 6.

32. Xinhua News Agency, photograph of Chow Tai Fook “K-gold National Essence Series”,
Jing Daily, September 2010,
http://jingdaily.com/hk-jeweler-chow-tai-fook-releases-new-national-essence-series/.

33. Shanghai Tang official website, http://www.shanghaitang.com.

34. Chen Man, photograph of NE Tiger Huafu Collection, February 2014,
http://news.xinhuanet.com/fashion/2014-02/13/c_126129176.htm.

35. Burberry Group Plc, Annual Report 2013/2014, accessed November 15, 2014, 55,
http://www.burberryplc.com/documents/ar-13-14/burberry-annual-report-2013-14.pdf.

36. "Burberry nianshouru 30% laiziyu zhongguo xiaofeizhe” [30% of Burberry Annual
Revenue Comes from Chinese Consumers], Yoka, April 30, 2014,
http://www.yoka.com/dna/d/266/162.html.

37. Fallon O’Connor, "China Bans Luxury Advertising," Edelman, May 30, 2013,
http://www.edelman.com/post/china-bans-luxury-advertising/.

38. L2 Inc., “L2 Digital IQ Index: China Luxury 2014 (Excerpt),” May 22, 2014, 5.
http://www.l2inc.com/research/luxury-china-2014.

75
39. “Inspired by London, Burberry Flagship Opens in Shanghai,” Burberry Group Plc.,
press release, April 4, 2014,
http://www.burberryplc.com/media_centre/press_releases/2014/burberry-flagship-opens-in-shan
ghai.

40. Jess Cartner-Morley, "Burberry Brings a Touch of London to Shanghai with Bailey
Catwalk Show," The Guardian, May 2, 2014,
http://www.theguardian.com/fashion/2014/may/02/burberry-shanghai-bailey-london-show-flagsh
ip.

41. “Fashion Influencers Rank – Brands,” Sina Fashion, accessed November 21, 2014,
http://fashion.eladies.sina.com.cn/fashionpowerfw/brands/index.shtml

42. "Tencent: 438M Wechat Users and 645M QZone Users by Q2 2014," China Internet
Watch, August 14, 2014,
http://www.chinainternetwatch.com/8229/tencent-q2-2014/#ixzz3JdZ314gs.

43. China Internet Network Information Center, “2014 nian zhongguo shejiaolei yingyong
yonghu xingwei yanjiu baogao,” [2014 China Social Media Users Behavioral Study], July 2014,
18, http://www.cnnic.cn/hlwfzyj/hlwxzbg/sqbg/201408/P020140822378154144978.pdf.

44. Gordon Chang, "Alibaba Rescues Slumping Luxury Brands In China," Forbes,
December 28, 2014,
http://www.forbes.com/sites/gordonchang/2014/12/28/alibaba-rescues-slumping-luxury-brands-i
n-china/.

45. Rachel Catanach, interview by Yumeng Wei, FleishmanHillard Hong Kong office,
Hong Kong, July 22, 2014.

46. Burberry Group Plc, Annual Report 2013/2014, accessed November 15, 2014, 55,
http://www.burberryplc.com/documents/ar-13-14/burberry-annual-report-2013-14.pdf.

47. “Live Reporting of the 11.11.Shopping Carnival,” Sina Technology, November 11,
2014, http://live.sina.com.cn/zt/l/v/tech/1111/.

48. Kering Group, Third Quarter Revenue Report, October 23, 2014, 6,
http://www.kering.com/sites/default/files/document/141023_final_q3_14_revenue_presentation.
pdf.

76
49. “Gucci shou chouwen yingxiang yeji dajiang” [Gucci Sales Drop Because of Scandal],
Sina Style, February 17, 2012, http://style.sina.com.cn/industry/2012-02-17/102291694.shtml.

50. Luca Solca, Paola Bertini and Hui Fan, “China Reality Check: Luxury and the Online
Boom,” Exane BNP Paribas Analysis, July 7, 2014, 23.
an
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Asset Metadata

Creator Wei, Yumeng (author)

Core Title Luxury branding in today’s China: case studies of global consistency and local adaptation strategies of luxury fashion brands

School Annenberg School for Communication

Degree Master of Arts

Degree Program Strategic Public Relations

Publication Date 04/22/2015

Defense Date 04/16/2015

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag China,Fashion,global consistency,local adaptation strategies,luxury branding,OAI-PMH Harvest

Format application/pdf (imt)

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Floto, Jennifer D. (committee chair), Lynch, Brenda (committee member), Yang, Aimei (committee member)

Creator Email vale.yumeng.wei@gmail.com,yumengw@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c3-556738

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