Group Members:1) Chan Chung Ying Angel 20125810442) Wu Shuting, Sukki 30350232213) Ng Ka Wai, Kery 20137037164) Cheung Hin Ting Heidi 30350559755) Yiu Wai Yue Tiffany 3035051084 6) Lam Sin Ye (Bernice) 20125363247) Lee cheuk Leung John 30350607488) Tse Yiu Wai (Winnie) 2012555526

GCIN 2006 Group Written Report

Question 1Over the years, as Shanghai Tang goes more global than ever, it has become more debatable if Shanghai Tang is still an intermediate luxury or has attained itself to be true luxury. We will hence use the Semiotic Square of Consumption Values and Semiotic Square of Veracity to determine the present positioning of Shanghai Tang today.

Under the Semiotic Square of Consumption Value, utilitarian value and non-existential value are placed on the left while existential value and non-utilitarian value are placed on the right. If a product falls more on the left than right, it is classified as intermediate luxury rather than true luxury. Firstly, utilitarian value corresponds to the values of use and its practicality. To increase sale, Joanne Ooi redeveloped Shanghai Tang into a fashionable and lifestyle brand. Encompassing not only clothing with a more fashion conscious, Shanghai Tang has brought in its own brand of home accessories and curiosities. Although its products still reflect diverse Chinese culture elements, it is done at the significant of making its products more wearable and not enhancing its Chineseness. The recreation of Shanghai Tang thus expresses the subjectivity of modern life and interrogates consumer lifestyles. Clearly, Shanghai Tang fulfils its role for being practical and functional to today’s society.

As opposed to utilitarian values are existential values which correspond to self-fulfillment and identification. Shanghai Tang helps consumers to construct self- identity and social dependency. Especially in an international conference, the wearing of Shanghai Tang’s clothes with distinctive Chinese symbolic features allows one to express her/his Chinese individuality. In addition, its products bring cultural immersion and promote a sense of rootedness among the Chinese. As such, Shanghai Tang’s products are accomplishment of personal identification to one’s culture- which falls under the category of existential values.

Thirdly, products that fall under non-utilitarian values will provide pleasure and emotional feeling. Truly, the use of carefully picked and natural silk gives one a sense of feminine and sensual feeling. However, most of the emotional feeling is induced from the store environment than the product itself. Shanghai Tang’s retail environments employ diverse Chinese symbols to influence consumer shopping experience. The oriental design in the store acts as a social cue, which affect arousal and evoke emotional effects. The feeling of pleasure is induced from the store’s environment and not the product itself, and hence Shanghai Tang does not fall under non-utilitarian values.

Lastly, non-existential values mean the logic of calculation and interest. Innovation cost and quality that fit with price are usually the most important aspects. Due to the increasing cost of rental fees and low sales, several stores such as the flagship store in Hong Kong’s Pedder Street and New York’s Madison Avenue have to relocate themselves in a cheaper location. Even in the store’s location, Shanghai Tang does not have enough money to keep up with the competitiveness and hence it has to place innovative economy as priority. Hence, Shanghai Tang clearly belongs to non-existential values.

Apart from the Semiotic Square of Consumption Values, the Semiotic Square of Veracity can be used to define whether Shanghai Tang is an intermediate or true luxury.

The Semiotic Square of Veracity is a framework describing the difference in authentic, ostentatious and intermediate luxury- and points out the difference between them. The framework suggests that the intermediate luxury is a lie by pretending to be true luxury when it is not. In particular, owners are not able to afford true luxury so they purchase intermediate luxury as an alternative. This interpretation of intermediate luxury, suits the positioning of Shanghai Tang. Truly, owning to its strong brand establishment over the years, Shanghai Tang’s products are definitely at the high end with a tint of luxurious feel. However, it is more likely for people to use Shanghai Tang product as a kind of ‘ready-to-bring’ product for casual purpose than a ‘mysterious’ product for social status purpose. This is because Shanghai Tang’s style still reminds people about the styles found in Cultural Revolution- which post as one of the greatest difficulties for Shanghai Tang to be an aspiring brand among Chinese.

Using Semiotic Square of Consumption Value, Shanghai Tang falls more on the left hand side of the framework than right hand side. On the other hand, Semiotic Square of Veracity states that the using of Shanghai Tang product as an alternative for true luxury is lying. Indeed, both frameworks show that Shanghai Tang is classified as intermediate luxury.

Question 2Lots of brands incorporate national culture ingredients into the products. Like Armani that uses Italian elements into its products, Shanghai Tang uses distinctive Chinese cultural elements in designing its products.

The first national cultural ingredient is Shanghai’s heritage - which affects the creation of brand image. Having the name as “Paris of the East”, the use of Shanghai in Shanghai Tang gives customers the perception that China has a romantic culture. The brand name Shanghai Tang not only promote the image of a positive, wealthy and romantic China, but also help to eliminate negative impression of China due to past history like Tiananmen Square incident or Cultural Revolution.

The second national cultural ingredients will be establishing self image through bespoke service. More often than not, service will affect the brand’s image. In couple with friendly service, Shanghai Tang makes use of bespoke service to build up its image. It seems that customers love to make product that give the feeling of ‘strictly her/his product’. Through the bespoke service, customers will be able to establish closer relationship with the brand. At the same time, staffs of Shanghai Tang will be able to enhance their friendly services through one to one interaction.

Another national cultural ingredient being used is the Chinese style art forms, which affects the pattern of products, interior design, advertising graphics and logo. The Chinese brand name ‘ ’上海灘 - which the characters are arranged from right to left like those in traditional China, is one of the styles that reflect Chinese classy style. It is easy to identify Shanghai Tang as a Chinese brand given the use of Chinese characters as a brand logo. In fact, the brand has collaborated with HK artist Chow Chun Fai to interpret the “Chinese identity” and well as “Rich culture” concepts of the brand’s beliefs and values so as to enhance its positioning in the world today.

The last cultural dimensions will be the use of Chinese elements and Chinese symbols in designing its product. The use of Chinese fashion cultural ingredient has affected the brand’s positioning on the attribute of products. Design aspects including the well-known symbolic Cheongsam, Qipao collars and Chinese knots, as well as cuttings evolved from China’s Qing Dynasty. Traditional decorative patterns are also used to demonstrate a tribute to the representative fashion, luxurious and decorative elements of China in mid-20th century. Shanghai Tang makes use of Chinese symbols to enhance its Chineseness in the brand. Over the centuries, China has been using Chinese symbol in design and architecture. For example, dragon is the symbol that implies strong power and wealth; on the national flag, the red background symbolizes the determination of revolution. Symbolism thus becomes one of the national cultural characteristics of China. Building an image of global luxury brand, Shanghai Tang makes use of Chinese symbols as part of the design to position its brand. For example, jade which symbolizes wealth and good luck in the traditional China is used in the

belt of a dress. It makes the dress more elegant and gives a superiority image to the brand. To some extent, legends of China are also use in designing the products. For example, the legend of ‘The Weaving Maiden and the Cowherd’ is used in designing some of the dresses so as to give a strong Chinese identity and remind people about the different traditional festival in China. In essence, Shanghai Tang aims to reintroduce traditional Chinese aesthetics to the customers.

Question 3

Shanghai Tang began a rapid expansion from 1997, with plans to open stores in New York, London and other Asian cities. However, the New York flagship stores closed only 19 months after it had opened. The sales of stores outside China did not meet expectation. Shanghai Tang did not have a good performance in building a global luxury brands. There are several reasons accounting for the unsatisfactory results.

The first reason will be overestimating foreign consumers’ interest. Consumers in different countries have different taste and fashion sense to the products. Some of the products of Shanghai Tang contained too many Chinese elements, which overestimated foreign consumers’ interest in upscale Chinoiserie. Foreign consumers didn’t show great interest on Shanghai Tang’s products and this leads to unsatisfactory sales in some areas.

The second reason will be confusing brand style. Shanghai Tang tried to show both pre-revolutionary and Cultural Revolution styles in one store. Furthermore, the tongue-in-cheek and post-modern take on China’s heritage was lost on the wealthy foreign buyers.

The third reason will be difficulties on price justifying. It was difficult to justify the prices for high-end Chinese trinkets in foreign Shanghai Tang stores. The reason is that the similar alternatives in Chinatown are cheaper. Foreign consumers did not have much knowledge on justifying the differences and hence feel that Shanghai Tang’s products are too expensive.

The last reason will be short history and lack of brand heritage. Established in 1994, Shanghai Tang is a young brand with only twenty years’ history. The brand awareness is comparatively low in the international market. Compared to other luxury brand with decades of history, Shanghai Tang’s brand heritage is too short.

Regarding the above problems, Shanghai Tang should have been differently in various aspects as the suggestions below.

The first suggestion is establishing itself as an international brand. With the past history of unsatisfactory sales in foreign markets, we suggest Shanghai Tang to establish as an international brand targeting on China’s luxury goods market. Most Chinese premium customers value a brand in terms of international profile and recognition. By benchmarking with international brands and frequent collaboration with international designers and artists, it is perceived as international brand inspired by Chinese culture, rather than retaining it at a regional level.

The second suggestion will be integration of Chinese style. Using Chinese history as the element of style is confusing to international customers with no Chinese background and is lack of modern twist to local Chinese customers. Therefore, by integrating the brand with contemporary Chinese culture, such as in the form of prints and textures, it helps to evaluate its status as an international luxury brand with Chinese representation.

The third suggestion will be price premium. Rather than lowering its price, the brand should retain its current price and to further emphasize it premium quality and craftsmanship that are hugely different from similar alternatives. In order to enhance its premium elements, premium line with tailor-made designs and personal styling services could be added on to further justify our premium craftsmanship with professional services.

The last suggestion will be building brand heritage. Although Shanghai Tang is a relatively young brand with only twenty years history, it could be an advantage rather than a disadvantage. By drawing a parallel between Shanghai Tang and China’s newly developed and booming economy, the brand will be perceived as China contemporary luxury brand that is undergoing rapid expansion in the international market with both regional and international recognition.

Question 4Shanghai Tang, a Chinese brand which incorporates oriental elements into its product, has been going more global than ever. More often than not, one may tend to assume that Shanghai Tang is a luxury brand given that it is empowered with respectable status, influential power and exquisite quality. However, Shanghai Tang has to recreate its products to be more fashionable and several of its flagship stores are

forced to relocate due to raising cost. In addition, Shanghai Tang’s clothes cost less than those of foreign companies and the brand itself is never an aspiring brand among the Chinese. Using the frameworks of Semiotic Square of Consumption Values, Shanghai Tang falls more on the aspects of practicality and critical economic than utopian and aesthetics. Thus, Shanghai Tang is actually an intermediate luxury.

Owning to its positioning, Shanghai Tang is established in Hong Kong on 1994 by David Tang. He wanted Shanghai Tang to be a quintessentially Chinese brand within the main stream. After 2001, the new CEO of Shanghai Tang, Le Masne, came up with a clear positioning which is a modern, glamorous and Chinese lifestyle luxury brand. Shanghai Tang put efforts on product, place, price and promotion to attain its brand positioning.

Firstly, Shanghai Tang’s products use fashion of the old China with fabrics and natural tissues in order to create product with Chinese style. Moreover, the colors of the products are sensual and dynamic. Shanghai Tang tends to collaborate with several top designers to add value on luxury side.

Secondly, Shanghai Tang has two channels to sell its products, which are free standing stores and shops. To target the China market, there are 30 stores in China out of the total 45 stores. Prime retail locations remain central to its channel strategy of maintaining access to luxury cusumers. In recent years, Shanghai Tang opened shops in world-renown hotels (e.g Peninsula and Four Seasons) and international airport (Hong Kong and Beijing)

Lastly, Shanghai uses promotion to establish its positioning. Like most of the luxury brands, Shanghai Tang uses different channels such as events and pubic relationship for promotion purpose so as to establish its positioning. The brand sponsor different events in the regional market and use celebrities as endorsement. The brand plays with its Chinese identity by Chinese campaign themes. For example, “The ritual of the Phoenix” is the theme of spring/summer 2012.

We have chosen two luxury brand for comparison with Shanghai Tang. They are Vivienne Tam and Louis Vuitton. Vivienne Tam is a renowned read-to-wear intermediate luxury which add Chinese elements to their clothing. We use Vivienne Tam as a comparison with Shanghai Tang because both of them sell ready-to-wear with Chinese elements. We could thus compare and contrast their characteristics as

well as their marketing strategy and positioning. Louis Vuitton is an internationally famous luxury brand and of course it is a true luxury. LV is in fact a conglomerate which sell various luxury products like ready-to-wear, wine and handbags. Through having a look on LV which is a very successful model for luxury brand, we can get some insight on the inadequacy of Shanghai Tang to become a global luxury brand.

Referring to the perceptual map (Exhibit XXX), which shows the comparison between different international luxury brands regarding their retail places in the Chinese market and their online presence in the Chinese social media platform, it can be seen that Shanghai Tang has a much lower Chinese retail footprint as compared to most of the other brands, such as Ralph Lauren and Hermes, given that it has the greatest distance from Louis Vuitton. Moreover, Shanghai Tang has a relative mid-level of online presence, but insufficient effort could be shown comparing to other luxury brands like Giorgio Armani.

In comparison with the brand VIVIENNE TAM and the China line under Louis Vuitton, ShangHai Tang displaces contemporary style with Chinese elements, while VIVIENNE TAM put forward modern designs that are inspired by the Chinese culture, and Louis Vuitton retains its signature by integrating its monogram patterns into the fancy designs. In terms of international profile, ShangHai Tang comparatively has low international profile due to low international marketing effort, VIVIENNE TAM and Louis Vuitton China line both have high international profile among the global high end fashion stage, with Louis Vuitton China line being popular among Chinese customers. Regrading online presence, the online store of ShangHai Tang acts as a functional selling platform with insignificant brand information, whereas VIVIENNE TAM has a better established website with detailed information about the brand. Louis Vuitton CHina line contrastingly has a comprehensive tailor-made website and online store strategically targeting at Chinese affluent customers.

We conducted the SWOT analysis (Appendix 1) to find out the direction of improving the positioning of Shanghai Tang. For strengths, Shanghai Tang has a distinct image of being the first Chinese luxury brand in the fashion field. It is also known for its craftsmanship. There is constant innovation of new designs by in-store designers’ team as well. In terms of weaknesses, Shanghai Tang has a low international profile, insufficient online presence and insufficient education of brand knowledge. On the other hand, for the opportunity in the luxury designers good market, there is an increasing demand of luxury goods, thus a huge potential customer base. There is a rapid growth of internet business in particular. There is also an increasing popularity of Chinese culture among the globe. However, the major threats in the market are the intense international competition in Hong Kong and China. Furthermore, most Chinese demands for luxury goods take place outside China. What’s more, increasing number of global brands are taking inspirations from China e.g. Shang Xia that makes Shanghai Tang not that unique after all.

Appendix 1

Strengths● Distinct image of first Chinese

luxury brand in the fashion field● Craftsmanship● High/consistent quality products● Constant innovation of new

designs by in-store designers’ team

Weaknesses● Low international profile● Insufficient online presence● Insufficient education of brand

knowledge● unclear target market and

direction● Weak brand heritage ● Lack of brand resonance● debatable effect of “made in

China”

Opportunity ● Increased demand of luxury

goods● Increasing growth of internet

business● Huge potential customer base● Increasing popularity of Chinese

culture among the globe● With more fusion and

contemporary designs● Broad designing ideas inspired

by Chinese history and culture

Threats● International competition in

Hong Kong and China● Liability and strength of brand

under international expansion● Chinese demand for luxury

goods outside China● Increasing number of global

brand that takes inspiration from China e.g. Shang Xia

Enhancing International Profile

We suggest the international profile to be enhanced through collaboration, with the objectives to introduce the modern chinese element, as well as bringing the brand to the world stage. For instance, we recommend a collaboration of silk scarf product with Internationally well-known Chinese Artist Zhang Da Qian, whose background

and painting techniques combine both Chinese and Western culture, which fits with the expression of a “Shanghai Tang”spirit.

Sponsorship

the possible achievements through sponsorship include an effectively use of the broadcasting medium, with the goal of showing the modern Chinese features of products. For instance, the brand may choose to sponsor Hollywood Stars and MCs of the Oscar Academy Award, an international event, with dresses with Chinese patterns, or jade clutch with Chinese knots.

the presentation of brand heritage

the presentation of brand heritage is needed to improve. The Digital Marketing Effort should be put. The directest method is to promote the heritage through the advertisements on social media and search engine. Social media means the website and communication platform like Weibo. Also, according to the graph of research about China’s search engine market share in 2012, more than ninety percentage of the Chinese internet users use Baidu and Google China to be their usual search engine. Showing the advertisements on those media, it is believed that the brand heritage could be premoted to the public. The enhancement of user experience and the increase of media exposure are also the objectivities. The tactic that are be considered is to make a specific webpage for heritage. Shanghai Tang should upload one video per month. The content should be the brand history, social elements and the myths. The spirit and story is needed to add to the brand and present to the potential customer.

Question 5Shanghai Tang has a range of product lines, including apparel, accessories, home and fragrance. It mainly focuses on men and women’s apparel in which the designs are modern and chic with Chinese elements. The brand vision is to create the first global Chinese lifestyle brand and it aims to position itself as a true luxury brand. However, consumers currently position it as an intermediate luxury brand based on the analysis

in question 1. As discussed in the previous sections, low international profile with insufficient education of brand knowledge would be the major problem at present. Therefore, Shanghai Tang should concentrate on promoting its existing product lines in the short run through digital platforms and traditional marketing tools, including public relation activities and sponsorship events relevant to different targeted regional market. It is expected that these marketing efforts could help Shanghai Tang to generate a higher exposure and penetration in the international market.  

In order to increase market coverage and further promote the brand awareness in different targeted markets, diversification into other accessory segments would be a good strategy in the long run. We propose that Shanghai Tang can extend into new segments by opening its own restaurant, florist shop as well as the establishment of the exclusive membership club. One of the primary objectives of this brand extension is to reinforce the brand meaning and positioning of Shanghai Tang as a Chinese lifestyle brand that is relevant to the high-end fashion market by targeting the wealthy Chinese and non-Chinese throughout the extended product categories. Also, it is anticipated that the diversification can help Shanghai Tang to generate more positive feedback that benefits its original product lines.

Firstly, we recommend Shanghai Tang to open its own restaurants- ST by Shanghai Tang, which serves classic-contemporary Chinese and Western fusion food. The concept of fusion restaurants emphasizes on the relevancy to the brand core value of integrating traditional Chinese culture into contemporary settings. To align with the brand image of Shanghai Tang as a premium lifestyle brand, the restaurant will be targeting at customers who are willing to pay a premium for high quality food and environment. The restaurants will be opened near to the location of Shanghai Tang’s retail stores, including hotels such as Shangri-La Hotel in Shanghai, department stores or shopping malls. In addition, the restaurants will adopt modern and stylish interior designs, incorporating some traditional Chinese elements and decoration of Shanghai Tang’s tableware. As a high-class restaurant serving Michelin standard food, the price of the dishes would be relatively high. In terms of products, fusion cuisines with innovative combination, for example, foie gras fried rice and scrimp dumplings (“Ha Gau”) with black truffle will be offered. The ideas of incorporating Western raw ingredients into Chinese cuisine or vice versa correspond to the overall image of Shanghai Tang. For promotion, the fusion food restaurants would conduct different public relation activities, including in-store promotion such as food-tasting events and sponsoring some lifestyle events like exhibitions. It would also invite editors from different food and lifestyle blog, for instance, lifestyle Asia, magazine and newspaper

to try their cuisines and write editorials for the restaurant. These efforts can raise the public awareness of the new brand extension of Shanghai Tang.

Secondly, a flower shop- The Florist by Shanghai Tang which sells mainly Chinese breed flowers is suggested to be launched at selected markets. This concept is to highlight the core value of Shanghai Tang of bringing an authentic Chinese lifestyle to its customers while bringing out the liveliness of the brand. In other words, it could help non-Chinese customers and Chinese customers overseas add the Chinese liveliness to their homes no matter where they are. This As the cost of importing fresh flowers every day would be relatively high, thus, we would suggest only opening up stores in well-established markets with free-standing stores i.e. Shanghai, New York, Paris, London, Hong Kong, Tokyo, Singapore, Zurich. The Floral Shop could be incorporated into the freestanding stores using modern folding-screens to separate the areas so as to save rent. Furthermore, orders could also be placed online on its existing online store. In terms of product, instead of selling flower bundles, special floral arrangements for home furnishing is recommended to maintain a competitive edge and stand-out from the intense competition in the floral market. Instead of popular flowers like Garden Rose and Peony, we would suggest selling arrangements with breeds like Orchid, lotus, Narcissus and more. Modern pot designs can be incorporated into traditional materials e.g. china, clay etc. to build a more premium and unique signature identity for the floral shop .To suite the homes of Shanghai and Hong Kong, the floral arrangements would be downsized in these two markets. Besides selling flowers during daytime, workshops for Chinese floral arrangements could be held there at night. This could reduce the waste of fresh flowers and bring more profit to the company at the same time. . In order to suite the luxurious brand image, the flowers will be priced quite high, similar to local famous florists especially in western markets as there are few premium floral shops selling Chinese breed flowers. For promotion, fresh flower scent in shops will serve as a natural, automatic in-store promotion. There would be traditional print promotions on newspapers, and luxurious lifestyle and fashion magazines i.e. Tatler magazine. Also, there would be special discounts for floral arrangement purchases for 2 months after its launch.  To increase the awareness of such a brand extension, there would be pop-up stores The Florist by Shanghai Tang around the city. As for online promotion, there would also be promotions on their website, subscription e-mail, Facebook and more.

Last but not least, we would suggest Shanghai Tang to set up its own luxurious club- The Shanghai Tang Club which targets at luxurious business travellers. This diversification into a luxury service lines up with the brand philosophy by

emphasizing the luxurious Chinese lifestyle everywhere which is a reinforcement of the second suggestion. By joining the club, members will enjoy the exclusive rights of dining, sleeping, using the Chinese massage therapy services, and personal shopping services at The Shanghai Tang Club lounge and being invited to exclusive fashion and luxury lifestyle related events. For price, members will be asked to pay a monthly membership amount. The memberships will be available worldwide, but the lounge will only be set up at the Airports of the key targeted markets i.e. Shanghai, New York, Paris, London, Hong Kong, Tokyo, Singapore, and Zurich. Integrating the first recommendation, food and tea served at ST by Shanghai Tang will be served at the lounge. In order to maintain the level of prestigious feeling associated with the club and the brand, it is suggested that applications for membership are by-invitations only by local public relations department.

With the above three diversification directions, Shanghai Tang could be perceived as a relevant Chinese lifestyle brand, not simply a clothing label. At the same time, its profit margin and market share will be increased worldwide, achieving a well-established international profile.