Ni hao – this category features any blog posts that relate to the People’s Republic of China, the Chinese communist party, Chinese citizens, consumer behaviour, business, and Chinese business abroad.
It is likely the post will also in other categories too. For example a post about Tong Ren Tang might end up in the business section as well. Inevitably everything is inherently political in nature. At the moment, I don’t take suggestions for subject areas or comments on content for this category, it just isn’t worth the hassle.
Why have posts on China? I have been involved in projects there and had Chinese clients. China has some interesting things happening in art, advertising, architecture, design and manufacturing. I have managed to experience some great and not so great aspects of the country and its businesses.
Opinions have been managed by the omnipresent party and this has affected consumer behaviour. Lotte was boycotted and harassed out of the country. Toyota and Honda cars occasionally go through damage by consumer action during particularly high tensions with Japan.
I put stuff here to allow readers to make up their own minds about the PRC. The size of the place makes things complicated and the only constants are change, death, taxes and the party. Things get even more complicated on the global stage.
The unique nature of the Chinese internet and sheltered business sectors means that interesting Galapagos syndrome type things happen.
I have separate sections for Taiwan and Hong Kong, for posts that are specific to them.
If you’re of a certain age, you might think that Suncity is related to Sun City in South Africa. Both are in the gambling resort businesses but I don’t think that either are connected. Sun City is part of a pan-African hotel and resort group headquartered in South Africa.
You might even remember remember the Artists against Apartheid song.
Suncity was associated with gambling junkets to Macau. The company is associated with Alvin Chau. Prior being sentenced to prison for 18 years, Chau was known as a philandering casino tycoon with a Malaysian-American mistress Mandy Lieu (劉碧麗).
Suncity Holdings was a Hong Kong listed investment company with:
Resort business in the Philippines
Hotels and gaming businesses in Russia
Consultancy for running hotels and resorts
Travel Agency and air chartering services
Property development
Shopping mall management
After Chau’s arrest, Suncity cut ties and shut down gambling rooms associated with Chau. Suncity then changed its name to LET.
The FT alleges that Suncity is also connected with online sports gambling, with services aimed at mainland Chinese. This is illegal in China.
The most shocking part of the FT’s video is The Gaming Commission (TGC) admitting that they didn’t want to disclose information as it would undermine trust in the ability of TGC to do its due diligence properly.
Australia’s daigou days done? | WARC – tightening regulatory standards and alternative employment are cited as two key factors by Asia News Network. I would also add increased national pride gau chao has changed the game for Chinese domestic brands
How Coach is using “expressive” luxury to connect with Gen Z | WARC – Heritage brands find themselves at a crossroads between preserving their historical roots and resonating with younger demographics. Tapping into influencer partnerships and cause-related initiatives are two ways to strengthen consumer engagement while simultaneously retaining a brand’s established culture.
Can Tokyo Fashion Week get back on track? | Vogue Business – The Japanese event is rebuilding momentum and simmering with fresh and unique talent, but hopes for international success are hobbled by insularity and pandemic lockdown aftereffects
Great manufacturing video showing 100% sports sunglasses being made. Interesting that they choose not to manufacture in China. 100% came out of the motocross scene in the US, back in the 1980s.
How dollar stores (especially Dollar General) have quietly conquered America. The documentary talks about how they’ve reduced their base costs and can work in sparse or very low income communities. If nothing else, this reminds of you of the scale in America’s mid-West.
I had this copy of Deluxe on my shelf for a while and finally managed got round to reading it. Deluxe – how luxury lost its lustre was written by Dana Thomas. Dana knows the subject that she’s talking about.
Dana Thomas
Dana Thomas is a Paris-based journalist who covered the fashion industry. Thomas started her journalistic career writing for the ‘style’ section of The Washington Post. For a decade and a half Thomas was a cultural and fashion correspondent for Newsweek in Paris. She has contributed to The New York Times, The New Yorker, The Wall Street Journal, the Financial Times, Vogue, Harper’s Bazaar and Architectural Digest. Deluxe is one of three books that she has written, the other is Fashionopolis, which focuses on the fast fashion industry and Gods and Kings covered the career of fashion designers Alexander McQueen and John Galliano.
Deluxe – How Luxury Lost its Lustre
In the introduction starts with a scatter gun approach. She bemoans Gucci and Burberry factory seconds on sale in China, revealing the global supply chain used by luxury brands now. She also criticises that luxury goods are used as currency by some sex workers from compensated dating to ‘returning gifts’ and pocketing the difference minus a restocking fee.
I get the sense that Thomas would like to see these companies remain small ‘secrets’ only known by a cosmopolitan cognoscenti, obviously including herself. What my younger peers would call ‘gatekeeping’ in a derogatory way.
Parasite singles
Most of Thomas’ ire focuses on Louis Vuitton early on. She describes Bernard Arnaud in unflattering terms and makes the globalisation of the brand sound like a mix of a happy accident and opportunity. Along the way she critiques the weakness of Japanese society’s love for luxury goods down to subtle social signalling and ‘parasite singles’ – young women living at home with their parents who spend their disposable income on luxury goods.
(The reality is that could be young people with a job in Spain or Italy either as east Asians and Southern Europeans tend to only move out of home to marry or to follow work or education.)
Japanese tourists took their luxury shopping abroad, taking advantage of duty-free shopping. It’s no coincidence that LVMH owns DFS (Duty Free Shopping) outlets across America and the Pacific rim. Some of the lessons that DFS and LVMH learned selling to Japanese luxury buyers, such last late closing, you can still see in showrooms across the Asia Pacific region.
Jumping from Japanese duty free shoppers in Hawaii, Thomas moves on to the connection between a generation of Italian designers and Hollywood. Richard Gere’s star power was as much down to his styling making him look the part by Giorgio Armani as it was to his considerable acting prowess.
From Hollywood, the book delves into the perfume operations of the design houses. It highlights how perfume formulation moved from being an in-house activity for design houses to being outsourced to a few specialists companies who work with a ‘creative brief’.
Quality issues
The area where I can agree most with Thomas is around the decline in quality of luxury goods. Deluxe approaches this from the different tactics that luxury companies have used to conceal their use of Chinese factories. However as Apple has shown, made in China doesn’t necessarily mean cheap or poorly made. Indeed, a decade and a half after Deluxe was written, we’re seeing local luxury brands displacing international luxury brands in the Chinese market for several reasons, usually explained using the term ‘guo chao‘.
Thomas estimates that there at least four factories in China who manufacture most of the luxury industry’s handbags and leather goods – alongside private label brands for department stores and supermarkets. I was surprised that even back in 2004, manufacturing in China only saved 30 percent of the bill of materials.
The book goes on to cover the cost cutting that has gone into luxury products, from clothes with cheap stitching, skipped tailoring such as no lining in jackets and dresses. Thomas highlights that these changes happened to allow luxury to go mass market. Luxury then followed customers out of the office or the salon into all aspects of their life including sportswear and ‘streetwear’. What my friend Jeremy calls the ‘Supremification’ of luxury.
The reliance on the mass market bought about two challenges in Thomas’ eyes:
Counterfeit products that are almost indistinguishable from the real thing by experts
Rockier finances for the large luxury corporates who are no longer sheltered from economic cycles by the continued spending of ultra high net worth individuals.
The future
Thomas left us with two parts to what we saw the future of luxury looking like:
The continued pursuit of emerging markets with India replacing China due to demographics.
The new luxury of industry specialists spinning off and creating new houses, because they were jaded with the existing business practices and structures. The book highlights Tom Ford; who recently gave up his label and sold it on in November 2022 to cosmetics business Estée Lauder and fellow fashion house Ermenegildo Zegna.
In summary
Dana Thomas’ Deluxe is a book of its time in the early to mid 2000s. Thomas clearly has some bias’ due to history with some of the protagonists, which is worthwhile bearing in mind. The historical part of the book is useful; but the luxury industry has moved on and in some ways the problems are now much worse. With those provisos in mind, I can recommend the book as a background read on the luxury sector.
TikTok quacks is a bit of a harsh label for TikTok content. The reality is that similar content to that turned out by various TikTok quacks appear on YouTube, Instagram and other social media channels. Quack and quackery are synonyms for medical false claims or a ‘snake oil salesperson’.
Social media not only spreads misinformation and false hope across a range of medical conditions, it allows the perpetrators to profit directly from their work. The rise of dodgy health businesses with commerce integrated into their social posts by the likes of TikTok (and Instagram) facilitates TikTok quacks.
Below are just some of the content currently exposing this intersection between health, wellness, beauty and dishonestly obtained profits.
Hong Kong’s corporate lawyers test boundaries as Beijing’s influence grows | Financial Times – legal practitioners, including corporate lawyers, are concerned the broadening scope of a sweeping national security law could jeopardise the independence of the city’s legal system, a legacy of British administration, as Beijing tightens its grip. “There is general concern . . . that people are not fully understanding where the boundaries lie,” said a senior corporate lawyer with a global firm who has worked in Hong Kong for more than two decades – not entirely unexpected and a great opportunity for Singapore
Digital materials look to use different geometry of materials to replace other materials with special properties like foams. It does this through 3d printed lattices.
Sweden Is Not Staying Neutral in Russia’s Information War | New York Times – The Psychological Defense Agency also raised political concerns when it was proposed, but its leaders have emphasized that mandate allows it to address only foreign sources of disinformation, not content generated in Sweden. The challenge is one facing all democracies that, as a matter of principle, decline to enforce official ideologies, allowing divergent points of view of what is true or false. “The government can’t control the truth if it’s going to be a democracy,” said Hanna Linderstål, the founder of Earhart Business Protection Agency, a cybersecurity firm in Stockholm, and an adviser to the International Telecommunication Union, part of the United Nations. “The government can’t control the truth if it’s going to be a democracy,” said Hanna Linderstål, the senior cybersecurity adviser of Earhart Business Protection Agency.
ChatGPT In Trouble: OpenAI may go bankrupt by 2024, AI bot costs company $700,000 every day – not terribly surprising, it’s computationally intensive and hard to monetise. Look at how Google and Facebook have looked to squeeze computing power per watt out of their data centres, along with squeezing cost per server right down as well – they did this to reduce operating costs versus income. ChatGPT hadn’t gone there on design and instead uses 10,000 plus servers based around power-hungry top-of-the-range Nvidia graphics processors
The August 2023 newsletter was inspired by LinkedIn’s in-built newsletter function. It’s almost the bank holiday so I thought I would spend some time to try out the newsletter function in LinkedIn.
If you’re reading this, you’re a pioneer! If this goes well I will put one out each month. You can find my regular writings here and more about me here.
LK99 & room temperature superconductors – why it was a big deal, what it would have meant if it were true and the damage likely to have been caused given it’s likely to be false.
Chip War by Chris Miller. You can read my full review here.
Things I have been inspired by.
How left wing politics inspired Prada’s clothing designs.
Encouraging empathy for people with dementia in Japan with the restaurant of mistaken orders (scoll to the end here to find out more).
Things I have watched.
Three Body Problem. Chinese adaption by Tencent Video and made available for FREE on their YouTube channel. Don’t worry it has English subtitles. This is based on the blockbuster novel The Three Body Problem by Chinese science fiction author du jour Cixin Liu. The three books in the series are all fantastic and there is soon to be a Netflix adaption as well.
The Peripheral on Amazon Prime Video. An ambitious adaption of William Gibson’s novel of the same name. Amazon Studios recently cancelled the next season of this drama, which is a real shame as its one of the stand out series amongst the content on Prime Video.
Un Flic and Le Samourai – the magical formula of French new wave director Jean-Pierre Melville and actor Alain Delon created some iconic crime films that inspired directors in Hollywood, Hong Kong and Japan.
The sales pitch.
Available for strategic engagements in the autumn. Contact me here.
The End.
Congratulations, you’re reached the end of the August 2023 newsletter. Until next month: be excellent to each other. Let me know what you think or if you have any recommendations to be featured in forthcoming issues.
What prompted me to write about Geico advertising was a stream of news from marketing services companies about the state of technology company advertising. At the time of writing Stagwell are just the latest marketing services firm after S4, IPG, Omnicom and WPP have pinned declining profits on a reduction in technology company advertising spend. Then this story broke about Geico advertising: Insurer Geico made more money after benching its famous gecko | Quartz – and my first reaction was that the wrong lessons might be taken away from this.
Geico advertising – a primer
Geico îs an unfamiliar name to most people outside of the US. If you’ve read American magazines chances are there was a print ad or two in there with their iconic Gecko spokesperson. It’s a similar case on American television.
Geico advertising and their Gecko are as familiar to Americans as the meerkats of Comparethemarket.com are to your average Brits.
The truth about technology marketers vs. Geico advertising
Having worked with technology brands on and off for the past three decades, I have enough experience to know that generally, they aren’t great marketing organisations.
Coinbase’s Super Bowl ad drove traffic to a site that fell over.
Geico reinforced brand equity in the insurance space and pointed out their 24-hour claims hotline (I imagine that this isn’t an exclusive feature, but you wouldn’t know it from the advert).
Growth mindset ≠ marketing mindset
As organisations, they have a growth mindset, but not a marketing mindset. Before the internet, this meant a powerful field sales force organisation and marketing meant a bit of branding / design work coupled with case studies for the sales people. With the internet came constant iterative ‘growth hacking’ on digital channels, that mirrors agile software development rather than the best practices of marketing science.
There is a good reason why organisations like the Ehrenberg-Bass Institute for Marketing Science are supported by FMCG manufacturers, luxury goods makers, media companies, marketing services firms and pharmaceutical companies, BUT has no technology company sponsors.
The reasons are cultural in nature:
Engineering – if I haven’t heard of it or invented it then it’s not valid and you’re just a suit. At best great product is the marketing – and that’s great if you have a clearly differentiated great product which is self evident. The engineering mindset is also why they trust adtech and marketing automation services which outsource your marketing communications approach to a black box
Sales – marketing is just support. Which is the reason why my early clients (like old school Silicon Valley royalty LSI Logic) promoted long serving secretaries and administration staff into marketing roles
Even if they had a marketer who knew about Ehrenberg-Bass they wouldn’t be able to get in buy-in from the wider organisation to participate and they’d likely be fighting other dumpster fires elsewhere
Secondly, their laser focus on data affects their outlook. To paraphrase the comedian Bill Hicks: they know the price of everything, but the value of nothing. Because they are only looking at short term data. Great marketing and advertising also has long term effects that both screws with the short term marketing data focus.
Marketing and growth hacking are considered synonymous. It would seem ridiculous for me to to claim in any large marketing orientated organisation that sales and marketing are synonymous. The differences and complementary aspects of both would be well known. Yet in technology companies, this isn’t the case.
By contrast Geico as a brand is an organisation who understood marketing. You make your car or house insurance decision at best once a year (though there is friction in making a change).
The technology sector approach would be for Geico to bid on search ads and aggregators to acquire customers and then do direct mail or email when it comes to renewal times. But Geico advertising does something different. Geico advertising builds mental framework, so that Geico means car insurance and will be one of the brands that you consider.
This achieves a few things:
You are less likely to move away from Geico, you may not love them, but searching for an alternative might be too much of a hassle.
You may be reassured that you have chosen ‘the’ car insurance
It helps new customers get over the ‘which car insurance company to choose’ decision
It helps with upsell on the products due to the reassurance of the brand
Technology companies deal with these problems in a slightly different way:
Certification of engineering staff. If you are Microsoft certified or Cisco certified, you are less likely to use open source software or Juniper Networks products respectively. It would be against your self interest and the investment in terms of time and money that you have made in your self development
Contractual lock-in – self explanatory
Technology lock-in. You can put your data or programming code into a particular system, but its much harder and more expensive to move on to another system
Owning the entire technology stack. This is the approach that Adobe Systems have taken, gradually acquiring over the years the entire marketing, workflow and creative systems used by ad agencies, media agencies and their clients
So why was Geico advertising spend cut?
This is the crux of my point about how the wrong lessons might be taken away from the Geico advertising spend cut, with no ‘apparent’ impact.
There are a number of good reasons why Geico made the cut in advertising spend:
There was a cut in insurance sector advertising overall, so that Geico maintained or even grew its relative share of voice while spending less. This should see it emerge with improved economic performance over time. Procter and Gamble became the behemoth it now is by INCREASING advertising during the great depression of the 1920s. So the idea of relative share of voice and its relationship to market share is older than I am. Further more research by the IPA has found that holding or increasing relative share of voice during a downturn has a positive impact for business performance over a five year period
Geico may have managed to make some efficiency gains, this is most likely to occur in brand activating activities
There is also a bad reason: saving money in the short term. Kraft Heinz cut marketing to the bone under the guise of zero based budgeting (ZBB) – which made a mockery of ZBB as a concept. Kraft Heinz shares massively underperformed and were down 60% in the last 5 years, compared to the S&P 500 having gone up 69%. If Geico is following this route then it bodes ill for the long term performance of the business.
Without us knowing the real reasons and focusing on the short term measure, it reinforces a growth hacking mindset.
Hard times mean no sustainability premium in North America | WARC | The Feed – every single economic recession this comes around and marketers are surprised. Time to pay attention to what the longitudinal research data says. I really like the work that Gallup have done on macro trends and the American consumer, in particular their work on attitudes to the environment.
‘Pokémon Sleep’ Review: Sleep-Tracking Game Made Me Into Snorlax – gamifying sleep. Pokemon Sleep has surged to 3.2M global downloads and an estimated $130k in daily revenue according to SensorTower data. The app ranked in the top 5 in the U.S. Games charts. It’s even more popular in Japan (the home of Pokemon), where it’s number 1 across the App Store categories
Using attention to scale creative excellence at Mars | WARC – Sales, distinctive assets, and attention to advertising are the go-to metrics to guide marketing decisions at Mars. Mars use Attention as a pre-testing tool, to inform creative choices in digital and also proxy in TV. Mars believe that an execution with a better attention score will travel across media channels better and will be a safer bet for you when you need to make a choice. Measuring Attention is a key element in helping us improve the creative hit rate. Advertisers should question how they measure consumer responses and focus on measures of real consumer behavior.
