On 11th July 2008, we visited Hangzhou Tower and met with Tom, the General Manager. The visit to Hangzhou Tower was our last company visit. In fact I would say visiting Hangzhou Tower was adding one more feather in our elite cap of visits. Hangzhou Tower (HT) is located at Wulin Square, which is said to be the most famous shopping area in the city of Hangzhou. Its selling space consists of 36,000 square meters and includes two blocks (A and B respectively). HT is a Sino-foreign joint-venture but state-controlled enterprise. Hangzhou Tower is a luxury lifestyle department store, renowned in China for the breadth and depth of its exclusive fashion merchandise. In 2007, the annual turnover was 3.3 billion RMB. It prides itself on its faith - thinking a lot, doing its best, and striving to be the first, which has been helpful in winning awards from the fashion industry, consumers and even the Chinese Government.
The targeted consumers are high-income. There are 50,000 VIP consumers. By undertaking shopping activities of minimum 50,000 RMB an individual can become a silver card member and by undertaking shopping activities of 100,000 RMB the individual can become a gold card member. The average age of VIP customers is 35 years. VIP customers receive the benefits of personal drivers, client managers, discounts, free parking. The client managers provide information about the latest fashion trends, shopping styles and therefore, even if the client managers do leave Hangzhou Tower, it does not impact the relationship between the customer and Hangzhou Tower. In addition, Tom said that consumers visit frequently due to the need for acquiring the latest fashion trends from their client managers. Tom said that since the customers receive the additional benefits, they are loyal to the tower. He also added that the management addresses any complaints as quickly as possible. The management believes that handling the complaints quickly is important to win-back the customer confidence, which ultimately helps to increase the loyalty. The management holds parties, family days every month. This helps the customers to form business as well as personal networks. Under the Emergency System, the tower provides medical services to its customers. Tom gave the example of a customer who suffered a heart problem while he was shopping. The emergency system unit took the customer to the nearest hospital. The customer thanked the management. Tom believes that such sad incidents (but planned for) help to have a long list of loyal customers. I believe that HT displays a very practical approach of Corporate Social Responsibility (CSR). Hangzhou Tower management plans to operate another tower which will mainly target young customers. The new tower will also include luxury brands. Tom said that the Chinese will pay for the Chinese luxury brands because patriotic emotions are attached to them. He added that due to globalisation Chinese consumers currently have variety to choose among luxury brands. The management says that the fake brands do not impact on the consumer buying pattern for two reasons. Firstly, fake brands are not allowed to be displayed and secondly, only those consumers shop in Hangzhou Tower who can afford to buy luxury brands.
In relation to pricing, Tom said that most of the luxury brands will not use pricing patterns to promote sales. During occasions like the cold season or the Chinese New Year, the tower management will ask the shops to co-operate for any discounts; however the discount percentage is depended on the shops and can be upto 10%. The promotion of HT is mainly based on the word-of-mouth. The management will use hotels, airlines, banks, mobile companies to promote the new tower. The management believes that attracting the new generation of Chinese will not be a difficult task because a lot of family activities are held, and as mentioned above every month family days are held. Therefore, from a very young age, Chinese children are introduced early to the luxury brands at Hangzhou Tower. In addition the tradition of shopping at Hangzhou Tower will passed down to the new generation. Tom said that Hangzhou would be the location of the new tower and not cities like Shanghai or Beijing. To expand on this decision, he said that Hangzhou is one of the safest cities in China, the economy and trading environment of Hangzhou is growing (a lot of import-export activities are occurring after the first tier cities).
