What the brands needs to learn from China

Brand managers break out in a cold sweat at the thought of trying to manage the Chinese retail market. That's cause they can't control the bootlegging and theft of their company's intellectual property and branding.

Walking around the French Concession and seeing remnant stores with clothing from Paul Smith, Evisu etc. made me wonder what was real (seconds, last season) and what was fake!? Then the question got harder as high-end boutique stores had Comme de Garcons for $30. But, did I care if it was real or not? After all we're talking about fashion here not a brakepads for my Audi or milk powder for infants?!

Bootlegging China is copying global brands and exporting them to feed greedy consumers and to accelerate its own economic wealth. This blatant bootlegging is different to how the Japanese and South Koreans copied (retro-engineered) consumer electronics gadgets and produced them on the cheap. As value-chains were re-thought and globalization set in the electronics prowess allowed Japan and South Korea to become the (sub-contracted) manufacturing centres for famous brands. Eventually this production experience was mixed with innovation and suddenly Japanese, Taiwanese and Korean brands have become a world force at the expense of American and European brands.

Each one teach one With its cheap labor and manufacturing expertise (90% of US toys are "Made in China") the world's brands are all turning to China for manufacturing. So, the Chinese are learning manufacturing standards from the best brands in the world and then mixing that expertise with entrepreneurship and lax China IP laws to flood the market with bootlegs.

What's selling? There are of course the humorous misspellings and retarded copies of brands you can find examples of via Google. These are just cheap knock-offs, but what I've been keeping my eye on is the sophisticated fakers who are producing very high grade fakes that are indistinguishable from the real deal ("do you want Good $, Better $$ or Best $$$?"). My hunch is that these are made in "mirror" factories that actually make the real brands. I've even read that European brands might have some China exposure and ship partially completed products back to France to earn the "Made in France" label by simply having some decorative pieces added and finally packed in France!

So what does that mean for consumers? Do we really care? As long as you think it's real and you're getting a reasonable deal (not retail $) may be everything's ok. I think we all have to be aware that the fakes are mixed in with the real stuff. If you're buying from the internet be prepared to do your homework, otherwise buy from a branded store. My philosophy is that some fakes are as good quality as the real deal, so I'm not opposed to them if it fits my mantra of "form, function, cheap!"(I'm only talking about fashion, sneakers and the like, not some iPhone knock-off or high engineering product which comes with a warranty or level of service).

New Generation But, China has entered a new phase where consumers wants their own brands. Walking the shopping areas of Shanghai you see the local brand stores. Bright, spacious and modern, just like Main Street USA. The difference is that one sports brand took the Nike slogan "Just Do It" and turned it into the derivative "Go Ahead".

Across the street I also saw another local brand with its "Everything is Possible" slogan, then I saw adidas' Olympics campaign with the clumsily worded "Impossible is Nothing". Who was first the chicken or the egg?!

What next? Look at sophisticated Asian markets like Hong Kong and see how some local brands sit comfortably alongside global brands - this will happen in China when they've earnt a market for themselves. Only the strong will survive.

As the Chinese become wealthier we should expect global brands to become more visible (affordable) in the Chinese emerging market. I think we'll see local acquisitions (Coke has already done its shopping in China) and then may be we'll be hot for these Chinese brands in the west. But what about this...China brands taking over household names! You never know! The US dollar's in the toilet and China has the US by the balls...