Networking there is so intense that I was often led to do business, even against my will, and in any case got to meet all the people who matter in luxury, whether clients or brands : all were present. Exhibitors that I had invited found what they were looking for, and much much more. A luxury metalworker  sold miles of hand-made, wrought iron gates to real estate developers, a leather goods company met with a crowd of interior designers and architects. An upscale travel agent made over 500 contacts … These were four days of intensely mixing business, sunshine, conferences and new relationships.

The clients are just as well B-to-C for jets, yachts, and luxury cars, as B-to-B , since the Chinese never forget to do business if the opportunity arises, be they shopping, visiting a yacht or enjoying a meal. And Hainan also provides them with a formidable platform to meet the brands face-to-face and to accelerate discussions.

Hainan is also an avenue of flashy pink felt, on the seacoast, lined on one side with the largest and the most beautiful yachts to visit from Azimut, Beneteau, and on the other side with the Royal Visun Marina complexe, where the conferences take place and which is packed with luxury boutiques. Finally, small houses with smaller booths for smaller luxury players, either B-to-C such as wines and wineries, or B-to-B  very focused on interior design and decoration.
Sanya airport, just a few miles away, handles the private jets.

The Hainan RV HNWI is dressed in Dunhill style sportswear with striped polo shirts in discrete/natural colors. Meanwhile, the women shine like jewels, carrying umbrellas and panama hats to protect themselves from the sun, along with black sunglasses and sunblock. They often wear long dresses with equally long sleeves to protect their milky skin color, or wear shorts underneath light clothing and lace veil which block sunrays. Hainan is a tropical island and the avenue is pink in the sunlight. One should protect oneself and avoid tanning. The women all display completely natural style make-up – which is actually very sophisticated. Everyone is very very very much in a hurry, not only to buy, but also to grow their business relationships with the French or European Art industries, not to mention attending as many exhibitor cocktail parties as possible… a heavy schedule …

This year’s Millionaire’s Fair shows a major trend that did not exist last year: There is now a clear opposition between the Riviera clients, which are « show off », industrious, statutory and the clients from the North, who seek culture and quality in the luxury goods. As a result, Hainan will organise two separate Rendez Vous in 2013 to treat differently those two types of clients, both in terms of brands present and in terms of services offered. This dichotomy is also at the heart of two new journals  from Excom, a publishing group specializing in the HNWI client and provider on both 2013 events, and which is led by two Golden Boys in Chinese luxury media : Olivier Burlot and François Amman. They will be launching Riviera magazine for the South, the sun, yachting, spas and sunglasses ; and in parrallel, Legacy magazine for the North, focused on the major new trend in Beijing, classic and collectors automobiles.

There are now over 2,700,000 holders of one million U.S. dollars in fairly liquid assets in China. It is no longer a niche but a market in its own right, which must be segmented to reflect the diversity in sources of wealth and in the behavior of this mass of millionnaires. The Chinese millionnaires no longer constitute one big market, but several well defined market segments.

Take Panda cigarettes. Today, they are the most expensive cigarettes on the market, at 13 euro a pack, in a country where you can buy cigarettes for 40 cents a pack. A huge price difference which cannot be justified by superior tobacco quality – as would be Cuban cigars compared to cigarettes. No such attributes, no special premium packaging. In fact, they are just the cigarettes that Chairman Mao smoked – along with the whole of the Party, government and still today the officials. They are a luxury product born from adoption by the political system, and whose price is only reflective of its power as a status symbol. But not just any status – the status linked to the members of the Founding Party, who are at the helm of the country, a “super elite” or better yet, the new Chinese aristocracy.

Now, let’s take a closer look at Moutai. Kwechow Moutai is a brand which was created at the turn of last century by Chinese entrepreneurs, who unified the various breweries of a single Moutai village, irrigated by a river whose water and mud constituted a perfect breeding groung for Sorgho alcohol. As early as 1949, Moutai understood the stakes and lobbied to be the alcohol of choice for the festivities at the creation of the People’s Republic of China. From then on, not only was Moutai consumed by the politicians, but it also became the gift of choice at official gatherings. It reached the pinnacle of glory in 1974 when Richard Nixon came to China, tasted Moutai and received a superb cristal bottle from the hands of Chairman Mao. A photo was taken which was seen around China and around the world. Moutai became the symbol of the people’s nation of China, and its visibility continues to grow on a domestic level. In a recent auction, a 60 year old bottle of Moutai was sold for a record 180,000 euro, demonstrating that Moutai is not only one of the most popular alcohols in the world, but also, now, one of the most expensive.

When it comes to Louis XIII and Chateau Lafitte, they maintained their distribution in China after the Revolution – through the “foreign currency – only” stores, and were consumed by the elite of the times, meaning the better tables of government and the senior members of the Party. The Chinese have always been aware of the quality of these two brands and despite occasional mixing with green tea, ginger or other ingredients, there is no need to reinforce the symbolic value of these two names. What supports the success of a Louis XIII or a Chateau Lafitte is quite simply 100 years of uninterrupted drinking by Chinese officials.

It would be interesting for other brands, particularly Chinese, to benefit from the same type of backing. This could provide a significant boost. After all, we’ve heard of Michelle Obama’s tailor, why shouldn’t there be recognised designers for the wives of Chinese officials ? This would promote both the  specific brand and the perception of China, more particularly of “made in China”. These days, every month sees the emergence of new fashion designers. As with alcohol, there could be a “politically correct” way to dress, which would put the spotlight on the majors designers in Chinese fashion.

Needless to say, a Chinese intern is not necessarily the best solution to do this job – but it still a good start for smaller companies. Indeed, for many small players, most of the effort goes into production and inventory of luxury products rather than in communication and advertising. Not everyone can be Louis Vuitton, and luxury often starts as local craftsmanship, as can be seen in the French wine industry, in the Swiss watch-making (outside of the major brands), in small jewelry…

Alas, they realize quickly that a Chinese version of their site will only be referenced in Google, which covers just 15% of the trafic. That if they want to be found on Baidu, the huge, leading Chinese search engine, they will preferably need the help of a Chinese communications agency ; worse, that they cannot buy their brand’s adwords from Baidu without demonstrating their legal, Chinese ownership of the website – which means that they must have at least some representation in China. Ditto for weibos – in order to be certified as true information in the Sina Weibo, they must show their Chinese business license. Sohu request their business license upon registratiion, while Tencent, which is more open, is only really effective in rural areas where their luxury products are not distributed. To make a long story short, a presence on the Chinese internet requires a good communication agency in China and either blind faith in the distributor who will become the legal owner of their sites in the eyes of Chinese law, or the costly establishment of a representative office. This results in significant costs and complexity, all for a weibo…

Some would argue that the Chinese web is a web for the Chinese and that any foreign presence is censored, controlled, and that human rights are lacking and that is why the web is so closed. Personally, I have heard these arguments before, but I think the Chinese State is mostly concerned about protecting itself against the dissent of its own citizens, expressed through local blogs and weibos. I am moreover convinced that the Chinese web is what one might call a closed loop, a market that is closed for the non-Chinese. In short, this is exactly what is known in legal language as a “non-tariff barrier to trade”, an important impediment to the free trade promoted by the World Trade Organization. Indeed, for non Chinese to be present on the Chinese web, they must pay a significant entry fee (which everyone cannot afford) and work with Chinese intermediaries such as agencies that have strong positions in China.

In many ways, including through the Internet, access to luxury clients in China requires the payment of an significant entry fee, and a cost which is comparable to what exists in the western economies. And while China may still be an eldorado, and the yuan may still be a »weak » currency, it remains an expensive market to do business in, and does not suffer an amateurish or lighthearted approach.

Weibo means microblog, and permits the sending of 140 chinese characters, (i.e. 140 words rather than 140 letters), text and photos which appear on a page resembling a Facebook “wall”. Weibos have “followers” depending on each person’s popularity; this is, to make a long story short, a weibo.

In reality, there is not one Weibo like there is one Twitter, but rather three Weibo systems, built initially on three different networks, and offering slightly different functionalities. As a result, each system appeals to a different part of the population. The three systems are (1) Sina Weibo, inventor of the concept in 2009 and most well known in the West,, built upon a popular chinese generalist portal sina.com, (2) Tencent Weibo, which is built upon the instant messaging system QQ belonging to Tencent, and (3) Sohu Weibo, the least developed, based on the generalist network of Sohu.com.

The Sina Weibo is the most influential and is full of people from the large cities of the eastern coastal regions. It is destined for people seeking fame or visibility.
Tencent Weibo originates from a rural nework, in the center of China, and includes an instant messaging system which reproduces the main function of the Tencent network, that is the QQ. Users of Tencent weibo are younger – teen-agers, students – not yet fully active in the workplace.
Finally, Sohu has not yet reached critical mass, and tends to be more focused on business information coming from the Sohu platform. This is a serious weibo contender, but which is not yet at maturity.

Sina weibo could be seen as ideal for luxury products but mostly on the East Coast, which is not necessarily where the active luxury buyers of tomorrow will be. Tencent on the other hand is perfect for commodity products, to educate teenagers for tomorrow’s mass consumption, and to access 3rd, 4th and 5th tier cities – those people which today are difficult to reach.
One clarification however – it is not because a person becomes wealthier that he/she will “change/upgrade”  weibo platforms. The main reason to chose a specific weibo is to go where a majority of one’s friends are. Therefore what is at stake is community marketing and groups of friends. In this environment, your “tweets” as a brand will only have a business impact if they are shared from microblogger to microblogger. The key is “viral” marketing rather than “direct” marketing to the end consumer.

Today, for any brand, there are good reasons to have a microblog on any of the three platforms. To target all of the potential consumers simultaneously, but with different nuances, the best solution is to be on all three !

NO You are a specialist on repositioning aging brands, have you observed this phenomenon of aging brands in China, and can you give us examples?

HG In a accelerating, multi-local and highly segmented world, brands have an historic opportunity to serve as reference points. At the same time it is an increasingly difficult challenge to meet. Paradoxically, it is precisely in China, a recently developed market, that the brands undergo the most accelerated aging. The Rémy Martin brand is symptomatic of this phenomenon. Its development in China started in the late 80s, when Cognac became the emblematic Western luxury drink associated with business and success. Today, business people in their  thirties, often educated abroad, certainly see it as iconic …. but associated to their fathers’ generation. For them, the Cognac is so ritualized, notably as a mandatory business gift, that it has lost a part of its glamour. Obviously the mechanical growth of the market does not reflect any loss of interest – on the contrary, Remy Martin is a safe bet, and remains very attractive to new consumers in the world of luxury brands. But the question is about image,  and therefore long-term dynamics.

NO what in your opinion are the main reasons for this aging of brands ? Is this a generational phenomenon?

HG It is primarily a generational phenomenon indeed. In every country, every generation wants to stand out from the previous one. Although respect for elders is more deeply rooted in China than in the West, the “baling hoo” generation (born after 1980), without being rebels, want to establish their own codes and give more value to personality and individual taste. Brands which are the most subject to trends, like fashion, spirits, automobile etc. …. are of course the first to feel the desire for renewal. Outside the generational phenomenon, attraction to novelty also comes from other factors: because they are extremely connected to the Internet, the Chinese are very versatile, not necessarily vis-à-vis brands but at least vis -à-vis products. These must innovate constantly to keep their customers’ attention and maintain their preference. Mass adoption is the 3rd accelerator of brand aging: the relatively small number of Western brands present in China, compared to the growing body of consumers and the mass advertising of these brands, makes them more vulnerable to such a phenomenon. For consumers looking for individuality, seeing the same handbag or the same watch on everyone makes them want discover other brands.

NO What have you done to rejuvenate the image of Remy Martin?

HG: Across time, across borders, across generations … The key thing for the brand is to remain desirable. It is not enough to promote ancestral know-how or French “art de vivre” : being desirable is more than being just “respectable”. It takes proximity and “news”, combined with the magic of the legend … For Remy Martin, this meant capitalising on the image of a high quality, highly emotional pioneering brand in China, but also on building the connection with the consumers, stepping down from the pedestal, in order to concretely flow into the glasses of the new “thirties” generation !

Rejuvenating the product range was the first step, and we had to learn to sort out what was the status of these bottles and what anchored it in the past. Learning to decode Chinese aesthetics to bring added value to the right place. During six years at Remy Martin, I’ve been particularly focused on highlighting the connections between the historical values ​​of the brand and the expectations of the young Chinese: promoting talent and audacity rather than wealth as the only yardstick of success, advocating honesty in relationships rather than the social image … I also created 5 years ago the concept of “Remy Martin Dance” parties, which encouraged young people to dance to disco (which they did not do spontaneously). These evenings are now happening throughout Asia and have brought the brand into the daily lives of 25-35 year olds.

NO Do you think there are other brands in the same situation as RM? Why?

HG Cognac brands were among the first to arrive in China, but any brand, regardless of its sector and market must continually attract new consumers. China is no exception, just a market where everything goes faster, where the thirst for novelty is the most intense in history, and where 80% of luxury brand consumers are under 45 years old ( versus 30% in the United States and 20% in Japan), which naturally increases their versatility. The entry of a brand into China is not an end in itself, it is the beginning of a great adventure but also of huge investment on the brand, in communication,  in innovation and in development. The issue is that the sheer size of the country and its status as the great Eldorado drains investment into distribution, and a  number of companies simply multiply store openings without working on brand building, the product range and the link with the consumer. The Chinese are very emotional, voracious and knowledgeable consumers. This offers great opportunities for the brands. Among the pioneers who clearly need to renew their positioning, I would include Zegna, Rolex and among others, Audi, which has been losing market share in favor of Porsche, BMW and Mercedes.

N.O. How does one recognize the phenomenon of aging?

HG The danger in China is that the phenomenon of aging is of course qualitative and the risk in the medium / long-term is hidden by strong short term growth. New consumers in second-tier cities largely replace the trendsetters and businessmen from Shanghai or Canton that are eventually tired of the brand … Marketing/image studies purchased by luxury brands can identify this risk early on – for example by distinguishing individual consumption from gift- based consumption, which is more seasonal.

N.O. Do you think that brands which are currently market leaders in China such as LV or Chanel may need to be revived someday in the future ? Are there mistakes which can be avoided, to avoid growing old?

H.G. We must constantly give meaning and create desire because aging is not just a generational phenomenon. Chanel understood the risk of becoming a trophy-brand in China and has recently invested massively in a wonderful exhibition on the history of Coco Chanel. Vuitton did the same with its “Voyage” exhibition and has slowed its store openings. In June 2011, Yves Carcelle, general manager of Vuitton, said of its 37 stores: “we will not go much further to preserve the Exclusivity.” These brands have clearly identified the issue, but the challenge of innovation and creativity remains. The Chinese market today is much more demanding that the Japanese market of the 80s

This is all very fine, but the accelerating knowledge of luxury in China also has important negative impacts on the very brands that are at its core: the life cycle of a luxury brand in China finds itself substantially reduced, while the Chinese “consume” the brands when they are firing from all cylinders.

For example: Five years ago when I started specialising in China, I visited the most prestigious Bordeaux vineyards and offered to help them sell to the Chinese. China at the time was not drinking red wine, distributors such as ASC or the Torres were selling “grands Crus” only to rich expatriates, and producers from the Bordeaux region had serious questions about Chinese taste for wine. Since then, the Chinese government has launched a campaign in favor of wine and against 60 degree rice alcohol, Bordeaux wines have marketed China with notorious success, and the whole of China has started buying up Chateau Lafite, as witnessed by the prices seen at auction houses such as Sotheby’s and Christies… particularly in Hong Kong.

Now, five years later (after two years of discovery and three full of success) the Chinese are bored, want something new, and are therefore turning to Burgundy and Romanee Conti. Yes, the Chinese are quick – to adopt new products but also to change their mind …

I carry out numerous consumer “insights”, ie luxury client interviews, and five years ago Louis Vuitton was all the rage with the wealthiest French families, as was Rolex for watches. Today, both of these brands have disappeared from the favorites list of French millionaires (whatever Hurun may say) and this creates a certain level of acrimony. The Chinese resent that these brands were presented as the best and the brightest, when a few years later, competitors like Hermes (vs. Louis Vuitton) or Patek Philippe (vs. Rolex) came to China with products of superior quality. To remain leaders in their respective fields, these brands must now make enormous efforts to demonstrate the exclusivity of their offering, and must move even more upscale, which goes against the democratization of luxury in the Western Hemisphere.

The life cycle of a brand is very very short in China. This is due to the Chinese law of great numbers. When a brand becomes successful in China, it becomes very successful, too much so, and rapidly the brand goes mainstream. Because the elites want exclusivity, they soon abandon that specific brand, thereby playing their role as trendsetters for the general population. Like magnets, elite and the middle class attract and repulse, and the brands meanwhile lose their reputation.
It is essential that brands be aware of, and take into account these dynamics, in order meet the challenge of the shortened product life cycle.

While the Jasmin revolution in the Arab countries was showing the power of Facebook or Twitter in mobilising crowds and organising resistance, on the other side of the globe, Weibo was spreading like wildfire in China, promoting brands and star bloggers such as the Han Han and Hublot couple. Weibo was dedicated to mass consumerism, and was developping powerfully, while protected from western competition.

And now,  a dazed West discovers a Weibo that is more userfriendly and popular than Twitter or Facebook, and alliances are starting to take place between Weibo and Facebook. Worse, internet media are calling Twitter a copycat of the latest version of Weibo. Unbelievable reversal of fortunes in just one year, which a number of western brands are taking advantage of to penetrate the Chinese market. Yes, I was surprised in 2011 when, around December 20, in the People Daily, the Chinese government announced it was now mandatory to register on with the central government to own a Weibo. In short, the end of a world of innocence and Chinese grumbling about social media.

Virtually no media, even those who had so actively condemned the departure of Google from China, has echoed this incredible information : the Chinese must now send their weibograms under State surveillance. Not a single conference, not one news outlet to expose this news, which is so much more oppressing than the departure of Google. Fighting for human rights is a noble cause, but to ignore something of this importance is irresponsible. Weibo works and facilitates mass consumption, so why should anyone care if its users are monitored ? as long as they buy ? As we say in France, “different era, different values’”.

The store is spacious and full of light, the products are abundently exposed everywhere, the walls are white and bare - to open the mind to what the jewels evoke. The craftsmen are French but designed by Chinese and Junlon is the only Chinese brand to produce in France.

Princess Fei Earings - Uighur influence

Junlon masters all sorts of materials, faceted stones or cabochons, whether precious and semi-precious, balls, pearls, that he assembles with all the skill demanded by “haute joaillerie”. But the most striking is the excellence of his traditional worksmanship at the service of contemporary pieces, often minimalist and warm at the same time, like the store which serves as their jewelcase. His creations contain many symbols mainly stories of Silk Road.  For example, the “Four Seasons” collection of rings uses perfectly rounded cabochons, to express time past, present and future turning to infinity.

Golden Abacus - Chinese Influence

Pearls, whether baroque or not, are selected according to draconian criteria. The jewels are both delicate and full of strength. The use of a multitude of small stones, assembled with white or yellow gold, results in finger rings so thin that you can slip them on one after another, according to the day’s mood or clothing. The earrings come in various lengths, depending on the ears or the neck they will highlight.

Women and men can only be seduced, so broad is the creativity, so reasonable the prices (for the time being!

Junlon has decided to take us on a journey, with excellence and humility, through his oniric universe, born on the Silk Road.

Silk Road by Ella Maillart

Silk Road for dummies : Silk Road exists from millemia, starting from Chinese capitals like Luo Yang (Xian today) or Beijing and end in Turkey around Trabzond.or Istambul. It goes through Central Asia,through towns like Kashgar, Samarcande, Khiva, Boukkhara and others. Silk Road was the most important exchanges road between East and West before the reign of vessels and the maritime roads. It has carried from East to West  precious goods, but also technics, ideas, religions which explain that all the cities along thèse roads are a melting pot of several influences Eastern ones as well as Western ones.

Silk road is the ancestor of contemporary global economy.

What?
The case study “Sephora Beauty Academy”, broadcasted summer 2011 on Dragon TV and the Web, presented at the first evening event China ConnectInTheCity event organized by Laure de Carayon.

How?
30 days of shooting with a team of five French and Chinese 90
10 episodes of 45 minutes broadcasted on primetime, with over 30% audience market share on the Shanghai region
15 million views of episodes on the net
25 million votes combined on the web
51 080 posts around the program on Weibo, one of the Chinese twitters
40,458 blog posts
A production cost equivalent to a programme on TNT in France, or, one third of a prime time on M6.

How?
Alexis de Gemini discovered China with Pekin(Beijing) Express. He moved in shortly after with his family and develops over ten concepts he pitches to brands and channels. “To go to China, it’s better to be small, agile, which many large audiovisual structures can not,” he says. Sephora was seduced by “Beauty Academy”, a format that allows to educate a population consuming more care products than makeup. “In Communist China, there was a total lack of makeup culture. The mother-daughter transmission does not exist. “Beauty Academy is a major competition in 10 episodes, looking for the country best “make up artist”. At stake: a two-year contract with the brand.

A 100% web broadcast was first thought of, before the main Shanghai region channel, Dragon TV, broadcasts the program, the first of its kind (reality TV with hidden mirrors). “In China, 15-35 years old watch video on computers. 35 and over, on TV. A TV broadcast gives coverage and amplify awareness. The Web can reach a younger population, with low purchasing power, but they are Sephora next customers”. Dragon TV took four months to give the agreement for the broadcast of the broadcast it has acquired for free, and wanted the format delivery 3 months after the signing! The local team was recruited in a month.

Chinese law is quite flexible on TV product placement: the main sponsor and its products can appear up to 12 minutes per hour. Sephora has given a list of products and brands to highlight, and the program was written to integrate them. The cast reflects the values ​​of the brand, highlighting a dynamic urban youth. A makeup artist from Benefit has come to give a masterclass, as well as Diane Von Furstenberg. Marc Jacobs held a fashion show specifically for the show. Make up Forever was associated with a challenge shot in Paris at the Moulin Rouge.

TV episodes were all available on video portals and on Yoka, a beauty portal. Rushes were used to design specific videos, around masterclasses and tutorials. The votes were exclusively online, legislation prohibiting voting by phone. Sephora now considers a broadcasting in other countries, and possibly a season 2, more digital, with the establishment of a true e-CRM strategy to maximize the ROI of the brand.

Article published on http://www.petitweb.fr/, http://t.co/IWIquoqq
by Benoit Zante and translated from French by the producer of China Connect in the City, Laure de Carayon