With A Big-Name Spokeswoman And Niche-Within-A-Niche Target Market, Can CECT’s Luxury Handsets Make A Name For Themselves Globally?
The Chinese telecom company Qiao Xing, which produces mobile phones under its subsidiary CECT, has recently made some tech headlines stateside, after rumors that the company had signed an agreement with American chipmaker Freescale Semiconductor to purchase Freescale’s mobile handset chip business proved true, then news broke that the company had hired 200 engineers to get busy developing new 3G mobile phones. All of this news, ostensibly, shows that Qiao Xing and CECT are interested in better positioning themselves to break out of the Chinese market and retool for global competitiveness.
Although the company is far from a household name outside of China and faces a pretty steep uphill battle against the Nokias and even the TCLs of the world, it looks like Qiao Xing, via CECT, is going niche in an effort to carve out a name for itself in the lucrative but cut-throat world of Chinese handsets. Qiao Xing’s VEVA luxury line, which has existed in some form for a few years now, is designed to be in league with competitors like Vertu, Nokia’s ungodly-expensive luxury sub-brand. Fitting in with the global form-over-function appeal of luxury handsets, the new touchscreen VEVA S90 will lack 3G capabilities, but is expected to follow the lead of CECT’s previous higher-end phones and feature plenty of gold, crystal, and/or any other shiny substance you can think of. According to an announcement of the recent debut:
Qiao Xing Mobile launched a thin touchscreen in its Veva line of handsets targeted at wealthy, fashion-sensitive “professional women” during a glitzy dinner event. Ultra-thin models in short black dresses pretended to use the new phone as they paraded on a catwalk to thumping dance music at the event. Multiple Chinese celebrities were in the audience.
Qiao Xing did not reveal the handset’s price, but its past handsets have sold for between 2,000 yuan (US$293) and 3,000 yuan. It offers one gold-plated handset for almost 5,000 yuan.
Luxury phones account for a minimal portion of China’s handset market, but winning over their users is vital for China’s mobile carriers as they launch 3G networks, said Ji Wei, an analyst at IDC.
Although the VEVA line is not quite luxury-priced by western standards, it is useful to have a little perspective on the Chinese market here. China, being the world’s biggest cellphone market, is no cakewalk for mobile phone manufacturers. There are dozens, if not hundreds, of domestic manufacturers, piracy and counterfeiting are rife, and competitiveness hinges on low price. Unlike Japanese consumers, the vast majority of handset buyers in China are not concerned with having the coolest new phone. They want a solid, affordable phone with the bare minimum of features, that is cheap and will last. Of course, to younger, educated, urban middle- and upper-class elites (a growing but still minority consumer segment), sporting the newest, most feature-laden, expensive model is always important. To tap into this elite segment, Qiao Xing feels it has to cater specifically to a niche within a niche — the professional, fashionable, wealthy 30-to-40-year-old woman. And what better way to market to this group than to sign a mainland superstar to be the face of the company? As Qiao Xing chairman Wu Zhiyang remarked in a press release,
“Our VEVA brand, launched in May 2008, is designed mainly for China’s fashion-conscious and upwardly-mobile professional females and males [note: Seriously?]. After signing Ms. Zhang Ziyi, international film megastar, as the brand’s spokesperson,the VEVA brand saw strong recognition and adoption among the targeted demographics, with 300,000 units shipped, at over 60% gross margin, in the third quarter of 2008 alone. The popularity of the VEVA can be seen at our four specialty retail stores in Beijing. We are confident VEVA as a luxury high-end brand, will merge fashion with high-tech and gain market share among China’s upwardly-mobile demographic.”
We’ll have to see whether Qiao Xing’s VEVA can hold its own among higher-end foreign competition in the mainland — or global, for that matter — market. I think the company will find it hard enough to convince deep-pocketed Chinese consumers to shell out for a domestic brand. Even with the star power of Zhang Ziyi — who, despite all appearances, is not the msot popular female star in China — and the glamorous debut events, it remains a fact that wealthy Chinese consumers on the whole prefer imported luxury products. The company will probably encounter difficulties marketing its VEVA handsets outside of China as well. While a larger proportion of Chinese consumers may be more willing or likely to add glittery accoutrements and spend as much money as possible to draw attention to their handsets, I can’t imagine a phone like the new VEVA gaining much popularity in New York or most other western markets, simply because flashy-for-the-sake-of-being-flashy has mostly fallen out of favor.
However, with CECT’s interest in spreading overseas and developing next-generation features, maybe they can afford to have the VEVA skip most international markets and bide their time until they have a new product that can appeal to western consumers on a broader scale. But with American and other western consumers increasingly embracing a new frugality, it begs the question: Will luxury handset makers even have a market to woo here in coming years?