In the past, luxury brands were reluctant to localize too much in China in case it would be detrimental to their global brand image. However, this trend is changing, as is evident in Chanel’s recent flagship boutique launch event in Shanghai.

Chanel communicated their connection to China in a number of ways. Firstly, Karl Lagerfeld and models from all over the world travelled to Shanghai to debut the “Paris-Shanghai” collection and to celebrate the opening of Chanel’s new flagship boutique. Even the name of the collection is significant as it connects the origin of Chanel’s brand in Paris to the city of Shanghai.

Secondly, “Paris Shanghai” featured a combination of Eastern and Western styles, with inspiration from Chinese history and culture including the Terracotta Warriors, the Shanghai cinema in the 1930s, and the opulence of the imperial court. Chanel displayed that in their eyes China is not synonymous with low quality but rather is a source of culture and prosperity.

To top it all off, the show took place along the Huangpu River in Shanghai with neon-lit skyscrapers in the background. As a prelude to the show Karl Lagerfeld wrote and directed a mini-movie, entitled “Paris Shanghai, A Fantasy”, telling the story of Coco Chanel's imagined voyage to China.

China, currently the 2nd largest luxury brand market in the world and expected to rise to 1st place by 2015, is becoming a centre of luxury goods consumption. As Chinese purchasing power continues to grow there will be more and more brands attempting to localize. There is always a delicate balance between sustaining the brand essence (the brand’s core values), and adjusting the brand positioning for the local context, especially for luxury brands. It seems the recent Chanel event and flagship store opening managed this balance very well.