Building brand power
The troubles of Korea Inc. stem from one place - China. Big and small Korean enterprises have either failed in their ventures in China or were burned by Chinese companies. An entrepreneur incapable of grasping the ongoing changes in China could bring disaster to the company. If a business enters China thinking anything made in Korea can sell, it is in for a disastrous reality check.
Sinocentrism is at its peak. The Chinese are vehemently proud of their legacy and culture. They may envy others, but they would never trade it for theirs. One also must not overrate China’s fever over Korean-made products. Koreans must be fearful of the Chinese as their domestic economy heavily hinges on spending by Chinese visitors. The Hong Kong and Taiwanese tourism industry was rocked by the fluctuation in the tide of visitors from the mainland. Luxury shops are empty, and real estate prices are nose-diving in Hong Kong. Mainland visitors to Taiwan have significantly dropped due to escalated anti-China sentiment. The Chinese instead have turned to Japan, which offers cheaper rates from a lower yen.
All this has not happened out of coincidence. The Beijing government has been behind the shift in tourists in order to tame Hong Kong and Taiwan. The army of cash-rich Chinese tourists is Beijing’s secret weapon against neighboring countries.
The Korean market that relies on the spending and arrival of six million Chinese visitors is equally vulnerable. The Korean consumer market remained more or less unaffected by the world’s biggest recession in nearly 70 years thanks to China’s penchant for Korean beauty products and other goods. But considering 120 million Chinese go abroad a year, Korea brings in less than 5 percent of them. Korea does not make it into the top five overseas destinations that Chinese prefer. Korea is merely favored for geographic proximity, cheaper value travel options and duty-free shops.
Few Chinese come to Korea enthralled by our culture. The Chinese were accountable for 46 percent of global sales of luxury products and 47 percent of duty-free shop revenue. With 1.3 billion people in the country now owning at least one smartphone and the country equipped with airlines that can afford to buy 170 Airbus and 300 Boeing jets in one go, Korea cannot win solely through geographic proximity.
Moreover, the Chinese are drawn more and more to luxury products than cheap value. No Korean labels are found on the shelves of duty-free shops around the world. The Chinese like shopping in Korea because the luxury goods, without taxes, are cheaper here than in China.
Korea will be hardest hit when the Chinese government starts working on containing visitors to Korea. As soon as the government gives out secret orders to travel agencies to moderate trips to Korea as it had done with Hong Kong and Taiwan, we may no longer see Chinese-speaking tourists on the streets.
Moreover, once Beijing reduces the tariffs on luxury imports and vitalizes local duty-free shops, the Chinese won’t need to make the trip to Jeju Island and other parts of Korea. If Beijing becomes annoyed by the pressure on the North Korean nuclear problem and the Korea-U.S. plan to deploy the U.S. missile shield called Terminal High Altitude Area Defense on the Korean Peninsula, it could label Korea a danger zone and send out advisories recommending against visits to Korea. The Korean tourism boon from Chinese visitors that primarily relied on shopping could evaporate.
The key is to attract Chinese regardless of any meddling from authorities. We must be able to produce and sell items that do not exist elsewhere in the world. The world’s 500 biggest corporate names and all the luxury brands are available in China. Everything available in the world is now available in China. What can win in China is something that is unique. No business now can survive in China with cheaper options.
So what is something we make that does not exist elsewhere? Korean home dramas are one. K-pop and the Korean Wave have become a signature brand. We must be able to make hit dramas and sell the contents. Stories on the lifestyle of Korea and Koreans can revive the Korean Wave. This should now be led as a national agenda rather than the individual enterprise of TV stations and production companies. Just as the government sponsored semiconductor and electronics parts as strategic industries by establishing and funding research and development, the government must also support the Korean Wave industry and infrastructure.
Consumer behavior in China has changed with the Chinese now looking at per capita income of $10,000. They now prefer quality and names over price. Branding Korean Wave-related products has become crucial.
Korean regions should be able to develop product brands with global appeal. They must come up with brands that stand for regions, like Bordeaux wine. We must now win with quality, not prices, in order to sustain the Chinese boon.
Translation by the Korea JoongAng Daily staff.
JoongAng Sunday, Feb. 21, Page 19
*The author is director of the China Economy and Finance Research Institute.
by Jeon Byeong-seo