Does Your Brand Need a Store in China to Succeed?

As brands speculate about continued economic buoyancy in China, the necessity of having physical stores has come under increasing scrutiny. The unrelenting enthusiasm for e-commerce shown by Chinese consumers has also given cause for questioning the relevance of physical retail.

Luxury and fashion brands have scaled back on their original optimistic plans to store expansion in China. Most notably, Louis Vuitton announced the closure of several Chinese stores last November. Also Walmart, has this week, launched a major brand repositioning to offer e-commerce solutions to Chinese consumers.

Pessimism about store space is becoming endemic. Dangdang.com, a local online bookseller similar to Amazon, has launched an audacious plan to create actual bookstores based on the idea they will receive free-rent in increasingly vacant shopping malls in big cities.

When a store, is not just a store

Looking at the importance of a store presence in China requires a specific cultural lens. A key starting point for most, if not all, foreign brands is that they are not inter-generational. That is, the reputation and trust of the brand has not been passed down through family legend. Instead, brands are initiating relationships from scratch with a fresh generation of consumers.

Taking the case of luxury, consumers have experienced the brand as a personal form of development. A key moment of truth in their relationship with brands is formed through store experiences –the physical inspection and feeling of products.

When interviewing Chinese consumers, the key difference that strikes me is how emotional the store experience and service are in the stories they tell about their favourite brands. Often, they become aware of a brand through peer recommendation, but their loyalty and ultimate advocacy is created through their retail experience.

Forgoing or not maintaining a retail presence is like introducing a ‘circuit breaker’ at the most crucial stage of brand adoption. Stores, irrespective of economic forecasts, must be seen as a symbolic, practical and emotional stepping stone for new consumers in China.

In one particular interview with in Chengdu, the thriving city in the Western part of the country, a Chinese entrepreneur was describing to me that one of his favourite brands was Tod’s (which he could not pronounce, and jokingly called it “potato slices” because it was the closest Chinese word he could find).

Despite having extreme difficulty in engaging with the brand at the official level, he has become a Tod’s aficionado based on his experience at the store – that he described as “like the home I imagine I would live in Italy”.

For him, the brand was the retail experience, it was enough to cement this loyalty and enthusiastic promotion to a large group of businessmen, who like himself, were ‘finding their feet’ with luxury brands.

Beyond a transaction point: Chinese stores as brand equity

From a broader strategic point of view, brands need to see stores in a wider cultural perspective. Beyond a point of transaction and sales number, stores are the clearest and most uncompromised expression of your brand to new consumers in China.

In the context of ‘face’, retail presence in new malls and as part of the new middle class’ weekend walkabouts is essential to suggest status and respect to Chinese consumers.

Once again, using Chengdu and luxury as an example: The way foreign brands were perceived in terms of their premium offering was directly related to their presence in two of the city’s new mall developments –meaning Burberry and Michael Kors enjoyed almost equal rating as early-arriving European brands.

Adding to perceptions is the way that Chinese consumers share their recommendations with others in-person and online is almost always footnoted with a proof point on quality. Invariably, this is described as the look, feel, or physical appearance of the product materials – the fabric of the dress or the sheen of the casing. In this initial peer-to-peer introduction to brands, physical inspection at a store is an essential part of the purchase journey.

Forgoing or not maintaining a retail presence is like introducing a ‘circuit breaker’ at the most crucial stage of brand adoption. Stores, irrespective of economic forecasts, must be seen as a symbolic, practical and emotional stepping stone for new consumers in China. Something that e-commerce, or lack of stores, can not address.