The Power of a Brand: Why Chinese Consumers Aren’t Going Away

Buying an engagement ring is a long, drawn-out process.

At least it was for me…

I was willing to spend the money. So I decided to make the rounds of every store in sight.

It wasn’t until I started looking that I released a number of options available. Because I was going for a diamond, size (carat) wasn’t the only thing to consider.

With each shop I discussed the cut, colour and clarity of the diamond I wanted. They all made sure to tell me about the quality and rarity of their handcrafted rings.

All our rings are made by an old jeweller who’s been in the business for 50 years. It takes him hours to handcraft each ring to your specifications,’ one shop clerk told me.

Prices among most shops were similar.

But then I walked into Tiffany & Co.

Buy yourself some social currency

I’m lucky they had seats in the store.

I was looking at the same rings that I had looked at in every other store. Yet if I wanted it from Tiffany’s I would have to pay thousands.

Clearly it’s because Tiffany’s is better quality, I initially thought.

It wasn’t until I went to an actual jeweller that he told me Tiffany’s was selling the same diamonds as everyone else. That few thousand extra simply paid for the blue Tiffany box and their name on the ring.

And it turns out I’m not the only one who now knows this. Yet people are still willing to pay thousands more for that little blue box and the Tiffany name.

That’s the power of a brand.

This isn’t something that happened overnight. Tiffany’s has been carefully building their brands for almost 200 years.

In the 1830s, Tiffany’s was one of the first companies to display prices openly. They also didn’t haggle with customers. They raised prices. There was almost never a sale.

Doesn’t seem like a big deal today, but almost no one was doing this at the time.

Over decades of reinforcing their quality status consumers started to see Tiffany’s as just that — a symbol of quality.

It’s why people continue to buy Tiffany rings, bracelets and necklaces. They know they could get the same thing at a discount somewhere else. What they’re really buying is the Tiffany name — a form of social currency.

And thanks to affluent Chinese, Tiffany shares just got that much richer last week.

The company exceeded analysts’ earnings expectations. The Australian Financial Review writes:

Shares surged 20 per cent and were on track for their best day in more than 17 years as the upscale jeweller posted its strongest rise in same-store sales in four years, driven by China-led growth in Asia and strong sales in its domestic market.

 

 

Different but the same

We are not all the same. One of the biggest dividers is culture.

Values in India, for example, are different from those in China. And values in China are different from those in Australia.

That’s because there are cultural differences in us all. It’s why there’s havoc, more often than not, when two cultures come together.

But we’re all more similar than you might think.

For example, what do most Aussies do when they receive a pay rise? If they’re in the middle class, economics says they spend it.

What about in China, Japan or Germany?

All of them spend it.

While we may all have different values and opinions, we all have a certain type of psychology in common.

We value goods and services that are expensive. We’d rather have $10 now than $100 in two years’ time. And we all fear missing out on spoils while our neighbours are getting rich.

It’s why Tiffany’s is not just a success in the US or Australia. It’s hugely successful in China and many other parts of Asia.

And it’s not the only brand that China loves.

Get in on growing Asian wealth

A testament to the rise of China’s middle class is the largest shopping centre in the world. Foreign Policy writes:

You may not be surprised to learn that the largest shopping centre in the world isn’t in Southern California, glittering Dubai, or the garden city of Singapore, but China.

‘…New Century and shopping malls like it are emblematic of the rise of China’s middle class, which is expected to expand from 430 million today to 780 million in the mid-2020s.

Among brands like Tiffany & Co., Coach and Chanel, Chinese consumers also love consumables from down under.

Blackmores Ltd [ASX:BKL], Treasury Wine Estates Ltd [ASX:TWE], BWX Ltd [ASX:BWX] and Australian Creams are all benefiting from China’s love affair with Australian products.

As more consumers rise into China’s middle class, you’d expect many more dollars will be spent on the products and brands such as those you see above.

It’s why in my brand new advisory service, Wealth Eruption, I’ve recommended two ASX-listed stocks that could rise significantly higher on the back of Chinese consumers.

Two more could explode on China’s massive mobile payments market. And another two are making a name for themselves in Asia’s fast paced tech world.

If you want to find out more, click here.

Your friend,

Harje Ronngard,
Editor, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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