How Retailers Succeed in Shanghai

I’ve been dark for about a week now and the reason is my recent trip to Shanghai, China. Forget The Forum Shops at Ceasars for high end luxury retail.  Forget New York (old, tired) Toronto or London (ditto.)  If you want to see what is current in luxury retail right now you have to see the shopping in Shanghai.

I was there during the Hong Kong Plaza grand opening which included a two-day celebration with a live music concert, private parties for Chinese movie stars and celebrities, speeches, dance parties and, of course, a fashion show.  All this for a mall that is not tremendously different than the IFC mall or the Super Brands Mall in Pudong – just a few miles away.  Hong Kong Plaza includes Cartier, Coach, Apple, Tiffany, Louis Vitton and other high end luxury goods retailers.  IFC includes all those plus Chanel, Hermes, Gucci, Prada, Cartier, Ermenegildo Zegna, Salvatore Ferragamo, Giorgio Armani, Dunhill, Burberry and Dolce & Gabbana.

Shanghai attracts wealthy shoppers from Asia and around the world.  Retailers across the globe are scooping up real estate – but not everyone is succeeding.  How to tell when they are going to succeed?

  1. The retailer is an international brand.  International brands like Apple, Tiffany and Victorinox who have worked to get placement in targeted European and International magazines and have a legacy of status are landing in Shanghai with a pre-built awareness and desire for their products.  Brands that are limited to just a domestic U.S. presence (no matter their desirability in the U.S) are having a tough time building credibility with the Asian market.
  2. The retailer either brings its own culture or adopts the Shanghai culture.  Stores with true international culture that transcend country boundaries (think Apple or Nike) are finding associates in the Shanghai market who already “get it” and are hiring folks who simply take the company culture and give it a Shanghai accent.  Other retailers who do not have a strong culture are getting confused once they open in Shanghai and their stores reflect that confusion.  Should the prices be EDLP or be the starting point in a bargaining negotiation?  Should customers be assertively greeted and engaged or given the freedom to look without interference from an employee?  Should advertising focus on Products? Retail Branding? Are in-store materials created in Mandarin or translated from English?
  3. The retailer learns quickly.  China will be an opportunity from now until my grandkids run stores.  But Shanghai is the first impression many retailers will make on the Asian market.  Opening a half dozen stores and then quickly making peace with China’s demands – both politically and commercially – to thrive will be important.  Retailers who accept that the Chinese market is like no other and learns how to adopt will succeed more quickly than the retailers who “are waiting for China to catch up” and behave like the western markets.  I truly heard a retailer tell me the reason they were not succeeding is that China needs 5-6 more years to mature into the kind of consumer that understands their value proposition.  REALLY?  THis is the kind of slow learning organization that will not succeed in Shanghai.

Shanghai has an energy that feels on the cusp.  That energy, demand and market can mean unprecedented retail success for strong international brands that learn to adapt.

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