» Biz Commentary
'Affordable luxury' promotion: Does the shoe fit?
A Brazilian marketing ace recently talked about the "affordable luxury" of Brazilian-made shoes bound for Chinese shelves.Interesting phrase, that. It captures the craving of Chinese people for luxury products after decades of deprivation while preserving the notion that consumer goods shouldn't cost half a year's salary.
Usually, "affordable luxury" might be considered an oxymoron. The Brazilian shoes on exhibit at the MICAM Shanghai global footwear trade fair last month sought to break through that perception. The most expensive shoes in the Brazilian exhibit were priced at around US$50, a little more than 600 yuan. But they looked remarkably like expensive shoes priced above 10,000 yuan in many department stores in Shanghai.Cristiano Korbes, international projects director of Brazilian Footwear Industries Association, must have visited those stores before coining his "affordable luxury" promo.
He said expensive Italian shoes sold in many local shops are beyond the reach of but a few consumers, but Brazilian shoes of similar quality are a seductive option. What Korbes didn't say was equally important. One market insider told Shanghai Daily that shoes priced at around US$50 at the trade fair will be four or five times more expensive once they reach the shop shelves.
This is not only an issue of price but also of value. Products deemed to be good value for price are highly prized by discerning Chinese consumers.
Take the recent "gold rush" in China, when neighborhood "aunties" started gobbling up the precious metal after the global price collapse in mid-April.
Media reports said more than 300 tons of gold worth US$16 billion were sold in China at that time. Chinese "aunties," a nickname for older women, were dominant among buyers.
No one can claim Chinese consumers are stupid when the price is right.
From years of experience, they have become hardheaded realists who will no doubt look askance at a term like "affordable luxury."
If a pair of shoes costs only US$50 at the factory gate, why should they want to pay thousands of yuan for them at the retail level? Diane Long, a veteran businesswoman and managing director of Xanadu Enterprise Shanghai Ltd, blames greedy middlemen.
Importers and distributors in China have been charging too much, Long told Shanghai Daily. Sometimes, prices in China are so high that they suggest price-fixing schemes afoot, she said.
The problem goes beyond imported goods. For domestic production, there is often a huge price gap between producer and retailer. Back in 2011 when China was facing a round of serious inflation driven by soaring costs of ginger and onions, farmers didn't benefit at all. Middlemen reaped the profits.
However, Chinese consumers are "incredibly savvy shoppers," in Long's opinion, and the Internet has increased their access to price transparency.
Smart Chinese buyers now resort to social media platforms like Weibo, WeChat, and of course, Taobao.com, to compare prices. And those Chinese who take holidays abroad have the opportunity to view the truer value of foreign-made goods first-hand.
Some may say it is not only the middlemen skewing fair pricing, but rather a whole business environment that has too many cozy ties, too many high taxes and too many grey areas.
Korbes may have reason to be confident about his "affordable luxury" promotion in China.
At least, the retail price of Brazilian shoes probably won't be as outrageous as those currently sold on some shelves.