Money talks as shoppers seek status

17  January 2013

Brands adopt a stylish approach for customers buying into image

The purchasing agent has a growing presence in China and enjoys a unique position as they bring the world of retail to consumers.

When you search on the biggest online shopping website, Taobao, more than 100,000 such agents will pop out.

As their name suggests, they buy international brands from overseas and sell them to Chinese customers.

The scale varies but stores they supply sell virtually everything from clothes, luggage to milk powder and vitamins. Cosmetics and designer bags seem to be the most popular.

The reason is not hard to fathom. Despite the agents taking their profits from the sale, these brands are still cheaper than those sold in city franchise shops.

This is the pricing strategy of international brands, analysts said.

George Yip, professor and co-director of the Center on China Innovation at China Europe International Business School, says international brands factor in costs involved in entering new markets into their pricing strategy.

Yip is also the author of Managing Global Customers.

“Foreign companies, generally, sell to a higher level on the economic pyramid in developing countries like China. So their customers can afford to pay the price,” said Yip.

“This is also a typical foreign-market penetration pricing policy. Start high and move down later to expand the customer base,” he added. “High prices are sustainable if customers will pay and if there is no cheaper competitive alternative.”

The “higher levels on the economic pyramid”, the upper and middle class in China, are expanding rapidly.

With the Chinese market becoming a major money engine for international brands, these multinationals are adjusting their pricing strategies accordingly.

Top: A Coach store in Shanghai. The American company positions itself as an “accessible luxury brand”. Above: A glo restaurant in London. Many Chinese dinners prefer “authentic” British fare.