Shopping in various street brands stores in the US has become a must for outbound travelers from China. Most of Chinese people are so surprised to see their middle-class brands are sold a lot cheaper in America.
The price of a pair of regular Levi’s jeans is around $60 and they often offer discounts. However in mainland China, such jeans is always like around 600 RMB (about $100)and rarely on sale. GAP, sells the same items using the USD price times the exchange rate of RMB in China. A pair of GAP’s jeans will probably cost you around 500 RMB and there is no 70% off sale as in the states. Most surprisingly, there is a huge price difference of Coach products between China and US. I just found out that a Coach handbag is selling at $198 in its American online store while in its Chinese online store the price of the same product is 2500 RMB (about $397), which is doubled. No wonder many Chinese students would fill their suitcases full of Coach handbags when they go back to China.
It is well known that Chinese consumers are willing to pay a premium for recognized brands. Being western brands, they will always have a certain cachet with the Chinese consumers. The China market is not familiar with such brands, which gives them a chance to build a new image with high-end label when they enter the market, hence the price increased. These brands would choose some high-end stores when they entered the China market to present their high-end images, and so their prices are higher than those of mid-range Chinese products. As the China market is booming and the need for foreign brands of Chinese people is getting stronger and stronger, American brands just quickly go there for money.
Many Western brands have ambitious plans for China. Especially in mainland China, US street brands’ consumers are expending so fast, there’s still much room for these brands to grow. In GAP 2012 annual financial report, the first special note on forward-looking statements is its international expansion, including opening additional GAP stores in China. GAP aimed to have 45 stores in Hong Kong and mainland China by the end of the 2012. Coach, on the other hand, will not only open around 30 new stores this year in mainland China, but also strongly promote its E-commerce business in 2013.
However, there are still some problems coming up. One thing is that many US street brands fall into a middle-class image trap: the product is fairly expensive in China but carries little prestige. Customers buy their clothes because they want to present themselves as middle class people. But anything in the middle is struggling: they trade up or trade down. Most Chinese middle class people believe that they are on their way to becoming the rich, so a lot of them start to chase low-entry-level luxury goods. The other challenge is design. Chinese consumers’ needs and preferences can possibly differ from Americans’. For example, GAP’s product is considered too bland compared to its price, people expect to get more; and it isn’t considered trendy or up-to-date enough. American brands need to have a better understanding toward their Chinese customers.