Attracting the Chinese consumer
Sweaters at a Gap store in Shanghai.
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Tess Vigeland: All retail eyes are on the coming holiday shopping season, and yes, we're going there, even in October. The NPD Group says most consumers are planning to spend about what they did last year, which isn't good news for anyone trying to sell something. And that's one reason many of them are heading to China. Next month, Gap will be the latest American retailer to try its luck with the hottest consumer market in the world. But shoppers there already have a lot to choose from.
Our China correspondent Rob Schmitz reports.
Rob Schmitz: There was once a time in China when all foreign retailers had to do was turn up -- the customers and their money would soon follow.
Marketing consultant Mary Bergstrom says those were the good ol' days.
Mary Bergstrom: I think that the days of a brand coming in and succeeding because they're from a specific country are over. So it's really more of a question of how are you, your brand and your products are innately connected to a Chinese consumer.
To explain, Bergstrom takes me to Shanghai's Nanjing Road -- one of the busiest shopping districts in the world. From Prada to Adidas to Krispy Kreme, all the big foreign brands are here. The ones that succeed, says Bergstrom, are those showing an effort to tailor their products to the Chinese consumer. Bergstrom takes me into a Starbucks.
Espresso machine whirring
Bergstrom: They're making a big effort to Chinese-ify their offerings. So we're going to have, in a moment, the coffee jelly frappucino.
Schmitz: What is a jelly frappuccino?
Bergstrom: We're going to find out, aren't we?
A jelly frappuccino may sound about as tempting as a meatball macchiato. But in the spirit of "don't knock it til you try it"...
Schmitz: This is jello that you put into a cup and you pour coffee over it and then you put whipped cream on top of it, that's what this is.
Bergstrom: And then you charge about four or five dollars.
Starbucks hasn't revealed how popular the jelly frappuccino is in China. But dropping strips of fruity gelatin into coffee is big in Asia, and Bergstrom gives the company points for effort. She advises Gap to follow that lead -- go out on a limb to appeal to Chinese customers.
Bergstrom: They're not as interested in going out to see you because you're you. They want to go out and see you because you relate to them, because you have some sort of value in their lives. For a commodity brand like the Gap, where young people have a plethora of options for different fashion, which might a little bit more stylish or less stylish, or more expensive or less expensive, what's gonna make the Gap special?
And that's the question I pose to Gap Asia president, John Ermatinger.
John Ermatinger: To your question: How do we differentiate? The easy answer is: We just be GAP.
Gap's China launch is part of a global expansion for the company after closing stores in the U.S. because of slumping sales. The only thing Gap will change about its apparel in China is the sizing, so it better fits the Asian body type. Apart from that, Ermatinger's confident Gap just needs to stick to its basics -- t-shirts, jeans and khakis. This is, after all, a fashion retailer. They're not selling hybrid Frappuccinos. To change the look of your apparel for one region could threaten what the brand is known for worldwide.
Ermatinger: When you go to a country like Israel or Australia or Athens or Turkey, these customers look at it as, "This is an American icon that is finally finally coming to my country, and now they're going to teach me what casual apparel is all about." And they're just euphoric over it.
But euphoria doesn't come easy to Chinese consumers, says Paul French. He's done market research for years in China. French says the companies that have done well in China -- Nike, Adidas, Zara, H&M -- all succeeded at communicating to the Chinese how respected their brands were internationally.
Paul French: I just don't think Gap has managed to communicate that yet, and if you look at brands that have come in, however successful they are in their home country, however compelling they are, their stories in their home country -- if they haven't communicated it here, they've failed.
Just take a look at Marks & Spencer, says French. The British department store chain was notorious for not bothering to change its clothing sizes for the Asian market when it arrived. Marketer Mary Bergstrom and I saw the result of this approach on a visit to the store on what was a busy shopping day... everywhere else.
Bergstrom: Well, I think if you look around, they are well-staffed and under-customered. I think it would be a great place to take a nap.
Bergstrom: Tell me I'm wrong.
Bergstrom says Marks & Spencer initially took a "build it and they will come" approach to China: Instead of spending a lot on marketing, it relied on what it thought was its international reputation. Many Chinese continue to ignore the chain.
As it turns out, Gap will be Marks & Spencer's new neighbor in Shanghai. A huge Gap billboard towers over 18-year-old shopper Zhou Yiting, who's just noticed it for the first time.
Zhou Yiting speaking in Chinese
I've never heard of this store, she says, looking a little bored. Down the street, signs for Puma, Nike, Levi's all battle for space. But Zhou isn't sure she'll buy anything there, either. She's a tough customer. And there's a billion more just like her.
In Shanghai, I'm Rob Schmitz, for Marketplace Money.