I saw the new movie Crazy Rich Asians last night. It was fun, escapist entertainment. However, the scenes in the shopping malls had me wonder, is this how the Crazy Rich Asians shop?

Singapore, Hong Kong, and Mainland China are well known for luxurious high-end malls filled with designer shops – which seem never to have anyone in them. Walk past these stores. You will see young, impeccably dressed, saleswomen milling around the store, straightening some item on display, or just looking through the front window. Where are the customers?

I have heard many reasons for this phenomenon. Some say that the malls themselves discount the rents to the name brands to make the mall more luxurious and attractive to potential stores. Others say that the stores are marketing activities to promote the store’s brand names to Chinese luxury consumers. A third theory is that the real shopping takes place by appointment in a private room behind the store or at the client’s hotel room. (The movie illustrated the third theory in a scene where Astrid was shopping for jewelry.)

40% of luxury purchases made by Chinese are made outside of China

The reality is that Crazy Rich Asians shop overseas and on the Internet. This is known as cross-border retail shopping.  A recent study shows that 40% of luxury purchases made by Chinese are made outside of China. Wealthy Mainland Chinese make an average of 5.9 international shopping trips per year. Hong Kong, South Korea, and Japan are the top destinations. Instead of selling to local customers, a recent survey by ContactLabs showed that 90% of all luxury goods sales in Hong Kong and Macau come from foreigners who engage in “touristic” shopping.

Internet shopping is also on the rise for the Chinese. Haito (海淘), buying imported products directly from cross-border vendors over the web, has grown at the breakneck rate of 74.8 percent annually since 2011 and exceeded $657 billion in 2014.

Why don’t Chinese purchase luxury products at home? Chinese consumers engage in cross-border shopping to get higher quality products (67%), to avoid counterfeits (45%), and to take advantage of lower prices (35%), according to Frost and Sullivan.

Fakes are so prevalent in southeast Asia that cross-border products have a higher chance of being the real thing.

Those of us who live in the West may worry that when we engage in cross-border shopping that we will get knock-offs. But, fakes are so prevalent in southeast Asia that imported products have a higher chance of being the real thing.

Hefty import tariffs and consumption taxes also raise prices for luxury goods in Mainland China. In 2016, the price for the Longchamps “Pliage” bag was France €76. In Beijing, it was 1100RMB (€150), double the price. (China is in the process of lowering tariffs for many products in 2018.)

Luxury brands are struggling to cater to the cross-border luxury customer. Her customer experience expectations are very high. McKinsey & Company states that the Chinese luxury customer expects:

  • “Being individually recognized by the store staff in every store of their favorite brands they walk in(to).”
  • “Experiencing a similar level of familiarity with sales staff as if they were in their preferred stores, like color preferences…”

Luxury brands focus on customer experience cross-border shopping

In response, luxury brands focus on customer experience cross-border shopping. For example, Burberry, which is well-known as an early adopter in customer experience, has reportedly hired 150 Mandarin speaking sales associates across popular travel destinations in Southeast Asia just for the Chinese traveler. (Chinese customers account for a third of the worldwide cross-border spending on luxury goods, and that percentage is growing rapidly. By 2025, McKinsey & Company forecasts that Chinese luxury consumers will account for 44% of the global market.)

However, placing Mandarin speakers in a store that does not solve the problem of recognizing your best customers in every store around the world. To do that, the sales associate needs to be able to retrieve all the relevant information about the shopper.

Data silos” are significant problems that impede the sharing of customer information between countries. They are databases that occurred naturally when a geographic division automated their operations before a global plan was created. These well-established and independently designed databases are difficult to link together.

The key for luxury retailers is to create a “system of reference”

The key for luxury retailers is to create a “system of reference” that enables all of the data silos to submit (and synchronize) information that can be used to get a complete 360 customer view from any store.

The problem of creating a system of reference is not just a technical or connectivity one. The issue is that customer data cannot be matched easily. For example, every customer record should contain the name of the customer. But, what happens if she has different names in different databases?

For example, in her home country, the name of a Chinese person is likely recorded in Chinese characters. However, outside of these markets, Chinese characters may not be supported at all. In those cases, a Romanized name is often used. However, Chinese names entered into Western systems are not always entered in the same way by data entry personnel.

Chinese surnames Wang, Huang, and Wong all refer to the same surname

For example, the Chinese surnames Wang, Huang, and Wong all refer to the same surname. In Singapore and Hong Kong, the Romanized name might be the surnames given in their dialects, as recorded by British officials at the time. Some Chinese even change their names to a Westernized name or initials to make it easy to transact business overseas. This means that a name in the database might not be at all related to the Chinese name at all.

At Global-Z International, my employer, we use a technique known as “cascading” to identify customers. Cascading uses information across multiple records to identify customers, even when data conflicts or is missing. (How to match records in data silos.)

Cascading helps us to identify those Crazy Rich Asians and assemble the information needed for a complete 360 view of each customer.

NOTE: My employer, Global-Z International has been a significant part of building the customer to brand relationship strategy for global luxury brands for over 25 years and in the People’s Republic of China since 2003.

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Changes in the South Korean addressing system can cause customer data quality problems for global retailers and others.  The original street addressing system, created in the early 1900s, is still used by many who send international mail from out of the country.  But, the new system, which involves street names and postal codes, should be used for all mailings and all customer database applications.

The following article, written by by Merry Law, President of WorldVu LLC, explains the changes in the system and its benefits:

What You Should Know About South Korea’s New Addressing & Post Code System

South Korea, in a project lasting for almost 20 years, has completely replaced its address system in the country.  The new address systems organization and logic changed from old addresses based on land parcels in reference to the locational hierarchical government units, to new addresses based on a building numbers and street names within a locality.

 

Learn More About the Challenges of East Asian Writing Systems 

The systematic nature of the addresses, plus the database of all address locations, provides significant advantages over the previous system.  According to the South Korean government, “The new address system will fundamentally make it easy to find a road, expedite the distribution and reduce the expenses.  This new system will also make it possible to effectively cope with disaster situations such as fire, first aid and urgent rescues. It also helps us create a more intelligent system when responding to crimes.  In addition, it will energize IT-related industries, such as mobile navigation, ITS, LBS, telemetrics and the like.”

The new database of addresses allows for quick identification of locations that will be made available at a low cost for businesses.  Ideally, will let private sector companies take advantage of the information in the database for address hygiene, delivery services, and any other permitted marketing uses.  All in all, the new system will help South Korea further advance its business opportunities and position in the global world economy.

History of South Korea’s Addressing System

South_Korea_Address3South Korea’s land-lot addresses were introduced under Japanese rule in the early 1900’s.  As expansion and urbanization occurred, the land-lot address system became more difficult to keep up-to-date.  The task of maintaining location information using the land-lot system had become increasingly costly and was not completely reliable, according to the South Korean government.  Korea Post plans to completely phase out these old addresses.  The old addresses are no longer used in governmental applications.  However, delivery of incoming international mail to the old-style addresses still continues at this time.

South_Korea_Address2Plans to change the outdated addressing system started in 1996. When authorizing legislation passed in 1997, the project has moved forward in a series of methodical stages.  With 230 self-governing bodies (various levels of governmental administrative units), the project required complex coordination between governmental authorities.  The road posts, doorplates, real estate registers, resident registrations, building registers, other official documents and signs needed to be changed to reflect the new addresses.  The final stage of establishing the new addresses was completed in 2015 with the introduction of new postal codes.

illustration

Addresses Prior to the New System

The previous land-lot addressing system, similar to that used in Japan, designated each parcel of land by reference to the hierarchical governmental units where it was located.  Addresses had two or more of these administrative units in addition to the local delivery information, such as street and building information.  A province (-do), city (-si) or municipality (-gun) was further subdivided in –gu, -dong, -myeon, -ri and –ga.  (In transliterated names, the suffix following the hyphen indicated the unit type.)  

The specific units required depended on the location, with differences in the units used in major cities, smaller towns and rural areas.  An address might include the following designations, all of which were used in the South Korean land-lot system, in addition to more specific information identifying the recipient and the premises.

  • Oechi-ri Worya-myeon Hampyeong-gun Jeollanam-do
  • Worya-myeon Hampyeong-gun Jeollanam-do
  • Juseong-dong Sangdang-gu, Cheongju-si Chungcheongbuk-do
  • Daerang-dong Jecheon-si Chungcheongbuk-do
  • Doma-dong Seo-gu Daejeon
  • Gangyeong-ri Okpo-myeon Dalseong-gun Daegu

 

An example of a typical land-lot address in Seoul, South Korea might be:

South Korea Address Seoul

Map of Seoul, South Korea. Detail from the World Map.

Map of Seoul, South Korea. Detail from the World Map.

The New System of Addresses

Today, the new addressing system takes a more practical and logical approach. Existing roads have been given names that reflect the local history and character, in consultation with local residents and Office of Street Administration.  Building numbers were assigned sequentially with odd numbers on one side of each street and even numbers on the other.  As local governments pave new roadways, they will be responsible for assigning street names and building numbers.  They will also be responsible for updating, “in real time”, the database of addresses maintained by the Ministry of Public Administrator & Safety.

The new street addresses eliminate some of the administrative units that were used in the land-lot addresses, simplifying the address structure.  The addresses are composed of the building number, street name, district, city or province, and postal code.

The following examples from Korea Post show the correct format for addresses written in the western alphabet.

South Korea Address Western Element

The format differs in Korean-language addresses, shown below.  Underlining in these examples is to indicate elements and is not used in addresses.

South Korea_Native Language

New Postal Code Numbering Formats
The 5 digit postal code breaks down like this:

  • The first 2 digits correspond to the largest administrative units: either the province or the metropolitan city.
  • The 3rd digit corresponds with the smaller sized city in the province, or the district-level area within the large city.
  • The last 2 digits are a serial number that corresponds to a specific area within the local district.

Here are two examples of the new codes:

  • 03139 corresponds to: Seoul Metropolitan City, Jongro District, Supyo 22nd Road, #17
  • 26412 corresponds to: Gangwon Province, Wonju City, Namsan Road, #203

The new addressing system also includes new “intel.” Numbers in the system indicate the distance between buildings. This can be calculated by taking the difference in address numbers between two buildings, multiplied by 10 meters, equals the distance between the two buildings. For example:

(Building 1 – Building 11) X 10 Meters = 110 meters from each other.

 

City aerial view of Busan, South Korea

City aerial view of Busan, South Korea

Adoption of the New Addresses by Residents

The South Korean people have little resistance to the new addressing system. Residents are adapting quickly and they are providing and receiving new addresses as the system expands.  The extensive planning, consultation with local governments and residents, and the time between initiation and final implementation all contributed to success of the new system.

Some observers in South Korea have noted minor objections to the elimination of the dong or other neighborhood identifier, which is no longer used in the new system.  Since there is considerable connection to the neighborhoods, the new addresses may still be given with the neighborhood indicator.  This is not a fatal problem and will disappear as residents become more familiar with and confident with the system.

Conclusion 

South Korea’s new addressing system opens doors for much better governance, communications and business related opportunities. Do you do business in South Korea? Have you considered what opportunities are in the market? If you have any questions about how and why this will impact global business, please reach out to us. Global-Z can help.