Furniture scandal hits consumers' nerve - Shaun Rein

Shaun Rein

Losing the confidence of Chinese consumers is easier than gaining is, tells business expert Shaun Rein in CNBC, analyzing the most recent products scandal: the fake furniture scam. What can foreign companies learn?

The products were shipped to China’s border, and then suddenly became “imported” the next day after bribing local officials to certify them as imported or ‘Made in Italy’. The situation has caused uproar among Chinese consumers and has become a media circus as the government has been pushing for an end to quality control problems in Chinese factories and has allowed the media to report on the scandal...

The scandal engulfing Da Vinci, and by association its partners, shows western brands need to be very cautious about whom they choose to represent their brands or to whom they license products. It is common for western brands to enter China via partnerships or licensing agreements rather than doing it alone. Now that the markets are more transparent than even a decade, it might make sense for some foreign companies to take back ownership of their China operations as Starbucks did when it bought out its partners for control of its store operations in the country. Luxury retailers Ralph Lauren and Burberry did the same thing to manage their brand and operations better.

Companies like Pierre Cardin or Disney generate a ton of sales from licensing and have done well so far. But if brands are going to go the route of licensing or partnerships, they need to police their partners well. Brands like Versace and Fendi will most likely take a hit on their reputations because of their association with Da Vinci. Consumers might wonder if these firms’ furniture products are made in China and have quality control problems, and they might have the same worries about their luxury clothes.

More in CNBC

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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