Luxury: China - E.U. Politics or Something More?

Luxury brands have long claimed that any substandard products that may arise in the course of production are immediately destroyed to preserve the brand's image and reputation for exacting standards of quality. This is why I'm intrigued by a piece in today's Telegraph detailing Chinese claims of widespread problems with imported European designer clothes produced outside of China (Yes, I know. Ironic isn't it?).

A sample of garments from a number of brands including Dolce & Gabbana, Trussardi, Hugo Boss, Hermes and Versace allegedly displayed a variety of defects such as poor colour fastness and high levels of acid or formaldehyde. Is this a case of China-EU political wrangling over longstanding trade issues being played out or does this suggest that Western luxury brands may in fact be "dumping" substandard products in Asia? Is this an isolated incident? I would love to know what you think.

Sincerely,

The Luxe Chronicles

Comments

[LLinNYC]

Many well-established luxury markets were once emerging markets. I wouldn't put it past a luxury retailer to attempt to sell sub-par merchandise in China, but if the Chinese evolve to be as sophisticated as say, Japanese customers -- and by all indications, consumers in the first-tier cities already are -- it will simply not be a tenable practice. Japanese customers are known to be intense inspectors and rejectors of luxury merchandise that are totally viable for other consumers. I think it's in Deluxe that Dana Thomas mentions LVMH often takes back "defective" merchandise that failed to sell in JP and puts it right on the shelves in Paris.

[willowblue]

The aura of a trade war looms between China and EU, as well as the US, so that may have foreshadowed the issue of defective designer goods alleged by China.
But the claim may not be entirely without foundation. The problem was uncovered purportedly in prosperous 2nd tier cities, where consumers are probably not so familiar with exacting standards set by the brands themselves.
The same complaint has not been found in Shanghai and Beijing or even Guangzhou, where the clientele is more sophisticated and also more cosmopolitan. The brands (if they are really ``dumping'' substd stuff) would do it in the top two cities only at risk to their own rep. My two cents. (*-*)

[Madeleine Gallay]

Love this series on other markets. An awkward moment last week that may be chest-pounding blather or may indicate a policy change in China. The government was in a very surly mood and pronounced that devotion to designer brands is not good for China, which owns an eager population for it and 27% of the luxury business is there. Which is not astounding in the sense that it is population proportionate. Quite a flux, with the seeming likelihood that Google really will depart in protest of censorship. Bothered a lot that Microsoft may try to slip in - mixed messages are not good.

Didn't mean to stray too far from your excellent points. China may not always be what it seems, though. It's own luxury jewelry retailer, FUQI, a high powered momentum favorite of day traders, recently announced that it will have to restate its income, there have been errors. The stock tumbled 67% and there are a number of class action lawsuits.

Many luxury goods have their footprint in China in conflicting ways. Luxury products are made there and now retailed there as foreign brands. Quite a stocky moment.

[RLG]

Dear Helene,

Thank you for writing back. It goes without saying that a difference in quality will hurt a brand's image, regardless of where it happens. But even more so in emerging markets. The massive influx of luxury brands over a relatively short period of time has made it clear to Asian consumers that they being heavily marketed to and seen as the new big buyers. The expectations are high.

Further, part of the excitement when buying into a luxury brand is becoming part of the brand ethos. If I felt I was getting less from a brand, be it through poor quality or bad customer service, my idea of that brand would diminish.

I recently wrote a piece on luxury brands in Inida which may interest you: http://roughluxegirl.blogspot.com/2010/03/marketing-luxury-brands-in-india.html

RLG

[Helene]

Thank you for your comment RLG. I would love to get your perspective as a consumer. Do you think less of brands who sell products of varying quality in emerging markets? Do you think this will hurt their image in the long run? I would love to know your thoughts.

Helene

[RLG]

I'm sure there is truth in this. I live in India which is another emerging market and often the same production units used to manufacture high street brands also produce luxury product. And this happens in all the major production hubs like Vietnam and Brazil - it's entirely possibe that the standard of quality is not the same everywhere.

Thanks,

roughluxegirl

[Helene]

Perhaps you could be more specific et? Don't be shy, spell out your suspicions.

Helene

[E]

Hmm... I smell something fishy called "tit for tat" here...
suspiciously yours,
et

[Mlle L.]

Dear Helene,

It is true that it does sound like a big allegation to make if they lack the evidence to support it. 60% of the stock also sounds like a bit too much to make it an unlucky oversight.

Do you know how the check European and US stock for this type of defects?

Best,

Mlle. L.

[Helene]

Dear Mlle. L:

You raise a very good point. Given the importance of Chinese luxury consumers to Western luxury brands' growth strategies, it would seem like a terribly risky thing to do. This is especially true in the age of Web 2.0 where news rarely stays within geographical borders.

Still, if the report is accurate, the claims made by the Chinese investigators are fairly precise and relate to technical aspects of the fabrics (levels of acid and/or formaldehyde used in the treatment of the fabrics) which would be difficult or impossible to detect by even the most discerning eye. Perhaps the calculation was that the defects would go undetected. Also, for all we know , the brands might not have been aware of the defects prior to shipping. Still, given how meticulous luxury brands claim to be about production and quality control, I find this incident odd.

Thank you for taking the time to comment.

Helene

[Mlle L.]

Helene,

This all sounds slightly too ironic to be true.

China is a huge emerging market, with a lot of money at stakes, and luxury brands are very aware of that. Why else would have Fendi relocated one of its catwalks to the Great Wall (aside from media coverage guaranteed of course).

I can't really see luxury brands taking the risk of carelessly tarnishing their reputation that way. From an outsider and marketing point of view, I feel like it would unnecessarily jeopardise their trading future and customer satisfaction.

Best,

Mlle. L.