A Case Study of Shanghai Tang: How to Build a Chinese Luxury Brand

This case focuses on Shanghai Tang, the first truly Chinese luxury brand that appeals to both Westerners and, more recently, to Chinese consumers worldwide. A visionary and wealthy businessman Sir David Tang created this company from scratch in 1994 in Hong Kong. Its story, spanned over almost two decades, has been fascinating. It went from what best a Chinese brand could be in the eyes of Westerners who love the Chinese culture, to a nearly-bankrupted company in 1998, before being acquired by Richemont, the second largest luxury group in the world. Since then, its turnaround has been spectacular with a growing appeal among Chinese luxury consumers who represent the core segment of the luxury industry today. The main objective of this case study is to formally examine how Shanghai Tang overcame its downfall and re-emerged as one the very few well- known Chinese luxury brands. More specifically, this case highlights the ways with which Shanghai Tang made a transitional change from a brand for Westerners who love the Chinese culture, to a brand for both, Westerners who love the Chinese culture and Chinese who love luxury. A close examination reveals that Shanghai Tang has followed the brand identity concept that consists of two major components: functional and emotional. The functional component for developing a luxury brand concerns all product characteristics that will make a product 'luxurious' in the eyes of the consumer, such as premium quality of cachemire from Mongolia, Chinese silk, lacquer, finest leather, porcelain, and jade in the case of Shanghai Tang. The emotional component consists of non-functional symbolic meanings of a brand. The symbolic meaning marks the major difference between a premium and a luxury brand. In the case of Shanghai Tang, its symbolic meaning refers to the Chinese culture and the brand aims to represent the best of Chinese traditions and establish itself as "the ambassador of modern Chinese style". It touches the Chinese heritage and emotions. Shanghai Tang has reinvented the modern Chinese chic by drawing back to the stylish decadence of Shanghai in the 1930s, which was then called the "Paris of the East", and this is where the brand finds inspiration to create its own myth. Once the functional and emotional components assured, Shanghai Tang has gone through a four-stage development to become the first global Chinese luxury brand: introduction, deepening, expansion, and revitalization. Introduction: David Tang discovered a market gap and had a vision to launch the first Chinese luxury brand to the world. The key success drivers for the introduction and management of a Chinese luxury brand are a solid brand identity and, above all, a creative mind, an inspired person. This was David Tang then, and this is now Raphael Le Masne de Chermont, the current Executive Chairman. Shanghai Tang combines Chinese and Western elements, which it finds to be the most sustainable platform for drawing consumers. Deepening: A major objective of the next phase is to become recognized as a luxury brand and a fashion or design authority. For this purpose, Shanghai Tang has cooperated with other well-regarded luxury and lifestyle brands such as Puma and Swarovski. It also expanded its product lines from high-end custom-made garments to music CDs and restaurant. Expansion: After the opening of his first store in Hong Kong in 1994, David Tang went on to open his second store in New York City three years later. However this New York retail operation was a financial disaster. Barely nineteen months after the opening, the store was shut down and quietly relocated to a cheaper location of Madison Avenue. Despite this failure, Shanghai Tang products found numerous followers especially among Western tourists and became "souvenir-like" must-haves. However, despite its strong brand DNA, the brand did not generate enough repeated sales and over the years the company cumulated heavy debts and became unprofitable. Revitalizing: After its purchase by Richemont in 1998, Le Masne de Chermont was appointed to lead the company, reposition the brand and undertake some major strategic changes such as revising the "Shanghai Tang" designs to appeal not only to Westerners but also to Chinese consumers, and to open new stores around the world. Since then, Shanghai Tang has become synonymous to a modern Chinese luxury lifestyle brand.