The New South China Mall has been almost completely empty for most of its 6 year existence. Many luxury flagship stores report a similar lack of foot traffic.

Many Western companies are excited about China’s rapidly growing middle class, and the consumer opportunity they present, but for luxury brands (not including luxury automobile makers) the most profitable path to capturing Chinese consumer spending power has been to market to the mainland, and sell abroad.

Why? For mainland China, import duties typically make the same goods 50-70% more expensive than they would be in cities outside of China. In France alone, a survey by Global Refund estimated that Chinese shoppers were responsible for nearly $1 billion in purchases. {Reuters} Perhaps in response to those type of statistics, China is preparing to reduce or eliminate the high import duties that drive consumers outside of mainland China for shopping.

Luxury Society covered some of the ins and outs of Chinese retail strategy for luxury brands. Essentially, flagship stores in mainland China are little more than street advertising to entice consumers to shop abroad, and on occasion private showrooms for a few high net worth shoppers who can keep the stores profitable with one or two spending sprees each year. The sales? Those are happening in places like Hong Kong, Singapore, Paris, London and New York.

In spite of the high taxes, and the fact that a good amount of Chinese luxury shopping is done outside of China, the country recently overtook Japan as the world’s second largest luxury market. Restrictions on luxury advertising in Beijing demonstrate the opposing views of communist capitalism, but China’s goal to increase domestic consumption and reduce their dependence on exports seems to be gaining ground over state sanctioned ideals.

After all, even though the current economic boom can create jobs building malls and flagship stores,  if doesn’t matter if none of that money makes its way back into the store.

Human breast milk from a cow? The cows were shocked too.

A dairy farm in China claims to have successfully genetically modified cows so that they produce human breast milk. If government approval is granted, the cow-produced “human” milk could be on supermarket shelves in China in three years. Maybe the breast milk ice cream shop was on to something.

If the genetically modified milk gets the stamp of approval, it will likely spark plenty of debate surrounding genetically modified food in general, and where the line is when it comes to ethics.

We were (and still are) admittedly a bit turned off by the prospect of eating something made from human breast milk, but the reality is that humans are the only animals who drink milk from another animal. And that’s something that’s not lost on nature. If you look at the rise of lactose-free dairy products and soy milk on store shelves, it’s no secret that not all humans are equipped to properly digest cow’s milk. Meaning that even if it seems weird, reaching for a bowl of breast milk ice cream is probably more natural than reaching for a pint of cow’s milk ice cream.

While that might be the case, milking women like cows is unlikely to gain popularity outside of a fetish community or two, meaning even if you are willing to splash breast milk on your cereal your options for finding a gallon are pretty limited.

Consider that China has a billion people to feed, and that a certain portion of those people might not be able to digest cow’s milk, and it becomes a little easier to understand why someone has undertaken this little experiment in the first place. Throw in the fact that many Chinese parents haven’t forgotten the tainted formula scandal that led to a formula manufacturer being sentenced to death (the plastic laced formula killed some of the babies who drank it), and there’s definitely a market.

Is the milk safe for human consumption? Presumably that’s what Chinese officials are testing for. Is it really human breast milk? Scientifically, this hasn’t been proven, so it’s difficult to say if the milk really is identical to what a child would get from a nursing mother. Let’s say it is; the bigger question is if enough consumers would be willing to put their initial reactions aside for farmers to milk the genetically modified food opportunity.

RenRen, a Chinese social network, just had a very successful IPO that raised $743 million for the company on shares priced at $14 (the high end of what many analysts anticipated). Currently, the stock is trading at $16.76 per share, giving the company a valuation of $6.5 billion on revenue of $67.5 million in 2010 – up 64% from 2009 revenues.

There’s certainly value in the network, but we have to go against the many media outlets who’ve promoted RenRen as “the Chinese Facebook.” It’s not.

Fortune notes some of RenRen’s similarities to Facebook: a social network that started by targeting college students before expanding to everyone, members using their real identities to connect with people they know, a platform for app developers, popular social games, a Connect system with partner websites. There are definitely a lot of similarities, but it’s the differences that account for why RenRen =/= Facebook.

1. Facebook is a big deal outside of the US, RenRen is only big in China

And according to their mission statement

“we aim to define social networking experience and to revolutionize the way that people in China connect, communicate, entertain and shop”

(emphasis, ours) they have no ambitions to change that. China is obviously a good market to be number one in, but so is the US. If Facebook had only focused on growth in the US, they wouldn’t be anywhere near where they are today. Facebook is Facebook because they’re the number one social network in the UK, in France, in Germany, in Canada and many more countries. Sure, there are plenty of countries where Facebook isn’t the top social network – notably Brazil, South Korea and Japan.

But as lucrative as the Chinese market is – and it’s certainly lucrative, being number one in one country just doesn’t equal being number one in 20 (sizable) countries.

2. When it comes to active users, there’s not a clear leader in China

RenRen claims 117 million registered users, but of that only 31 million are active. Percentage wise, that’s slightly more than 1/4th of registered users. No social network is immune to abandoned accounts, but worldwide Facebook claims more than 500 million active users, with 50% logging in daily. At an advertising event in February of this year, Facebook’s head of US Agency Relations broke out some country specific numbers. In the US (Facebook’s home country), there are 149 million active American users, 70% of whom log on daily. {TechCrunch}

Since Facebook doesn’t release registered user numbers (at over 500 million active users, it’s kind of  unnecessary) there’s no definitive figure to compare that with, but Google’s ad planning tool estimates put the number of absolute unique US users to Facebook in March 2011 at 190 million. If we assume all of those users have a Facebook account, that would mean almost 80% of Facebook’s US users are active, and 55% of their total registered user base – not just those who are active – visit the site every day.

RenRen’s active user numbers aren’t close. Add to that, even though analysts say competitors like 51.com are declining, they still maintain an equal or higher number of active Chinese internet users. {SAI/BusinessInsider} So RenRen isn’t exactly losing the fight when it comes to Chinese social networks, but there’s a way to go before they’re declared the winner.

3. Facebook is an internet presence outside Facebook

For a while, some people saw Facebook as the new AOL: a walled garden service that would eventually crash as people began to decentralize and move to sites on the open web. Then Facebook released widgets that allowed for the easy addition of Facebook social features to almost any site on the open web. Almost overnight, it made Facebook a force beyond Facebook.

The ‘Like’ button is officially a year old as of April 21st, and 10,000 sites are using it. RenRen Connect, which launched in October 2009, has 600 partner sites.

It’s not an apples to apples comparison, but probably one of the clearer examples of why our first two points matter.

4. User growth is beginning to plateau

RenRen is still growing, but percentage wise, user and revenue growth is slowing. {BusinessInsider} Facebook’s overall percentage growth may not be as rapid as it was in the past few years, but that’s because it’s pretty hard to keep up 100% year over year growth in every market when you have 500 million active users.

5. There is no RenRen ecosystem

Part of the reason Facebook has been able to raise so much money at eye-popping valuations is the fact that it’s an ecosystem that has the power to not only create revenue for itself, but cottage industries as well. Sure, Facebook owes some of its popularity to companies like Zynga, who create games and apps that keep people on the site; but Zynga also owes a good part of its multi-million dollar value to Facebook. Then there are companies like NorthSocial and BuddyMedia, who provide brands and companies with tools that help them manage their presence on the site.

Even Twitter, who still hasn’t completely figured out how to capitalize on the value it’s creating, has managed to create an ecosystem that other companies can be built on.

While Chinese game developers have had hits, RenRen just isn’t in a position yet to create industries specifically around RenRen.

While it’s highly unlikely that RenRen will ever equal the success of Facebook, it doesn’t have to to be successful. As of April 2010, ComScore estimates that 38% of Chinese internet users visit social networking sites, compared to 81% of US internet users. That means there’s still plenty of room for growth in users and revenue to satisfy investors. Add to that the fact that it’s notoriously difficult for Western consumer tech companies to succeed in China without partnerships, and RenRen certainly has a chance at becoming a significant Chinese internet company. Just don’t compare it to Facebook.

However, in private, Beijingâ€s luxury-obsessed consumers are now more spoiled than ever, as many of the worldâ€s top high-end brands have learned that outdoor advertising is less effective than online outreach and have gone increasingly digital.

While some luxury brands have limited their digital efforts in China to Chinese-language versions of their websites, others have taken steps to harness the growing popularity of online shopping. International retailers ranging from the Gap to Armani have recently launched online shopping platforms for the China market, and over the next year, weâ€re likely to see brands like Diane Von Furstenberg offer e-commerce platforms on their Chinese-language sites. However, for some brands, simply adding a couple of extra features to their websites isnâ€t enough. For Louis Vuitton and Burberry, two brands that have made serious pushes into the digital space in China, itâ€s all about technological superiority in the China market.

Back in 2008, Louis Vuitton, already one of the most well-known luxury brands operating in China, tapped celebrities Shu Qi, Joan Chen and Gong Li for its Soundwalk audio guides campaign, and last year LV became the first major luxury brand to experiment with digital marketing via Sina Weibo — Chinaâ€s answer to Twitter — a move saw other brands like Chanel, Gucci and DVF follow in rapid succession. Louis Vuitton has also taken steps to localize its digital outreach efforts by not only staking out a presence on Weibo, but also working to ensure its output resonates with Chinese netizens. From Wave:

Louis Vuittonâ€s official brand page on SINA, a popular Chinese social network similar to Twitter, has attracted a strong fan base with over 70,000 followers, more than other premium brands like Chanel or Gucci. Alongside posts about their products and cultural events, Louis Vuitton have recently posted pictures of their charity sponsored panda, named “Louis”, who acts as an emblem for the brandâ€s supportive actions towards panda protection in China.

WaveMetrix analysis shows that the post about Louis the panda generates the most positive response among all topics Louis Vuitton posts about. This suggests that a successful way to engage consumers in emerging markets is to post about topics that will resonate with their cultural background. In addition, Chinese consumers are not only more positive in response to the charity post, but also express more love for the Louis Vuitton brand than they do for product-related posts.

While Louis Vuitton was arguably the first out of the gates in terms of embracing the Chinese blogosphere, Burberry — which has spent the last couple of years trying to change its image from one of stodgy British tradition to one of hip internationalism — is in the midst of an extended (and expensive) effort to crack the China market. Last July, the company bought back control from its trading partner, Kwok Hang Holdings, for US$108 million as part of a restructuring effort and announced plans to unify its brand message to appeal to Chinese consumers. Earlier this month, Burberry unveiled its largest-ever digital rollout in preparation for the opening of its massive Beijing flagship, promoting the event by launching official accounts on the four major Chinese social media platforms (Kaixin001, Douban, Youku, Sina Weibo) and becoming the first luxury brand to experiment with Chinaâ€s location-based social media network, Jiepang. (A social “check-in” service akin to Foursquare.)

To celebrate the opening of its flagship, Burberry held a dazzling runway show at Beijing Television Centre, which incorporated huge digital screens and music by the British band Keane and DJ ShanXi. Following its star-studded event, Burberry announced that it would upgrade all 57 of its current China locations to make them more “digitally-savvy.” As PSFK notes:

The stores will have touchscreens as big as full-length mirrors displaying special collections and staff will carry iPads to help customers order items that arenâ€t available in their store. Fashion shows will be streamed from other countries, and there will be special Burberry-produced entertainment. Burberryâ€s other markets will later follow the digital retail model debuted in China.

Now, as Burberry  has arguably taken the lead in Chinaâ€s digital luxury “war,” the ballâ€s in Louis Vuittonâ€s court. But will LV be able to move quickly enough and appeal to a younger, hipper crowd? Do they want to? Will other brands like DVF or Gucci soon leapfrog LV in the digital sphere and successfully incorporate Chinese social platforms and cutting-edge technology into their China strategies? Interesting questions to keep in mind as major brands continue to make the transition from physical advertising to tailored digital outreach.

As Beijing Cracks Down On Outdoor Advertising, Luxury Giants Go Digital by Avery Booker originally appeared on Jing Daily and is republished on Signature9 with permission.

Lady in red

Really, there’s not much to say about the First Lady’s look besides wow. Vera Wang, in one of her own designs, was more understated but still elegant. We have to say the biggest surprise came from Wintour though. Perhaps it was out of deference for the First Lady, but the Vogue editor seemed a bit under dressed. Yes, Chanel suits are elegant and classic, but among the gowns of the evening – not just Michelle Obama’s either – it seemed like something better reserved for a cocktail gathering than a formal affair.

No one wants to be accused of trying to upstage the Michelle Obama or the first family (just ask Desiree Rogers), but did Wintour take that directive too far? We’ve seen the Met Gala photos so we know she has some gorgeous gowns in the closet, and we can’t imagine many designers refusing to lend a gown to the editor of the leading fashion magazine. Being low key is a good way to ensure an invitation to the next event, but we hope that Wintour doesn’t play it quite as safe the next time around.

Anna Wintour, Vera Wang and Christianne Amanpour (wearing an Armani suit that seems like a better choice for a formal dinner)

the Forzieri China website

While this might be bad news for Alipay, the ever-intensifying fight for market share is great news for Chinese consumers, who now have an increasing number of options for online shopping. As a Peopleâ€s Daily article this week points out, as online payment companies continue to duke it out and offer more incentives, Chinese shoppers can now avoid dealing with currency exchange and do more direct online shopping from individual global luxury brands or shopping portals.

From the article (translation by Jing Daily team):

Nowadays, consumers can skip the complex process of currency exchange, and purchase luxury goods from Gucci, Prada, Armani and other international brands directly through their websites.

Recently, after the Italian luxury brand Forzieri announced its cooperation with Paypal and launched a direct payment feature, the well-known fashion retail site Raffaello Network decided to test the waters of the Chinese online shopping market. As the No. 1 Italian fashion e-commerce website, Raffaelo Network sells Gucci, Prada, Fendi, Armani, Versace, Todâ€s and many other international brands. Consumers can not only choose from among 40 designers and 15,000 items according to their taste, but also enjoy an average 40% discount below retail prices.

It has been reported that during the transaction process, Paypalâ€s “overseas purchase” service helps domestic [Chinese] consumers exchange yuan into foreign currencies immediately, which is then paid to the seller for overseas shopping, which increases the convenience of direct transactions. At present, the “overseas purchase” feature supports currencies like the British pound, U.S. dollar, Swiss franc, euro etc. — 12 foreign currencies in all.

In response, industry insiders have claimed that the convenience of overseas payment has greatly stimulated the desire of Chinese consumers to shop online, which could lead to more overseas online shopping sites entering the Chinese market.

Global Luxury Brands “Testing The Waters” In Chinaâ€s E-Commerce Market originally appeared on Jing Daily, and is republished on Signature9 with permission.

Though it sounds like fodder for Stuff Chinese People Like (inspired by Stuff White People Like, of course), token white person is actually a job some Western expats in China have made into a career. According to CNN, white people – often out of work actors or models, or expats looking to pick up a few extra yuan, are often rented by companies to give a sense of prestige and international connections.

The requirements? “1. Be white. 2. Do not speak any Chinese, or really speak at all, unless asked. 3. Pretend like you just got off of an airplane yesterday.” {CNN}

The hired actors pose as anything from architects to oil tycoons, and duties can range from simply showing up at dinners or lunches to shake hands and look important, to actually presenting business cards and engaging in fictitious conversations through a “translator,” who is in reality not translating anything, but answering on behalf of the company. Longer term rentals aren’t unheard of, with some companies hiring white people to simply sit in offices for a few hours where customers can see them. For women, the opportunities range from foreign girlfriend to business executive.

Vicky Mohieddeen, a Scottish woman, took a job where she pretended to be an oil tycoon. The conference she attended, apparently wanted some diversity in the foreigners attending: people of nationalities ranging from Pakistani to Nigerian were brought to the event where they were feted with a sumptuous dinner.

“I was like, ‘Yeah, we have a lot of oil in Scotland.’ I didn’t know what to say. It was a bit nerve-racking. We were guests of honor of the vice mayor. We were put in a nice hotel. It was quite fancy. It is part of what China is all about, you know. There is quite an elaborate fantasy world going on here where if everyone buys into it, it does not matter if it is the truth. Those kinds of experiences give me a fuller understanding of the way the culture works.”

Israeli student Valera Kovtun also attended an oil conference where he was assigned to portray (imaginary) Egyptian investor Abdullah Hamedi. The task? Pass out business cards, pretend to be interested in the oil technology being presented and attend a banquet where he was one of the guests of honor.

Asked if he had any qualms about the practice, Kovtun said “I don’t mind what they do to themselves. Basically the government people trying to con the government people.”

That doesn’t mean there aren’t risks. An American actor who uses the name Brad Smith received a visit from Beijing police at his apartment after a financial company he briefly worked at in Xi’an, a city in western China, allegedly swindled millions of yuan out of clients. “That company said I was the guy in charge. I didn’t even remember the company’s name,” he said.

But it wasn’t enough to stop him from continuing a career as the token white guy. “After that, I decided I was never going to use my passport again with these fake companies. The small gigs are much less dangerous.”

And you thought American Apparel’s hiring practices were questionable.

Despite talks between the search engine behemoth and the Chinese government, Google announced today that the launch of two Android phones (previously scheduled for tomorrow) has been postponed.

The launch of the phones, from Samsung and Motorola on the China Unicom carrier, would signify the opening up of the Android mobile operating system to the previously untapped (and obviously HUGE) Chinese market. If Google continues to hold out, it could risk losing a lot more than face.

Here’s the timeline, updated:

• mid-December 2009 – Google and twenty other companies (reportedly including Yahoo!) suffer a “highly sophisticated and targeted attack” that attempts to extract data on Chinese human rights activists. The Gmail account information of two activists are accessed, but not the emails themselves.
• January 12th, 2010 - Google announces on their official blog: “we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.“
• January 13th, 2010 – Chinese citizens hold an informal memorial mourning the imminent loss of Google.
• January 14th, 2010 – The Chinese Government puts IMDB.com on its list of inaccessible sites.
• January 14th, 2010 – China indirectly responds to Google by publicly defending its right to censor information and stating that companies in China must abide by Chinaâ€s laws.
• January 14th, 2010 – Employees at Google China are given “holiday leave” and ” no longer have access to company systems.”
• January 18th, 2010 – Google and China commence talks.
• January 19th, 2010 – Google indefinitely postpones launch of Android phones in China.

Read More {AFP}

Read More {Engadget}

Read More {Mashable}

Things are getting a little hairy for Google in China.

Here’s the breakdown of events as they unfolded:

• mid-December 2009 – Google’s corporate infrastructure in China is hacked in a “highly sophisticated and targeted attack.” According to Google, this hacking also affected twenty other companies (reportedly including Yahoo!) and were meant to extract data on Chinese human rights activists. The Gmail account information of two activists are accessed, but not the emails themselves.
• January 12th, 2010 – Google announces on their official blog: “we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.“
• January 13th, 2010 – Chinese citizens hold an informal memorial mourning the imminent loss of Google.
• January 14th, 2010 – The Chinese Government puts IMDB.com on its list of inaccessible sites.
• January 14th, 2010 – China indirectly responds to Google by publicly defending its right to censor information and stating that companies in China must abide by China’s laws.
• January 14th, 2010 – Employees at Google China are given “holiday leave” and ” no longer have access to company systems.”

It seems that it’s only a matter of time before Google.cn is swept under the rug.

Read More {Bloomberg}

Read More {Google Blog}

Read More {Matador Network}

Read More {TechCrunch}

The real stars of the show, however, were the clothes: classic Chanel tweed suits received the traditional Chinese sartorial treatment based on cheongsam and qipao, juxtaposed with Last Emperor-worthy gold brocade; armor-like shingle embroideries adorned dresses and outerwear evocative of the terra-cotta army. Who knew that the famous Chanel quilted handbag was inspired by Chanel’s love of Chinoserie? Of interest were also this season’s popular thigh-high boots being made art-worthy to resemble exquisite Chinese porcelain vases and carved redwood furnitures. Certainly, the collection wouldn’t be fitting a Chinoserie-inspired one without a nod to the face of China, Chairman Mao, who, luckily, only reappeared in spirit in a pair of military green his and hers Mao tweed suits and comrade caps.

Lagerfeld definitely scored Chanel an epic victory of dynastic proportion with this latest audience-minded collection. The famous interlocking C’s (Chanel and China in this case?) might not be flying atop the Imperial Palace, but a Karl dynasty in the Imperial Kingdom might not be a far-fetched reality: Chanel is staking its capital strategically with a new store in Shanghai’s nexus of consumerism that is the Bund, further stoking the appetite and loyalty of a nation that is fast on Japan’s heels to take over the title of the world’s next biggest luxury consumer market.

Read the full story {Style.com}