Karina Auchenberg Og Francisk

ECCO goes fashion -a repositioning strategy in China Master thesis By Karina Auchenberg and Franciska Larsen Supervisor: Søren Biune Copenhagen Business School 6 October 2009 Number of tabs: 271.974 Cand.merc.int Business and Development Studies Executive summary: Facing declining sales due to the economic crisis, many luxury companies are looking for new strategies of growth. Currently, many luxury and premium companies are looking for growth in the promising Chinese market for luxury consumption. China’s middle class is growing at fast pace and it has been predicted that China will become the biggest market for luxury consumption within a near future. Hence, a great opportunity for growth in China lies ahead and is seen as a promising sanctuary for western companies to recover from being in the red. The master thesis concentrates on the Danish shoemaker ECCO and its ambitions on the Chinese market. Currently, China is just one of ECCO’s many markets however it is ECCO’s strongest growth market and is therefore likely to becoming ECCO’s main market in the nearest future. The main purpose of thesis was to assess whether it would it be a viable growth strategy for ECCO in China to reposition their brand as an upper premium brand by using a brand extension into clothing as a tool to reach a broader segment and increase market shares. ECCO’s has been quite successful on the Chinese market targeting business men and women aged 35-40 and 55+. According to ECCO, their brand is perceives as being in line with luxury brands such as Prada on the Chinese market. However, one of our main findings was that this is not the general perception of ECCO in China, at least not among the young consumers. Moreover, though ECCO has been quite successful in targeting the older consumer group, we conducted a brand awareness survey based on young Chinese consumers which indicated that brand awareness was very moderate, almost non- existing in this segment. In comparison all our contestants knew luxury brands such as Prada and Louis Vuitton. In order to grow luxury and premium brands within the fashion market, not only seek out new markets to conquer, but also make use of brand extensions into adjacent categories such as apparel, leather goods, perfume, cosmetics and eyewear as well as watches and jewellery. As ECCO is already making shoes, bags, belts and wallets we suggest that ECCO makes an extension into clothing. As the young segment aged 20-29 is the segment that spends the most money on clothing and as ECCO is already covering the older segments we suggest that ECCO targets the elder part of this young group. However as our findings showed a low brand awareness and a lot of confusion about ECCO’s positioning and brand attributes, ECCO is facing a strategic brand building and positioning challenge. ECCO has to decide upon which position they should hold, how to capture this position and which segment they should target on the Chinese market in order to expand and increase their market share. Our suggestion is that ECCO makes the brand extension into clothing as a sub-brand targeting the younger segment. However, ECCO should be careful not to lose their current target group on the way, when incorporating the younger less affluent and less status possessing younger consumers into the brand universe. That a brand can be used as a status marker is one of the most important aspects for the Chinese consumers who are eager to show the surrounding society that they have success and leads a good life. However to boost status and for the brand extension to succeed ECCO has to make heavy investments in elevating their brand socially and on creating brand awareness among the different Chinese consumer segments. This can be done by using an aggressive marketing and branding campaign and by applying the right kind of positioning strategy. ECCO has to be clearer about how they want to be perceived by the Chinese consumers. Our suggestion is that ECCO reposition itself with the use of a new and more consistent positioning strategy supported by the new brand extension. To be perceived as a true upper premium brand ECCO could look to what the well know luxury brands are doing to create a luxurious image. Hence ECCO has to upscale everything from their distribution and service, to price and products etc. All in all ECCO have to seem more luxurious in all its communication with the consumers. Moreover, ECCO should make use of among others sponsorships, celebrity endorsements, fashion shows and fashion magazines in order to create a constant buzz around their brand thereby creating interest in the ECCO brand as well as permitting ECCO to create a stronger bond to its current and new customers. By doing this ECCO will make the Chinese consumers realize that ECCO is a strong premium brand and the indispensable brand equity will be created. Deciding upon such initiatives as the ones described here should however not be done without making intense marketing research. ECCO should carefully make pre-testing and research based on quantitative and qualitative analysis, before making the final brand extension and repositioning decision. If ECCO choose to make the brand extension and to engage in a repositioning campaign it is also of outmost importance to follow up on these by making sufficient measurements of its sales figures and brand equity. Appendix I: Definitions In this project we will use the word high-end brands to cover both upper premium brands and luxury brands. By luxury brands we mean brands such as Chanel, Louis Vuitton, Armani, YSL, Prada, Gucci etc., these fashion houses “owe” a luxury and prestige status and have contributed to shaping the global fashion market 1 . According to Phau and Prendergast (2000) ‘luxury’ is a subjective notion, however it is possibly to define the concept of a luxury brand. “Luxury brands compete on the ability to evoke exclusivity, a well-known brand identity...brand awareness and perceived quality.” Moreover, luxury brands are “those whose ratio of functional utility to price is low while the ratio of intangible and situational utility to price is high”. In reality this means that though consumers judge fast moving consumer goods on the brand and brand associations, they will normally put greater emphasis on functionality and price. In opposition, luxury consumers weights brand and status the most, whilst functionality is assumed2. Premium brands are those brands situated just under the luxury brand like Polo Ralph Lauren, Lacoste, Calvin Klein, etc. Premium products have high quality and highly priced products like luxury brands but have a wider distribution than the luxury brands. Though premium brands often seek to be perceived like luxury brands their marketing mix strategies are more attuned to the mass market, albeit the more luxurious part of the mass market3. Therefore we characterize both premium and luxury brands as high-end brands. We categorize ECCO in China as a premium brand4 . However, there seem to be some confusion among the Chinese consumers about where to place ECCO. ECCO’s position varies from everything between mass market where we find brands such as H&M, Zara, Mango, Top Shop, to being a low-end luxury brand. Moreover, the confusion is only made greater as ECCO sees itself as competing with Prada in China. 1Okonkwo 2007, p. 44 2Riley, Lomax and Blunden 2004, p. 42 3Okonkwo n.d. Table of contents 1 Introduction ..................................................................................................................................1 2 Method..........................................................................................................................................4 2.1 Sub-questions ........................................................................................................................4 2.2 The structure of the master thesis..........................................................................................4 2.3 Delimitation...........................................................................................................................5 2.4 Methodology .........................................................................................................................7 2.4.1 Scientific approach:........................................................................................................7 2.4.2 The data collection:........................................................................................................8 2.4.3 Primary empiric material: ..............................................................................................8 2.4.4 Interview design:............................................................................................................9 2.4.5 Criticism on empiric material: .......................................................................................9 2.4.6 Validity and reliability of our empiric findings: ..........................................................10 2.4.7 Secondary empiric material: ........................................................................................11 2.4.8 Theory selection:..........................................................................................................11 3 The Chinese fashion market .......................................................................................................14 3.1 The luxury model: ...............................................................................................................14 3.2

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