CHINESE CONSUMERS GO AFTER QUALITY, NOT COUNTERFEIT
Until fairly recently, “Made in China” was the biggest stigma a product could carry, conjuring up images of clothing that fell apart, tainted food, and counterfeits of every luxury brand imaginable. But as China emerges as a world power, its production practices have changed dramatically, as have Chinese attitudes toward fake merchandise.
“The difference of buying real and fake products is how you feel after,” says Mr. Liu, a 36-year-old who runs his own fiber-optic-technology sales business and has a steady income of around 15,000 yuan a month. “I can wear a label I’ve paid for and feel proud.”
A survey last year by China Market Research found that 95% of Chinese women between 28 and 35 said they would be embarrassed to carry counterfeit handbags.
Escada, the women’s clothing design group, found a steep drop in Chinese consumer willingness to buy fakes, from 31 per cent in 2008 to 12 per cent by 2010.
“Consumers in China are even more discerning than their counterparts in the Western world,” says Aidan O’Meara, president of the Asia-Pacific division of VF, North Face’s parent company. “They don’t want to be caught dead with a fake product.”
North Face, whose products were widely counterfeited in the late 1990s and early 2000s, now has around 500 stores in China and is continuing its expansion. VF, plans to open 450 North Face stores in China within the next three years.
Fakes were fine when all the Chinese wanted was a logo to flash around. But as the Chinese middle class grows wealthy, it is learning that quality is worth more than appearance alone.
Max Magni, head of McKinsey’s Chinese consumer goods practice in Shanghai, says the market for luxury fakes is growing much more slowly than the real thing, and Chinese consumers are getting harder to please.
“From fruit to paint, Chinese are willing to pay for something with a safety seal,” says Shaun Rein, author of The End of Cheap China. The UK retailer says the Chinese middle class is “becoming increasingly sophisticated in the quality of products they purchase”, including buying more foreign and high-end brands, not just safer food.
That’s not to say the counterfeit market has disappeared entirely. Chinese authorities seized counterfeit goods valued at 5.33 billion yuan ($847 million) last year, according to China’s General Administration of Quality Supervision, Inspection and Quarantine. The country also is the leading source for counterfeit and pirated goods seized in the U.S., accounting for 62% of the $124.7 million in goods seized last year, according to the U.S. government.
But apparel companies insist they have boosted investment in China in response to the overall shift in consumer attitude. Nike last month said it plans to open a campus in Shanghai to expand its operations and boost sales to $4 billion by 2015. Nike reported more than $2 billion in revenue from the Greater China, which includes the mainland, Taiwan, and Hong Kong, last year.
“Consumers want the real product and the real experience that comes with buying it in the retail store,” says Nike spokeswoman Jeanne Huang.