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ASIA INC MAY/JUNE 2006

AIMER AND YOUNGOR, two Chinese apparel brands, might be virtually unknown outside China. But to Dr Paul Temporal, a branding expert, these two are just a sampling of Chinese brands that might soon achieve global status, as the Chinese economy grows further. Ningbo-based Youngor, which sells men’s suits and shirts, was founded only in 1993. It has since grown to a company with assets of more than 1.5 billion yuan ($187 million), an 8,000-strong workforce, a nationwide network of 560 boutiques and 3,000 other retail outlets. Youngor’s factory produces 10 million shirts and two million suits annually — a capacity not many companies can match. The company has also diversified into property, trade, packaging and finance.

Aimer, the flagship brand under Beijing Lingerie Company, recently posted record daily sales of more than 18 million yuan on March 8, during a Women’s Day promotion, which the company said set a record for the highest single day sale achieved by a lingerie brand in China. “The quality and design is fantastic. The brochures, the packaging are world-class. They could be another Victoria’s Secret,” says Temporal, group managing director of Temporal Brand Consulting, in an interview with Asia Inc. Also established in 1993, Aimer now has more than 2,000 employees, and its line of products are carried in more than 300 retail outlets all over the country.

In Youngor’s case, “the design and quality will be quite at home on the streets of London and New York. They could have gone global,” says Temporal. But they are not exactly desperate to do so. “I asked the executives of Youngor what’s their target market. The answer: the 200 million middle-aged Chinese men,” says Temporal.

And so, as far as both Youngor and Aimer are concerned, China is very much where their focus is — for now. SPENDING ON BRANDING A MUST From Temporal’s perspective, things are set to change. Like many other Asian companies, China is starting to appreciate the importance of branding, he says. “It’s quite clear that their mindset has changed from ‘why should we spend on branding?’ to ‘we must spend on branding’,” says Temporal, author of the book Asia’s Star Brands. Oxford-educated Temporal, who is a Visiting Professor at Shanghai Jiaotong University, has been engaged as a consultant by the Chinese government to help companies build their brands since 2002. Led by the Ministry of Commerce, there is now an inter-ministry effort underway to build global brands for China. As one government official told Temporal: “We have 1.3 billion people, our costs are 10% that of America, we have the best technology, and no problems with quality. The only difference we have with Western companies is branding.” China and its companies are more than aware of the brand-building efforts of other Asian economies, notably South Korea. “There is now a lot of furious activities going on at the national and provincial levels to promote brands,” says Temporal. Japan, the emerging Asian economic giant of the last generation, took 30 years to build up its brand. China, being larger and growing faster and more ambitious, will probably do so faster. Including the likes of Youngor and Aimer, “we will see a huge number (of global Chinese brands) in 10 to 15 years”, says Temporal. Nevertheless, the biggest obstacle for most other Chinese companies is the perception of making low-quality products. Inevitably, Made in Japan or Made in Korea seems much more acceptable. However, some Chinese companies have found ways to get around such an issue.


HAIER, MADE IN USA
Qingdao-based Haier is one of the largest white goods maker, holding leading market  share positions in segments like washing machines and refrigerators. Interestingly, Haier is able to win a significant share of the refrigerator market in America, especially among college students in dormitories. How did Haier — with its ambiguous yet distinctive brand name — achieve this? When the company decided to export to the US market, Haier did not choose the cheaper way of manufacturing in China. Instead, it set up production in the US so that it can legitimately stick the “Made in USA” label on their products. “American consumers can’t really pronounce Haier, but they see the label. So, many would assume its ok to buy,” quips Temporal. “They (Chinese companies) are learning fast and they are ambitious. I can’t see anything that can stop them,” says Temporal.

So, is the coming Chinese onslaught unstoppable? From the way things are going, the mass market segments would soon be taken over by Chinese brands. Should Western companies just fold up? Not so fast, says Temporal. The luxury consumer brands — the likes of Prada and Gucci — will remain unassailable for quite a while. “These are the brands that took 50, 60 or even 70 years to build,” he says. In the art of branding, China has another potent weapon — its one-child policy which has created a generation of children pampered by six loving adults (parents and two sets of grandparents) who will stop at nothing to provide them with the best of everything in life. A new breed of businessmen, with brand management talent, is ready to be tapped. “We are getting people in the early 20s who know nothing but success. In the branding world, they are young and they are learning fast. They are confident they cannot be beaten,” says Temporal.

Made in China, anyone?