Journal of Business Research 69 (2016) 357–364

Contents lists available at ScienceDirect

Journal of Business Research

The standardization-localization dilemma of brand communications for

luxury fashion retailers' internationalization into China☆
Sindy Liu a,⁎, Patsy Perry b, Christopher Moore c, Gary Warnaby b
a
International University of Monaco, 2 Avenue Albert II, Monaco
b
The University of Manchester, Oxford Road, Manchester M13 9PL, UK
c
Glasgow Caledonian University, 40 Fashion Street, Spitalfields E1 6PX, UK

a r t i c l e i n f o a b s t r a c t

Article history: This paper considers the standardization–localization debate within the context of foreign luxury fashion re-
Received 1 September 2014 tailers' internationalization into the emerging Chinese marketplace. Luxury retailers must balance a global–
Received in revised form 1 December 2014 local dilemma, given the challenging trading conditions of a complex marketplace with low brand awareness
Accepted 1 January 2015
and loyalty, alongside the need to maintain exclusivity and standardization of brand image across all markets.
Available online 28 August 2015
Qualitative data from 22 luxury fashion retailers currently active in the Chinese market provide rich insights
Keywords:
that reveal the decision-making process for marketing strategies that support entry into China. Foreign luxury re-
Luxury communication tailers balance the ‘global–local dilemma’ in China firstly by locating operational management control within the
International retailing strategic hub of Hong Kong, and secondly by implementing far more adaptive and enterprising marketing com-
International standardization munications than seen in other mature markets. At the same time, foreign luxury retailers retain tight strategic
Localization control of key branding dimensions at head offices in their home markets, as part of a successful long-term luxury
China brand management strategy. As Chinese luxury consumers increasingly feel part of a global elite, over-
Regional differences localization may cause confusion over brand identity and country of origin (COO). The insights may be strategi-
cally useful for luxury retailers entering or expanding in China and also provide indications of future trends of lux-
ury retailing in China and other emerging markets.
© 2015 Elsevier Inc. All rights reserved.

1. Introduction
The luxury fashion sector has undergone considerable structural
change, as couture houses expanded in scale and scope, with many lux-
ury fashion retailers internationalizing extensively through market seg-
mentation and the development of diffusion brands to target a global
segment of cosmopolitan luxury consumers. Consumer desire for luxury
goods transcends national and regional cultural boundaries, forming a
global luxury culture (Wiedman, Hennigs, and Siebel, 2007), and hori-
zontal segmentation strategies adopted recognize these developments
(Cleveland, Papadopoulos, & Laroche, 2011). Key constructs of luxury
brands contributing to consumer motivation to purchase include heri-
tage/history, craftsmanship/product integrity and global reputation
(Fionda & Moore, 2009). China's emerging luxury market provides lux-
ury retailers with immense opportunities (Bain & Co., 2011; KPMG,
2013) along with considerable marketing challenges resulting from its
high psychic distance from countries of brand origin (O'Grady & Lane,
1996). Retail challenges include the vast size of the country and signifi-
cant regional differences, censorship of international social media, unre-
liable printed media and low brand awareness (Chevalier & Lu, 2010;
Kapferer & Bastein, 2009). Consequently, brands must ‘localize’ market-
ing communication strategies (Chevalier & Lu, 2010). This paper offers
deeper insights into the decision-making processes of industry experts
responsible for negotiating these challenges, by posing the following re-
search question. How do foreign luxury fashion retailers balance the
need for adaptation of marketing communications to overcome chal-
lenging local market conditions in China, alongside the need for stan-
dardization of marketing communications, to maintain exclusivity of
brand image globally?
The following sections review the literature on Chinese consumer
behavior, luxury retail internationalization and standardization/adap-
tion theory. After setting out the qualitative methodological approach,
the study presents research findings. The final section offers a conclu-
sion and discussion of managerial implications.

2. Characteristics of the Chinese luxury consumer

☆ Sindy Liu was with University of the Arts (London College of Fashion) when this article
was submitted and accepted.
⁎ Corresponding author.
Luxury retailers' global expansion involves targeting wealthy con-
E-mail addresses: sliu@inseec.com (S. Liu), patsy.perry@manchester.ac.uk (P. Perry), sumers and elite levels of society (Kapferer, 2014). As cosmopolitan
C.Moore@gcu.ac.uk (C. Moore), gary.warnaby@manchester.ac.uk (G. Warnaby). consumers gain extensive exposure to other cultures via traveling or

http://dx.doi.org/10.1016/j.jbusres.2015.08.008
0148-2963/© 2015 Elsevier Inc. All rights reserved.
358 S. Liu et al. / Journal of Business Research 69 (2016) 357–364
global media consumption, they develop more international and less
provincially-oriented self-perceptions (Alden, Steenkamp, & Batra,
2006; Cleveland et al., 2011; Yeĝenoĝlu, 2005). Promulgated by the
mass media, certain product categories become symbols of modernity
and cosmopolitanism within a global consumer culture (Alden,
Steenkamp, & Batra, 1999) and luxury goods may be used to signal so-
cial and personal identity (Hennigs et al., 2012; Zhang & Kim, 2013).
However, despite the rapid development in Chinese luxury consumers'
taste and sophistication in first-tier cities (i.e. Beijing, Shanghai,
Guangzhou, Shenzhen), to a level where Chinese consumer behavior
converges with that of consumers in mature markets (Bain & Co.,
2012; Mintel, 2012), evidence suggests Chinese consumers still endorse
both modern and traditional values (Dong and Tian, 2009; Hung, Li, &
Belk, 2007).
Chinese consumer luxury purchasing behavior is significantly differ-
ent to other nationalities, with the lack of brand awareness and loyalty,
beyond the most recognizable brands, representing key barriers to re-
tailer success in China (Bain & Co., 2011; Chevalier & Lu, 2010; Lu,
2011, 2012; Zhan & He, 2012). Chinese luxury consumers are younger
(KPMG, 2013; Lu & Pras, 2011) and more conspicuous than those in de-
veloped Western markets, and their motives for purchasing luxury
goods are to show off their wealth and social status (Chadha & Husband,
2006; Kapferer, 2014; Li, Li & Kambele, 2012; Lu, 2011; Lu & Pras, 2011).
In recent years, however, Chinese consumer behavior has shifted to a
greater focus on intrinsic value, rarity and exclusivity (Harjani, 2013;
Kapferer, 2014; KPMG, 2013; Red Luxury, 2012). Chinese consumers'
behavior is also influenced by a brand's social meaning and the sense
of belonging to a desirable social group, as opposed to the focus upon
self-expression and individualism typically found in Western markets
(Kapferer, 2014; Shukla & Purani, 2011; Zhan & He, 2012). Furthermore,
Chinese luxury consumers are not only concentrated within the four
Tier 1 cities, but increasingly fragmented across Tier 2, 3 and 4 cities,
that could provide future investment opportunities for foreign retailers
(Deloitte China, 2011).
3. Luxury retailing internationalization: standardization
and adaptation
Fashion retailers tend to adopt a global strategy that replicates do-
mestic retail formulas across geographical markets in order to control
brand image (Alexander & Doherty, 2010; Salmon & Tordjman, 1989).
Success depends on creating an exclusive brand image through globally
standardized advertising campaigns, store format and product offerings
(Moore, Fernie, & Burt, 2000). Luxury brand communication strategies
aim to not only sell the product, but also create a dream and reinforce
brand values (Dubois & Paternault, 1995; Kapferer & Bastein, 2009).
Standardizing brand positioning and advertising is therefore essential
in maintaining consistency. Global positioning confers greater credibili-
ty, authority, power and value, ultimately leading to stronger brand eq-
uity (Aaker 1991; Kapferer 1992). This differs from other consumer
goods categories, where advertising standardization/adaptation deci-
sions tend to be based on cost efficiency considerations (Cleveland
et al., 2011; Fastoso & Whitelock, 2007). Luxury retailers also tend to
adopt centralized management, aiming for a high degree of control
over brand perception and development of operations in foreign mar-
kets (Kapferer & Bastein, 2009).
To succeed in international expansion, luxury retailers must maxi-
mize brand power, but with the rapid growth of emerging markets
with different characteristics, it becomes crucial to adapt to local market
needs (Chevalier & Lu, 2010). Marketing of luxury goods must also bal-
ance satisfaction of increasing consumer demand and protection of
brand status and exclusivity (Dubois & Paternault, 1995; Kapferer,
2014). Hence, retailers' international strategies are largely based on a
mix of both global and multinational approaches (Goldman, 2001).
Brand communications seeking cultural congruity with consumer pref-
erences in a particular region may incorporate local cultural values,
nationalistic appeals, colors, symbols, artifacts, and myths (Westjohn,
Singh, & Magnusson, 2012). Advertising examples include simple lin-
guistic and visual adaptations, or more extensive adaptations involving
model ethnicity, sentiments, usage situations or advertising appeals
(Hung et al., 2007; Zhou & Belk, 2004). China's complex luxury retail
market necessitates adaptation of marketing communication strategies
to include PR tactics such as lavish flagship store events, fashion shows
and use of Chinese celebrities as brand ambassadors to increase brand
awareness (Bain & Co., 2012; Chevalier & Lu, 2010; McKinsey, 2012;
Mintel, 2012).
4. Method
Using a phenomenological approach (Goulding, 2005) to generate
understanding of a real-world issue in a meaningful way (Patton,
2002), the first author conducted expert interviews during 2009–2014
with senior marketing managers in 22 luxury fashion retail brands op-
erating in China. Previous studies focusing on luxury fashion retailers
have successfully utilized such qualitative approaches (Dion &
Arnauld, 2011; Moore et al., 2000; Tynan, McKechnie, & Chhuon, 2010).
Following Zhang and Kim (2013), the term ‘luxury fashion’ includes
all items that can be worn on the person including apparel, watches,
jewelry and leather goods. The sample came from a wider population
of luxury fashion brands present in the Chinese marketplace in 2008,
which were identified using the luxury associations of four countries
that produce luxury fashion goods (Fondazonie Altagamma, Italy;
Comite Colbert, France; Walpole, UK; CFDA, USA), luxury market re-
ports (Mintel, Bain & Co., McKinsey), online databases (WGSN, Business
of Fashion) and top fashion magazines (Vogue China, Elle China). The au-
thors contacted 57 foreign luxury fashion brands, identified from the
above sources, and ultimately a final self-selected sample of 22 compa-
nies (representative in terms of size, country of origin and scope of
product range), agreed to participate (see Table 1). Brand identity in
all cases is anonymized at the request of respondents.
Adopting a purposive sampling strategy within each company to ac-
cess senior managers with relevant expertise and depth of involvement
allowed for the creation of information rich cases (Patton, 2002), as
shown in Table 1. The authors contacted the CEO of each company,
who then provided access to the most relevant employee. Subsequently,
a snowball technique provided access to further relevant employees in
each company. The first author conducted an average of two semi-
structured face-to-face interviews, lasting an average of 90 min in
total with each brand, with at least one interview at Director level.
Given the fast-moving nature of the business environment and the Chi-
nese market slowdown since end of 2012 (due to the Chinese
government's clamp-down on corruption), eight companies agreed to
participate in follow-up interviews in 2014 (companies 1, 2, 3, 4, 6,
10,17, and 20). Each interview covered a number of topics, as appearing
in Table 2.
Respondents gave permission for interviews to be recorded, which
enabled subsequent transcription. As a form of thematic analysis, tem-
plate analysis (King, 2012) facilitated data organization and reduction,
enabling systematic comparison of themes across a large body of data
to provide a rich and detailed account (Braun & Clarke, 2006). From
the literature review, the authors generated a priori codes to create
the initial template for analysis and the flexibility of the template anal-
ysis method allowed the incorporation, where appropriate, of additional
codes as the interpretive process proceeded (King, 2012). The study
used established qualitative data analysis principles to identify cross-
connections and relationships within the data (Miles & Huberman,
1994). The authors analyzed the data deductively, by coding the inter-
view transcripts according to key themes identified in the literature,
and inductively, with themes emerging from the data itself (Braun &
Clarke, 2006). The authors then revisited the literature alongside the
preliminary analysis, which led to re-coding and refinement of themes
 S. Liu et al. / Journal of Business Research 69 (2016) 357–364 359

Table 1
Sample breakdown.

Company/producta Country of Year and city of entry Respondent(s) Number

origin into of
China interviews

1. Leather goods, accessories & RTW France 1992 (Beijing) Vice President 4
Marketing Manager (Greater China Region)
CRM Manager
2. Men's bespoke & RTW UK 1992 (Beijing) CEO 3
Managing Director
3. 3 key brands of conglomerate: jewelry, watches & Switzerland 1993 (Beijing) Group Senior Executive for Asia Pacific 5
menswearb International Marketing Director
Marketing Manager, China
4. Leather goods France 1997 (Beijing) Commercial Area Manager, China 2
5. RTW Italy 1997 (Beijing) International Group Marketing Director 2
6. RTW UK 1997 (Shanghai) Head of Licensing 3
7. RTW UK 1999 (Shanghai) Head of Wholesale 3
8. RTW Germany 1999 (Shanghai) President, Greater China Region 2
Director (Accessories)
9. Leather goods & RTW Italy 1999 (Shanghai) Regional Marketing Director (Asia Pacific) 1
10. Jewelry US 2001 (Shanghai) Marketing Manager (Greater China Region) 4
European Marketing Manager (responsible for Chinese
tourists)
11. Jewelry UK 2002 (Shanghai) President, China 2
12. Leather goods & accessories US 2003 (Shanghai) Head of International Public Relations 3
13. RTW Italy 2004 (Hangzhou) Brand Manager (Greater China Region) 1
14. RTW UK 2004 (Shanghai) International Marketing Director 3
15. RTW France 2004 (Shanghai) CEO 2
Director of International Marketing
16. RTW & couture France 2005 (Beijing) Marketing Director (Asia Pacific) 2
International Marketing Manager
17. RTW France 2006 (Shanghai) Head of Franchising & Licensing 3
18. Men's bespoke UK 2008 (Beijing) Director/Owner 2
19. RTW Italy 2009 (Beijing) CEO 1
20. Footwear UK 2009 (Beijing) Brand Manager (Greater China Region) 2
a
RTW refers to ‘ready-to-wear’ (pret-à-porter).
b
Company 5 is comprised of three interviewees within the same conglomerate,who requested their data be grouped together. The Group Senior Executive for Asia Pacific did not wish
to reveal his actual job title.

and categories to create a final template for structuring the final analysis
(King, 2012), as shown in Table 3 below.
5. Results and discussion
Foreign luxury retailers balance the ‘global–local dilemma’ in China
by adapting to challenging market conditions, while maintaining a stan-
dardized luxury image through two key areas of strategic adaptation.
The first of these is the use of Hong Kong as a bridgehead to entry into
the Chinese mainland. Secondly, highly adaptive and enterprising
brand communications are employed to raise brand awareness and
generate loyalty, to an extent not seen in retailers' home markets. Find-
ings also reveal nuances in consumer sophistication between different
tier cities and the dangers to brand image and country of origin percep-
tions that may occur as a result of the over-localization of marketing
communications.
5.1. Use of Hong Kong as cultural and managerial bridgehead
Strong evidence supports movement towards decentralization of
operational management control through the use of Hong Kong as an
intermediate management place. As most luxury retailers have long
histories of success in Hong Kong, the location provides luxury re-
tailers with the existing resources and knowledge to successfully ex-
pand into mainland China. Retail internationalization patterns are
influenced by geographic or psychic proximity (Moore et al., 2000;
O'Grady & Lane, 1996; Salmon & Tordjman, 1989), and in this case,
Hong Kong's colonial history and geographic location provides cul-
tural proximity to the West, as well as cultural and geographical
proximity to the Chinese mainland. As the most popular tourist
destination of Chinese ‘mainlanders’ (KPMG, 2013; Yu, 2012) and
with greater luxury expertise, Hong Kong is crucial in increasing
brand awareness and success in China:
For brands that already had huge success in Hong Kong, our compa-
ny could already see the potential of China before the mainland was
opened up to foreign investors…Plus the distributors of luxury
brands are all from Hong Kong, which helped many of our brands'
start-up in mainland China. (Group Senior Executive for Asia Pacific,
Company 3)
A follow-up interview in 2014 confirmed the continued adoption of
this “near neighbor approach” (Moore et al., 2000, p.921):
Hong Kong is the window of mainland China. The rest of Asia also
use Hong Kong as a reference in terms of luxury, lifestyle, fashion,
pop culture, business center etc. And doing business is much easier
in Hong Kong, plus the Hong Kong retail market is one of the most
competitive in the world, so that if you're strong in Hong Kong, peo-
ple respect you in Asia. (Head of Franchising & Licensing, Company
17)
Hong Kong's connection to both China and the luxury retailers'
home markets provides luxury retailers with a perfect intermediate lo-
cation, and there was evidence of how Hong Kong's importance could
increase incrementally over time. The first stage in moving away from
centralized control in the retailer's home market is decentralized oper-
ational control in Hong Kong, with a regional management team wholly
responsible for marketing communication strategies, regional retail op-
erations management and regional warehouse and distribution. Experi-
ence over time could lead to the next stage of decentralized operational
360 S. Liu et al. / Journal of Business Research 69 (2016) 357–364

Table 2
Interview topic guide.

Initial interviews Follow-up interviews

Market entry methods Marketing strategies

When did your brand enter China?
What were your motives for entering
China and your expansion process in
China?
What were your market entry
method(s) in China? Advantages and
disadvantages of market entry
method(s)?
Did you have problems with the Chi-
nese government's restrictions on for-
eign investment? If so, how?
Is this your ideal market entry method?
If not, what is? Do you plan to change it
in the foreseeable future?
How different is China compared to
your other markets in terms of market
entry method selection?
Do you have a flagship store in China? If
so, how does this benefit your brand in
China?
Do you have a Chinese website? If so,
how does this benefit your business in
China?
Which specific marketing strategies do you adopt in China? Any changes in market entry method?
How do they benefit your business in China? Reasons?
In terms of management, do you hire local Chinese or transfer Benefits of such change in China?
from your home country? Downside of such change?
What are the advantages and disadvantages of this approach? Future change?
Do you manage your Chinese operation directly from your Other marketing strategy changes
head office, or does it operate alone as an independent market, Adaptive vs. standardized marketing activities
or is it managed from your head office in Asia? Examples of recent significant marketing activities in China
What are the advantages and disadvantages of this approach? Further development of the Chinese luxury market
Has your business performance in China achieved your expec- New opportunities?
tation so far? New obstacles?
Based on your company's experience, what are the elements Have previous obstacles improved?
for achieving success in the Chinese luxury market? Has the global economy downturn and the rapid change of the
Based on your company's experience, what are the differences Chinese market affected your business in terms of marketing
between second tier cities (e.g. Hangzhou, Nanjing) and major strategies? From a worldwide market perspective and from the
cities (e.g. Shanghai, Bejing)? Chinese market perspective?
What problems are you facing/have you faced in China? Additional comments on future development of luxury fashion
How does your company deal with the Chinese business cul- retailing/marketing in China?
ture?
How different is managing your Chinese operation compared
to other markets?
What is your company's future outlook in China?

control in China, but integrated with the regional Hong Kong operation. launch parties in second or third tier cities, which promoted the estab-
This could take the form of a China subsidiary managed by the Hong lishment of brand image in regional locations. The Vice President of
Kong subsidiary and the head office in the home market, or alternatively Company 1 highlighted the importance of regional flagship stores in
a China operation which is jointly managed by the Hong Kong subsidi- such a vast marketplace where wealth is not solely concentrated in
ary and a local partner. Research findings suggest no significant varia- first tier cities:
tion in this pattern, according to the size or the product orientation of
In such a big country with regional differences, a lot of messages get
companies. In all cases but one, Hong Kong is an instrumental step for
lost if you only communicate in Shanghai or Beijing, so there's no
foreign luxury retailers to expand into mainland China, and acts as a
better way to communicate your brand image via a flagship store.
strategic gateway to the mainland Chinese market.
Regional flagship stores are very important in China, especially since
wealth is not only concentrated in first tier cities like in most
5.2. Use of flagship stores for brand tangibility and relationship building
markets.
Due to the low brand awareness and loyalty of Chinese consumers,
Additionally, flagship stores were found to assist smaller luxury
retail success is largely dependent on the level of brand recognition.
brands to upwardly position their brand, thereby increasing brand
Findings suggest that foreign luxury retailers incorporate this by under-
taking heavy marketing communication strategies to build up brand
awareness and increase brand loyalty. The flagship store was reaffirmed Table 3
as a highly effective marketing strategy to increase brand awareness in Final template for data analysis.
China, as 20 of the 22 companies set up either directly-owned flagship
Key challenges Development pattern Specific strategies
stores, or sizable standalone boutiques managed by their partners. For in the
larger foreign luxury retailers, the flagship store is highly associated ‘global–local’
with a luxury brand's prestige and status in China. Flagship stores dilemma
offer luxury retailers the perfect marketing tool for tangibly establishing 1. Brand 1.1 Combine centralized and 1.1.1 Hong Kong subsidiary
brand image and for organizing events, affirming previous studies on management decentralized approach 1.1.2 China subsidiary
the role of flagship stores in marketing communication of luxury re- 1.1.3 Head office control
2. Market 2.1 Differences between sizes of 2.1.1 Wholesale
tailers' brand image (Joy, Wang, Chan, Sherry, & Cui, 2014; Moore,
entry brands 2.1.2 Franchise
Doherty, & Doyle, 2007). PR events are a very popular marketing com- methods 2.1.3 Direct retail as future
munication tactic – for example, store openings, special fashion trend
shows, exhibitions that showcase the brand's heritage and craftsman- 2.1.4 Use of hotels
ship, and charity events. Flagship stores were utilized to foster brand 2.2 Flagship store 2.2.1 Flagship for image and
status
loyalty by providing a high level of personalized service, offering special 2.2.2 Flagship for CRM
collections of products exclusive to China, and educating consumers on 2.3 Mixed entry method 2.3.1 Benefits
brand heritage and quality through in-store workshops and small exhi- 2.3.2 Challenges
bitions. The current study extends previous literature by emphasizing 3. Marketing 3.1 Global strategy 3.1.1. Standardize ad campaign
strategies 3.2 Differences between city 3.2.1 Level of adaptation
the importance of setting up flagship stores in China not only at nation-
tiers 3.2.2 Volume of events
al, but also regional level, given the size of the market. Setting up region- 3.2.3 Country and provincial
al flagship stores as a key strategy for success in China was affirmed by level flagship stores
all respondents, including a leading British luxury retailer (Company 2), 3.2.4 Need to adopt Chinese
whose CEO spoke of the PR benefits of store opening events: local media social media channels
3.3 Creativity and innovation 3.3.1 Hgh levels of innovation
would clamor to report the presence of Chinese celebrity guests at
 S. Liu et al. / Journal of Business Research 69 (2016) 357–364
status, especially if located in premium surroundings, such as the same
shopping malls as large luxury retailers:
With a directly-owned flagship store, we can offer everything to our
customers at the same level as our store in Bond Street, which cannot
be achieved through wholesaling; if you're not Vuitton or Chanel, it's
even more important to look ‘luxury’ as part of the luxury brand
identity, to compete with other brands as well as to engage with cus-
tomers at a deeper level. (Head of Licensing, Company 6)In order to
establish a luxury brand's image and to become highly visible in
China, one must set up a flagship store … it's also an opportunity
for smaller brands to build up their image quickly, especially in less
sophisticated cities. (President, Greater China Region, Company 11)
Such flagship stores and regional flagship stores can, therefore, act as
a platform to represent the luxury brands' image and a location from
which to conduct marketing communications in order to drive brand
awareness and increase brand loyalty. Smaller luxury retailers can
thus benefit from the lack of luxury awareness in the Chinese market-
place and build a reputation more quickly than might be possible in a
mature, competitive marketplace with high levels of brand awareness.
5.3. Highly enterprising marketing communications
Respondents confirmed the unique characteristics of Chinese luxury
consumers that necessitated an adaptive approach to brand communi-
cations, consistent with previous literature (Dong and Tian, 2009;
Hung et al., 2007). Furthermore, in a follow-up interview in 2014, the
lack of cross-generational luxury experience was highlighted as a barri-
er to brand awareness and loyalty:
Most wealthy clientele in China are first generation, therefore their
behavior is very different to the West where a lot of wealthy clien-
tele had generations of luxury lifestyle, so it's highly important to
show the Chinese the true value of the luxury brands and keep edu-
cating them. (Group Senior Executive for Asia Pacific, Company 3)
Linking to the discussion above, flagship stores also enable larger re-
tailers to experiment with entreprising communication strategies. In
the case of a key brand from companies 3 and 18 (both very small in
size internationally compared to their counterparts, but highly recog-
nizable in China), both indicated that their flagship stores enabled
them to experiment with more effective customer relationship manage-
ment in China, such as opening up private clubs within their flagship
stores. Many luxury retailers are entreprising in communications in
the Chinese market to an extent not seen in other markets, for example
by launching occasional special collections or products for China,
through active social media involvement, PR events and TV advertising.
Innovation in marketing communication attracts consumer attention
and PR benefits, thereby building brand awareness. In the case of
established retailers, such activities maintain market leader position
by showing artistic innovation and special concern for Chinese con-
sumers, as a means of increasing brand loyalty:
Chinese are very demanding shoppers… we're always trying our
best to offer consumers better shopping experience than others…
We'll soon improve our aftersales service by offering free repair ser-
vice for customers who purchased our products outside, because the
Chinese buy a lot abroad. (Vice President, Company 1)We had a big
fundraising event for families who suffered in the Sichuan earth-
quake…Chinese people very much appreciated that, it showed the
company cares about the people in China. It's very innovative be-
cause corporate responsibility was a new thing back in 2008 in
China. (International Group Marketing Director, Company 5)We
are very discreet in other markets, but our partners insist on the
need to adapt in China that we must conduct more events to com-
municate with Chinese consumers. (Managing Director, Company 2)
361
Educating the consumer by way of exhibitions that highlight the ar-
tisanal techniques and craftsmanship underpinning luxury products, as
well as the legendary roots of the brand, is an effective way of building
brand awareness and communicating the symbolic authority and intan-
gible benefits (Kapferer, 2014). This also underpins the shift from the
luxury market's traditional conspicuous consumption model focused
on the product, to an experiential sensibility defined by the consumer
(KPMG, 2013; Atwal & Williams, 2009; Wiedman, Hennigs, and
Siebels, 2007). Within this shift, retailers create a highly personalized
service for the most important clients of the firm, which goes far beyond
products and retail service but instead aims to closely integrate the
brand within the consumer's lifestyle, as indicated in one of the
follow-up interviews in 2014:
With very important clients, our aim is to make them ‘dream’, pro-
viding not just goods and services that can bought in-store, but an
emotional connection … We also propose a program for them when
they're traveling …if for holiday in Paris for example, we'll entertain
them, open doors for them that they won't be able to by themselves,
such as some very private leisure activities. (CRM Manager,
Company 1)
Despite extensive evidence of such highly adaptive tactics, there was
a keen awareness of the need to retain a degree of consistency in overall
global positioning. In the following subsections, the overarching need
for standardization of brand positioning is discussed, with particular ref-
erence to the nuances that exist between different city tiers.
5.4. Standardization and the dangers of over-localization
Strategies for brand communications in the Chinese marketplace re-
quire careful adaptation of global consumer culture positioning that ac-
knowledges the traditional values of Chinese luxury consumers.
Respondents identified the danger of over-localization, in terms of
compromising the standardized international luxury brand image.
Over-localization could result in inadvertently patronizing consumers
or causing consumer confusion as regards brand identity and country
of origin. The creation of special collections for the Chinese marketplace
should be carefully considered, in the words of one respondent:
Companies really must consider China as part of the global commu-
nity; it's silly to become the ‘clichéd Chinese’ because Chinese hate
gimmicks…putting a dragon on an Aston Martin or Ralph Lauren do-
ing a whole cheongsam dress collection is considered as patronizing
by Chinese! (President of Greater China Region, Company 11)
The Commercial Area Manager in Company 4 praised Cartier's suc-
cessful adaptation of its series of exhibitions across China, noting how
the exhibition was educational as well as culturally influential. It was
adapted to Chinese regional heterogeneity by being curated in different
ways in different provinces, and then combining all of them to create a
complete history of the brand that underpins its heritage and crafts-
manship. In contrast, the efforts of Emporio Armani in creating a sepa-
rate seasonal ad campaign for the Greater China region, using
exclusively Chinese celebrities, were strongly criticized:
It's a terrible mistake to over-localize. We did some consumer re-
search about Emporio Armani after the company used two Hong
Kong celebrities to front their campaign in the Greater China Region,
and the mainland Chinese thought it's a completely different brand
to the Armani brand, and thought the brand is of Hong Kong ori-
gin…So it's clear that the brand image must be consistent interna-
tionally to avoid confusion over brand identity. (International
Marketing Director, Company 14)
The need for global consistency was confirmed by the respondent
from Company 4, who explained that over-localization could
362 S. Liu et al. / Journal of Business Research 69 (2016) 357–364
compromise brand image, especially for well-traveled Chinese con-
sumers with greater brand knowledge (cf. KPMG, 2013):
We do very strong business in China, but we also do very strong
business with Chinese people who travel abroad; so it's very impor-
tant we have a centralised strategy that can affect brand image, like
advertising campaign and merchandising strategy. (Commercial Ar-
ea Manager, Company 4)
While Hung et al. (2007) indicate that a local (Asian) look enhances
consumer identification among Chinese female consumers, this study's
findings suggest that Chinese luxury consumers prefer to be considered
part of a global elite, rather than targeted as a discrete sub-set. This sup-
ports the existence of a global luxury culture whose members identify
with similar people around the world to a greater extent than with
those in their own community (Westjohn et al., 2012; Zhang & Khare,
2009). This sense of belonging to a global luxury elite overrides the in-
fluence of cultural congruity on perceived value, which is usually seen
in consumers from countries where national identity is high
(Steenkamp & Geyskens, 2006). Recent evidence suggests Chinese con-
sumers are moving further towards consumerism, increasing demand
for a more Western look in TV ads (Morris, 2014). The 2014 follow-up
data emphasized that the sophisticated Chinese luxury consumers in
first tier cities are truly ‘global’ consumers, thus the need to include
China as part of the global marketing strategy is inevitable. Such
globally-oriented consumers are more likely to hold positive attitudes
towards global brands rather than local brands (Alden et al., 2006;
Zhang & Khare, 2009). With their facets of heritage and history, luxury
brands also benefit from a strong connection to country of brand origin
(COO). As COO is a key contributor of consumer value perception for
luxury brands, the danger of causing confusion by over-localization is
very real. Hence, marketing strategies that can affect brand image,
such as seasonal ad campaigns and bi-annual key collections, should
be strictly centralized in all luxury companies as part of a successful
long term brand management strategy to maintain luxury image and
positioning (Kapferer & Bastein, 2009). Company 1 highlighted the de-
cision to include a famous Chinese actress as part of their global ad cam-
paign, rather than in a separate campaign for China. However, the
strategic implication of the global luxury culture in China is that brand
managers must look to wider trends than those within the Chinese
marketplace:
High net worth individuals in China are the true global luxury
consumers, they travel abroad often, especially those in their
20s and 30s, have much more choice and more information re-
ceived from digital media, they're willing to experience more
with everything. So the brands need to react very fast, be con-
stantly in tune with the new trends globally rather than only fo-
cusing on China. Nevertheless, it's about the balance, brands
shouldn't let consumers dictate strategies, but should use strate-
gies to enforce products and brand image. (Group Senior Execu-
tive for Asia Pacific, Company 3)
However, caution is expressed about moving towards a model of co-
creation of brand experience that is too consumer-led, which may dilute
the luxury status of the brand (cf. Kapferer & Bastein, 2009; Tynan et al.,
2010).
5.5. Regional nuances between city tiers
Regarding retail store expansion, the follow-up interviews in 2014
acknowledged the dangers of brand over-exposure, which subsequent-
ly led to label fatigue, especially as Chinese consumers are not brand
loyal. Thus, established brands in China should focus on the develop-
ment of existing flagship stores in first tier cities and prominent second
tier cities only, to maintain status and exclusivity. Respondents from the
2014 interviews explained the nuances between first tier and lower tier
consumer behaviors:
We've noticed a significant change of behavior in Chinese consumers
since 2012: the Chinese from first tier cities are very sophisticated,
comparable to the West; but most second tier cities and third tiers
are still highly conspicuous. So marketing strategies must be more
targeted than before. (European Marketing Manager (responsible
for Chinese tourists), Company 10)A few superbrands made the mis-
take of opening too many shops in Shanghai, thinking they must
catch up with the demand of the market without realizing the rapid
development of Chinese consumers' level of sophistication, so now
they got tied up to some new shopping malls and cannot get out.
Store opening must be carefully planned, some brands are suitable
for heavy expansion but some aren't, especially the ones who are
at the highest position. (Commercial Area Manager of Greater
China, Company 4)
Respondents from other companies expressed similar views, and the
interviewees from smaller companies emphasized how the rapid devel-
opment of consumer sophistication provides smaller luxury brands
with greater opportunities in first tier cities. Therefore, the already
established luxury brands in China must seek out more innovative strat-
egies to increase brand loyalty and maintain consumer interest. Data
from 2009 to 2011 identified the need for a high level of adaptation in
marketing communication, and other than the use of flagship stores to
support brand image building, PR events are the most significant mar-
keting communication strategy in China. Examples of entreprising mar-
keting communications include conducting special projects for the
Beijing Olympics by one company, and enclosing brochures within top
fashion magazines by another to enhance direct communication with
consumers. Neither of these tactics were conducted in either company's
established markets.
The follow-up interviews in 2014 indicated the need for an even
higher level of innovation in first tier cities. For example, respondents
emphasized the importance of exhibitions and PR events aiming at
brand education and promotion of heritage and craftsmanship. Citing
examples of innovative marketing communications events such as
Burberry's 3D holographic store opening show and digitally enhanced
flagship stores, respondents spoke of the viral marketing and reputation
building benefits of activities that emphasized brand heritage and story-
telling, hence increase brand awareness and loyalty among Chinese
consumers:
Our research found that Chinese consumers from first tier cities are
more interested in story and quality than logos. (Brand Manager of
Greater China Region, Company 20)We are constantly thinking
about the innovative ways to excite our Chinese consumers… events
are not only exciting and a great tool for product promotion, they al-
so intrigued and educated Chinese consumers about the Western
luxury heritage that they missed out on during that era. (Commer-
cial Area Manager of Greater China Region, Company 4)
Other respondents shared similar views that being innovative is par-
ticularly important in first tier cities. Similarly, Kapferer (2014) notes
how luxury brands' associations with high art has longer-term benefits
than the comparatively superficial tactic of celebrity endorsement. In-
novating with art cements the luxury brand qualities of “timelessness,
substance, and cultural and temporal substance” (p.376). The follow-
up interviews in 2014 also confirmed that using innovative marketing
communications is highly useful in building luxury brand status for
smaller companies, which is otherwise difficult, and can subsequently
upward position smaller brands and enable them to to compete with
large brands in first tier Chinese cities:
The consumers in first tier cities are very sophisticated now, so it cre-
ates opportunities for smaller brands if you can come up with unique
 S. Liu et al. / Journal of Business Research 69 (2016) 357–364 363

Table 4 The study identifies a number of strategic implications. Firstly, luxu-

Summary of results. ry retailers should aim to secure top tier luxury consumers' loyalty, as
Key themes Summary of results opinion leaders and influencers, through effective customer relation-
Use of Hong Kong as managerial Location acts as a two-way window to China
ship management. Secondly, innovative PR events such as exhibitions
bridgehead and the West are the most subtle and effective way of marketing communication, in-
Availability of talented human resources and corporating leisure activity, entertainment, education and promotion.
efficient distribution systems The luxury flagship store remains the most important strategic tool for
Use of flagship stores for brand Create brand awareness by conducting PR
luxury brands because it provides the highest level of direct consumer
tangibility and relationship activities within the store
building Increase brand loyalty through educational engagement and the best location for showcasing the brands' heritage,
activities and highly personalized levels of story and creativity. Nevertheless, being innovative in store design and
customer service service are key in order to stand out from the competition (cf. Le Fort,
Provincial level flagship stores maximize 2014). Finally, Chinese consumers, especially in the most sophisticated
communications impact across a vast market
Highly enterprising marketing Varied activities which are not always
first tier cities, want to be included as part of the global community,
communications conducted in brand's home market therefore it is important to incorporate China into the global marketing
Key to educating first generation luxury communications strategy. At the same time, luxury companies must
consumers recognize the significant differences emerging within the Chinese mar-
Standardization and the dangers of Key elements of marketing communications
ket, and subsequently should design targeted marketing communica-
over-localization must be standardized globally
Overlocalization could inadvertently tion programs for different tiers of cities and different regions. Based
patronize consumers who perceive on these findings, luxury strategies in China may be categorized into
themselves as part of a global elite three separate markets. In first tier cities (especially Beijing and
Overlocalization could cause confusion over Shanghai), sizeable flagship stores showcase the brand image, with
brand COO
entreprizing marketing communication strategies focused upon brand
Regional nuances between city High levels of innovation are needed to
tiers communicate with highly sophisticated education and innovation. Brand development is regarded at the same
consumers in first tier cities level as mature markets, hence these cities are incorporated into the
More cautious approach in lower tier cities to brand's long term management (e.g. innovative communication strate-
avoid over-exposure of brand
gies in China that benefit an international audience). In second tier cities
(especially the most prominent, such as Hangzhou and Chengdu), re-
gional flagship stores are combined with heavy marketing communica-
and interesting strategies to promote the brand. For instance, we tions (albeit quite traditional) strategies such as store events and
created a lively … event … and it really enhanced our luxury image celebrity endorsement are still relevant. Greater levels of conspicuous
and enabled us to compete with the larger menswear brands in consumption compared to first tier cities necessitate a separate commu-
China. (CEO, Company 2) nication strategy. Third tier cities are still relatively underdeveloped and
may be unsuitable for the most exclusive luxury brands.
Table 4 summarizes the findings. For future research, the insights drawn from this study could
be empirically tested and theoretically extended. In-depth case
6. Conclusions and implications studies could be conducted on luxury retailers that achieved success
(or failure) in China. Additionally, conducting comparison studies
The importance of balancing the ‘global-local dilemma’ is significant across different product categories could contribute to the under-
for foreign luxury retailers in China. Adaptation must take place within standing of the different sectors within the luxury industry. Finally,
the overarching constraint of a globally standardized brand image. The testing in other emerging markets, especially the Asian emerging
study affirms Chevalier and Lu's (2010) view on the importance of markets surrounding China that share similar cultures and consumer
adapting marketing communication strategy for entry into China and behaviors, would potentially further identify the nuances that exist
highlights in particular the significance of incorporating Hong Kong as in global markets. A further aspect worth investigating would be
an adaptive management operational control strategy. Additionally, it the differences in strategy between Western luxury brands and
indicates the pattern of future luxury retailing in China, as an increasing- those originating from emerging nations.
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