Ged Carroll

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  • Is there a luxury smartphone segment?

    There are luxury smartphones, but is there a meaningful luxury smartphone segment?

    From Apple’s iPhone price inflation to Huawei and Blackberry’s Porsche Design devices, manufacturers have looked to cater to a ‘luxury’ consumer.

    Prior to this is you had the Vertu phone with its concierge service and niche players like Goldvish catering for the the Gulf based clientele and Russian entrepreneurs. TAG Heuer tried launching its own phone.

    Pierre Cardin approach to licensing

    Prada and Bang & Olufsen had collaborations with Korean manufacturers. Even Dolce & Gabbana allowed their names to be used on a gold anodised Motorola RAZR. But these brand licensing deals rather like what Pierre Cardin were famous for in the 1970s and 80s.

    There was little input in the product beyond doing a launch.

    Luxury is an attachment

    Luxury brands have been smart enough to jump on the tech bandwagon in their product accessories. I used to have a Coach-made pouch for my Palm V courtesy of Sun Microsystems that I got given as part of a conference goody bag. (The dot-com era meant that money was thrown around willy-nilly).

    There were a variety slide in pouches from the likes of Louis Vuitton for Blackberry devices and Apple iPhones respectively. This then evolved into cases like Moschino’s famous ‘McDonald’s fries’ box.

    moschino

    Where’s the missing space?

    We know that China has become the workshop of the world. We know that Qualcomm’s reference designs, Google’s Android and Jolla’s Sailfish OS make smartphones easy (relatively speaking) to roll out.

    We also know that luxury firms are not afraid of:

    • Global supply chains and manufacturing in China
    • Attempting to step into complex manufacturing (like Louis Vuitton and Montblanc’s entry into watchmaking) or to do technology

    One only has to look at connected watches from the likes of Breitling or Louis Vuitton. Montblanc’s e-strap was way ahead of Sony’s WENA Wrist Pro Smart Watch Band.

    We know that luxury brands have moved away from the the stereotypical luxury buyer being an older western person of means to a younger Asian person with family money. That’s why we’ve seen the coalescence of streetwear and luxury brands.

    So where is the luxury smartphone? And why aren’t luxury brands embracing the space?

    Price elasticity

    I suspect that the issue is technology isn’t price elastic in the same way that luxury product categories are. Technology products by their nature are ephemeral. The benefits of technology products depends on network effects rather than exclusivity.

    In his blog post, Is the pace of technology adoption really speeding up? Nigel Scott put together evidence to show that price points and technology adoption are intrinsically linked. We are not in a state of constant acceleration of technology adoption, but instead only adopt it when the price is right.

    It would be reasonable to assume from this work that there is an inelasticity in technology pricing that makes luxury smartphones hard to sustain. It also explains why relatively low price accessories make more sense than ‘luxury’ smartphones. This seems to be a conclusion that Apple has some to (at least in China). It has rolled out discounts through third party channel members and made devices cheaper to purchase with zero interest financing.

    This makes the moves by Huawei and Samsung beyond Apple pricing with their latest phone launches a bit odd and a definite move to define a luxury smartphone segment. These must be halo effect handsets with no expectation of real profitable production; rather like Ford’s special cars like the GT-40. More luxury related posts here.

  • Shut down digital marketing + more

    Mark Ritson: It’s time to shut down digital marketing teams for good | Marketing Week – return to media neutral and evidence based marketing? It also reminded me of a debate that I had back in 2008 with James Warren about when were we likely to see the end of the digital strategist. It hasn’t happened yet, because there are plenty of businesses selling ‘digital transformation’. Basically the old enterprise IT sales process in a new design thinking bottle. I suspect that the time to shut down digital marketing teams might be a while away yet, though I agree with Ritson’s sentiment.

    Carmakers quitting Britain won’t blame Brexit – it’s not in their interest | The Guardian – classic reputation management; I don’t blame the Japanese for taking this approach. I imagine that Mini, Bentley and Rolls Royce might take this approach too, if the brands survive electrification. Aston Martin and Jaguar Land Rover may go further showcasing India or China as a premium vehicle powerhouse.

    Europe lagging on 5G? Don’t be so sure, says Ericsson | total telecom – Ericsson believe that the move to speed up 5G rollout in Europe will come from Industrial, rather than consumer focused use cases. European government’s and operators are looking to fast track their 5G rollout programmes, dispelling the myth that Europe will be ‘late to the 5G party’, according to an industry expert

    WSJ City | Key investors unhappy with SoftBank Tech-Investment Fund – not terribly surprised

    Gender and box office performance: Applied Economics Letters: Vol 26, No 9 – having a male star in a film generated a premium in the neighbourhood of 12%, while female star had no statistical impact on a movie’s performance – is this down to the way that they are marketed or the way that male stars are perceived versus female stars? I also tend to follow directors because of the sense of style that they bring to a story. Their name is a mark of quality

  • Legend of Old McLanden & things from last week

    BMW’s X7 advert about the Legend of Old McLanden has been cited as a piece of feminist advertising. I won’t spoil it for you watch the clip and you’ll see why.

    I think that its part of something different which has been less heralded: a return to craft in advertising. We’re starting to see a refocusing of marketing. Away from the shiny toys of ad tech and influencer networks back to advertising craft.

    The Legend of Old McLanden would fit comfortably with the golden age of TV adverts and I think that’s a good thing for brand building. Especially when we usually only see this kind of thing during the Super Bowl.

    I am a big fan of Visual Politik’s videos, but was unimpressed by this video on crypto currency. I get the attractiveness of a more decentralised internet, BUT I don’t buy into the cryptocurrency hype and believe that blockchain is at best a solution for niche problems.

    The video reminds me a lot about the techno-utopian opinions of the early web, P2P technologies etc. It has value, but it isn’t likely to be transformative in the way its implied.

    SK-II has a new instalment in its #changedestiny themed campaigns called ‘Meet Me Halfway’. This time they focused on the pressure that single Chinese women face during family gatherings for lunar new year.

    It follows on the SK-II marriage market makeover campaign done in 2016. More beauty related content here.

    Whilst many consumer brands have dashed into the influencer marketing space, it interesting that adidas have developed a contra-influencer content. It does

    Diesel’s ‘Be A Follower’ campaign took a similar line to this latest Adidas campaign.

  • Aeron chair + more things

    Why the Aeron Is Still the Most Coveted Seat in the Office | WIRED – love my Aeron chair. The Herman Miller Aeron was an icon during the dot com era. When Enron and at lot of internet startups went bust thousands came on the secondhand market. I picked up my own Aeron on the tail end of the dot com bust from a German reseller. More design related content here

    China’s social credit system shows its teeth, banning millions from taking flights, trains | South China Morning Post – Over 3.59 million Chinese enterprises were added to the official creditworthiness blacklist last year, banning them from a series of activities, including bidding on projects, accessing security markets, taking part in land auctions, issuing corporate bonds, according to the 2018 annual report released by the National Public Credit Information Centre.

    Return of the audio format wars and other money-making scams • The Register – I’d also put it down to dissatisfaction with Spotify et al

    Salesforce’s Marc Benioff speaks about sexual harassment and equal pay – Business Insider – this isn’t about being good but being smart – the value in the business would walk out the door otherwise

    China’s most popular app is a propaganda tool teaching Xi Jinping Thought | South China Morning Post – I wonder if it has been optimised for learning the content?

    AAAS: Machine learning ‘causing science crisis’ – BBC News – high propensity of bullshit results

    Spintronics by ‘straintronics’ | Electroniq – possibility of new hybrid ferro-magnetic semiconductor composite devices

    Amazon HQ2: Leaving New York proves all of Amazon’s critics right – Recode – interesting analysis of Amazon going beyond HQ2. Big tech can now expect a can of whoop-ass to come its way as the Amazon New York debacle showed its vulnerability. When Amazon threw in the towel on the New York City HQ2, it showed the rest of the world how to beat Silicon Valley (AMZN)

    Inside China’s crackdown on young Marxists | Financial Times – Interesting article that posits China’s governmental changes are due to potential societal disruption due to very high Gini score. The Gini score is a measure of inequality. With rising inequality goes potential questions around the Communist Party’s exclusive legitimacy. The 1989 protests where workers joined students came out of inflation, growing inequality, corruption and inflation. This year marks sensitive anniversaries – 30 years since 1989 and 100 years since the founding of the republic.

    China is worried that left leaning student activists will further inflame this. An academic research paper by Yuyu Chen et al at Peking University indicates social mobility fell in the post-Mao era of economic reforms to pre-civil war levels, as measured by the dependence of children’s educational attainment on their fathers’. The money quote: “China is now sufficiently capitalist to make Marxist categories perfectly suited to social analysis,” from Rebecca Karl, professor of Chinese history at New York University. – (paywall)

  • Chinas Disruptors by Edward Tse

    Reading Chinas Disruptors by Edward Tse is a great primer on how China’s enterprises are structured differently to foreign companies. The government / private relationship is a complex one. Tse does a good job at explaining it well. This alone is a good reason to read the book.

    Tse’s background as China based management consultant and academic provides him with a greater understanding of how the China’s entrepreneurs work, which he channels into Chinas Disruptors.

    Innovation

    His points about the equal but different status in Chinese versus Western innovation are well made and not given sufficient consideration in non-Chinese analysis of the country.

    reading

    At the time of publication of Chinas Disruptors, Premier Xi’s changes were only starting to take root and so one has to take Tse’s writing in that lens. He identifies some of the main reasons why Chinese companies have managed to grow, even where they haven’t had explicit government protection: notably eBay versus Alibaba. It is also noticeable that eBay failed in Japan as well.

    Tse didn’t cover how Baidu’s battle with Google in the same depth. Even before Google was banned; Baidu had become the market leader. Google didn’t do as good a job as it should have done indexing the Chinese web. The Chinese web was growing at a faster rate than even Google could have imagined. Google also struggled in other ideogram based language markets like Korea and Japan. This implies a weakness in their core search offering. Baidu has had only limited success outside Chinese language speaking markets.

    Optimistic viewpoint

    The author takes an optimistic view on the future of Chinese companies abroad. He thinks that Chinese approaches applied to foreign markets will win out. Yet one of the key aspects of Haier’s past success has been extreme localisation.

    As an outsider I detect a certain hubris and arrogance in some Chinese companies going abroad.

    Wolf culture

    Tse doesn’t explore the wolf culture at all. The wolf culture that has been fostered inside some of China’s most notable companies has toxic side-effects on employees and partners. Even within the company it can create a ‘them and us’ division that splits Chinese workers from their non-Chinese colleagues. This is much greater than the grain of sand in a shoe type irritation that you get between US and other western management structures. It’s even greater than the insiders / outsiders friction working in a Korean or Japanese firm.

    China acquiring abroad

    One of Tse’s examples: Chinese company Sany acquiring German concrete pump company Putzmeister now looks like a high water mark for Chinese acquisition of German technology and knowhow. Tencent buying into Reddit has seen a community pushback that is designed to push the buttons of an increasing assertive Chinese government.

    The complex amorphous nature of Chinese company structures, the directive nature of their relationships with the Chinese government and strategic nature of their products has created an equal and opposites reaction in foreign markets. Chinese state companies have had variable success in Belt and Road initiative projects. The service sector growth desired hasn’t kicked in yet as Chinese consumers still prefer to save in preparation for whatever future change throws at them.

    Western tire of Chinese tactics and populism rises

    There has also been an attitude change in western businesses who have had enough. They’re tired of the regulatory environment and non-tariff barriers being stacked against them. You also see a backlash against globalisation spreading across the western world which will adversely affect China going global.

    In conclusion, Tse’s work is an excellent primer, just bear in mind when you read it:

    • Edward Tse has a got a glass half-full perspective
    • The one constant in China is economic and social change

    More related content can be found here.