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Hong Kong Branding Secrets

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CHINESE ECONOMY
AP

The past week I've enjoyed a rare window into Asian culture and thinking. I hopped a Saturday night flight on Singapore Airlines from San Francisco and fifteen hours later -- on Monday morning -- my host's driver picked me up at the sparkling Hong Kong airport.

Hong Kong assaults you with its verticality. Office towers and skinny concrete apartment spires sprout skyward like jungle bamboo. Zoning, planning and architecture are an afterthought, other than the landmark buildings like I.M Pei's ingeniously geometric Bank of China Tower. Interestingly, Pei wrote that he was attacked by the local Feng Shui "police" for his building's "sharp corners (which would) bring bad luck to one's neighbors." But the irony is that while Feng Shui may ward off the evil spirits it appears to do little for urban aesthetics. Laundry haphazardly hangs from windows hundreds of feet in the air, generating the overwhelming sense that function has beaten beauty.

Yet Hong Kong is an astonishing social accomplishment. In a week I will see but one beggar here, whereas on any given day in my hometown of Mill Valley, California, I'll encounter several panhandlers. Though the tiniest studio apartment in Hong Kong costs a million dollars, the tightly woven social fabric of parents, aunts and uncles routinely pitch in more than half a million in starter cash to ensure young professionals gain a toehold. Even the poor are provided for in public housing. Employment is virtually universal, as I experienced first hand one afternoon when I dropped the wrapper from my tasty pork bun. Before I could pick it up, I watched it deftly swept up by one of the ubiquitous street sweepers. While the city may not look beautiful in the same way as San Francisco or Paris, natives enjoy other privileges. The government of Hong Kong regulates what in practice is nearly indentured servitude. Young women plucked from the desperate Philippines slave away as live-in servants for families six days a week for a government mandated $640 dollars a month--that's less than $27 a day. These "Amahs" shop, cook and clean, providing the ultimate in luxury, a live-in servant. Something you'd rarely find in the U.S.

Hong Kong is an ongoing social experiment in space and a strict social contract. Down in the gleaming super-efficient MTR subway, order and politeness rule. Men and women cue up neatly between yellow lines for the trains. There's none of the rough pushing and jostling you'll find on the mainland (Hong Kong natives consider most mainland Chinese rude and ill-mannered). Young men here freely give up their seats to the elderly. As for the blue hospital masks you see on locals and especially food handlers, no one is immune. Public pressure, and the constant threat of another bird flu scourge, makes them essential. The smallest sneeze or cough requires that you don one, or risk being attacked with brutal glares.

Brands here live in this cross section, a city of mannered, orderly citizens capitalizing on a bustling economy despite being crammed into impossibly small spaces. My host's driver took me to what locals consider Hong Kong's Upper East Side -- the Happy Valley district. The garage is filled with BMW's, Audi's and a couple of Porsches. My apartment for the week is a clean and unremarkable one bedroom valued at three million U.S. dollars -- ten times what it would fetch in a top U.S. city. (Price, in other words, is relative) Next door the tiger mom relentlessly pushes her son through his daily piano lessons, and out my window is a view of laundry and concrete soiled with years of humidity and grime.

"Joy is BMW," is a tagline you see all over Hong Kong. I know what I see out my window and on the streets, and it does no make me think of joy. But what does a native see? What does a BMW or an elite brand mean when your daily physical reality is largely devoid of design and beauty?

The answer, my Hong Kong friends tell me, is that they don't see what I see. Just as I see Manhattan as bustling and vital, to a native's eyes Hong Kong is an Asian symbol of success. Unemployment here hovers around 4 percent. Opportunities for professional advancement here and abroad are excellent. Hong Kong may ostensibly be part of China but in practice it is largely free of the censorship and rigid authority of the communist party.

Luxury brands, especially those that can be seen or carried, are all the rage here. Chic Canton Road, home to many of the world's most elite brands, is nearly always packed with shoppers happy to drop thousands of U.S. dollars for a purse, shoulder bag or tote -- as long as it's the genuine article from Hermes, Mulberry, Louis Vuitton or Prada. Conventional wisdom once dictated that top-end consumers dominated these upscale purchases: China is home to more than 900,000 millionaires. But this past week AFP reported "The market is now being driven by China's burgeoning middle class, with the truly rich going ever further up-market -- happily spending tens of thousands of dollars on the right bag." Handbag sales for Prada grew by over 80 percent in China in 2010, Sebastian Suhl, chief operating officer at the Prada Group told AFP, while those of the group's Miu Miu brand rocketed by over 500 percent. China is expected to become the world's largest luxury goods market in nine years, according to the brokerage firm CLSA Asia-Pacific Markets, accounting for 44 percent of worldwide sales.

What makes this market explosion even more extraordinary is that 45 minutes away in Shenzhen, China, knock offs of thousand dollar bags can be had for $15 to $80, depending on your haggling skills. The new contrarian thinking is that those rip-offs have been good for major international brands, whetting the appetite for the real McCoy. The Asian love of the luxury bag has become "a cultural fact," blogs Christina Ko, at HK Fashion Geek. "In the same way that Asians prefer rice to potatoes, they also prefer luxury handbags to non-branded ones." And carrying a fake bag to many Asian women is no longer worth the risk of being exposed as a phony.

With branded luxury bags going stratospheric in Hong Kong, I wonder what will happen with brands that can't ride the wave of human billboards. Hong Kong natives rarely entertain at home for business or even friends. It's partly cultural quirk, and partly about space. The elite join outrageously expensive clubs designed to exclude the public and to entertain other elites. Young professionals aspire to move up the ladder of miniscule (though expensive) apartments simply too small to entertain.

That makes for two kinds of brands. Those you drive in or wear -- the visible, luxury brands -- and those that live in isolation behind the doors of seldom seen homes and apartments. The visible brand must shout that you are more than just another anonymous cog in Hong Kong's throbbing mass of humanity -- in the teeming subways, crowded restaurants and jam-packed streets. That's a big part of why middle class women here are willing to save and then splurge thousands of dollars on a luxury bag.

The homebound brand raises another question. How do you launch a brand no one else is likely to see? What does it take to win the heart and mind of a Chinese consumer in a product she may never get a chance to show off to friends or associates?

Whoever unlocks that secret may win the biggest prize of all.

Next Week: Part II. Chinese Voodoo

The Business Tightrope: Navigating unlucky numbers and risky gifts

Jonathan Littman is the founder of the storytelling and branding studio, Snowball Narrative. He's the co-author of two bestsellers, The Ten Faces of Innovation and Art of Innovation, and seven other books, among them the Fugitive Game and Crashing Augusta, a collection of his stories as a Contributing Editor for Playboy.