“All war is based on deception.”
— Sun Tzu
After spending several days in the small towns of Liaoning, a province in China’s northeast, I was looking forward to my night at the Shenyang Marriott. The wide main street that snaked through the city was lined with Chanel, Versace, Gucci and Louis Vuitton boutiques. Our taxi drove past the Kempinski, the Sheraton and pulled into a glittering, golden atrium. My eyes fell upon a brass plaque: It said ‘Welcome to The Marvelot.’
It was nearly 10 p.m. and I was hungry. I dialed room service. Practically nothing on the menu was available at that hour. I went down to find the waiters at the Chinese restaurant cleaning up after what appeared to be a lavish banquet. It took them nearly 90 minutes to present a simple pasta meal; the room service boy was trailed by a sheepish manager with a basket of fruit. I was left marveling at a lot of deceit.
As the number of millionaires in China’s second and third tier cities grows faster than in the top tier cities, they are demanding expensive-looking brands and services, authentic or not. No wonder local automakers such as Geely are designing cars that make no apologies to resembling the Mercedes-Benz Gullwing. A concierge in a big city hotel would sneer if you drew up in a Geely Gullwing, but not at the Marvelot!
Over the last few years, several commentators have written about the Shanzhai (copycat) phenomenon. Shanzhai companies were known to target less developed areas and tier three and tier four cities with mobile phones called Nokir, Samsing and Anycat, and food brands like Haagon-Buzs, Pizza Huh and Buckstar Coffee.
Since major companies ignored these less developed regions, the Shanzhai companies faced a strong demand for their products. Lower price levels, regionalized features, an in-depth understanding of local markets and a higher responsiveness to evolving markets helped the Shanzhai companies gain market share and exploit growth potential.
The result: a market shakeout. In the initial stages, Shanzhai operators attempted to take their products online, hoping that consumers, especially those living in smaller cities, would be gullible in the new shopping environment. They were disappointed. Eagle-eyed buyers complained, compelling Taobao, China’s largest online retail platform, to find ways of cracking down on vendors selling fakes.
Now, there are far fewer fly-by-night operators than before. But those who dreamed and planned big have survived. It’s a policy that seems to work for all businesses in China, and the deceivers are no different.
The Marvelot Hotel is a great example of reaching high. The National Games, to be held in Shenyang in 2012, has chosen the Marvelot as its official hotel, serving as a badge of honour assurance for most guests (barring me, of course). Any slip-ups in service could be excused, blamed on a stray staff member. This hotel had the government’s support, after all.
A visit to Fashion Town
Through the following days of my stay in Shenyang, I realized that the brand imitators in second-tier Chinese cities had taken their game to a whole new level. Three years ago, they were fly-by-night operators happy making copies of Olay cream and calling it Oily, imitating Avon and calling it Avoid. But now, there was a “Hiyatt Boutique Hotel” rising 20 floors high.
The next day, I visited 0101 Fashion Town in the heart of the city. Shop owners and salespeople asked us not to take pictures (but I surreptitiously did). It was easy to understand why. I could see brands like S-Squared (a knock-off of D-Squared). The audacity of “Jack Walk” was stunning – they had a store right next to Jack Jones.
There were Rabex watches, and they weren’t cheap. Rosht and Manjaz chronographs proclaimed their Swiss origins, while Ederbo, an apparel brand, was all about ‘England Style’ since 1901. I’ve known Horacio Pagani as a specialty Italian automaker, but it was news to me (as I’m sure it would be to him) that he had diversified into menswear in China.
In the central square a vendor sold knock-off iPod shuffles for 30 kuai (less than $5). I kept my eyes peeled for a Dolce & Banana store – I had seen a picture, but couldn’t find it.
Brand authenticity and consumer education
In the end, the Chinese brand copycat phenomenon is a lesson in brand authenticity. In emerging markets like China, consumers are looking for greater meaning and sincerity from the brands they choose.
This search is fuelled by a desire to connect with things that feel safe, certain and unambiguous. At its heart, authenticity is about practicing what you preach; being totally clear about who you are and what you do best.
Established brands must make the effort of educating lower tier Chinese consumers about the true meaning of brand authenticiy. For a brand like Hermes, that would mean thinking about creating experience zones; showing consumers the craftsmanship of a bag, not just on Shanghai’s glitzy Huaihai Road, but also in a humble Shaoxing or Shenyang shopping mall.
Editor’s Note: Yes, we know the “beckoning cat” in the image up top is actually Japanese in origin. Get the back story on The Sparkbeat.