Disney Bets on China Thirst for Luxury 迪士尼押注中国名品市场

By newsdoug on January 18, 2012

Disney to open premium stores in China China’s thirst for luxury goods is a well established fact, with sales soaring for big brands like Louis Vuitton and Burberry in recent years as Chinese consumers eagerly spend thousands of dollars for the latest status symbol. But the taste for luxury for more everyday items is far less established — a reality that Disney (NYSE: DIS) will have to contend with as it embarks on an ambitious plan to open up to 40 of its recently developed Disney-brand stores in China over the next 3 years. (English article) Western firms have a very strong track record in China at the top-end of the luxury goods market, but things are decidedly more mixed at the middle-end where Disney will try to sell items like pricey clothing bearing Mickey and Minnie Mouse, and similarly expensive stuffed toys. Rival toymaker Mattel (NYSE: MAT) suffered an embarrassing setback in China last year when it shuttered its biggest House of Barbie in Shanghai, amid talk that Chinese were unwilling to shell out big bucks for the expensive toys and other kid-oriented services it was selling. (previous post) Likewise, Best Buy (NYSE: BBY), the world’s biggest electronics retailer, shuttered its own-brand stores in China last year after realizing consumers weren’t willing to pay a premium for its products in exchange for its big name and better service. (previous post) On the other hand, Starbucks (Nasdaq: SBUX) has found big success in China, using its premium image to get local yuppies to pay for lattes and cappuccinos that often cost twice as much as an entire meal at ordinary restaurants. Disney has a number of advantages over companies like Mattel, Best Buy and even Starbucks, in that its name is far more recognized in China than any of those other brands in China, with more than 20 years of history. Furthermore, this retail initiative is part of Disney’s much broader multi-faceted approach in China, which also includes selling its traditional TV shows and movies, licensing merchandise, opening Disney-branded English language schools and plans for a Disneyland in Shanghai. The big question is whether parents will be willing to pay such a large premium for toys and other Disney store merchandise for their kids, who are unlikely to notice the difference from lower-priced goods. But given Disney’s big name and popularity in China, I would say its new store initiative stands a good chance of success.

Bottom line: Disney’s new store initiative in China stands a good chance of success, drawing on the company’s strong brand awareness and premium image.

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