David Wertime

Chinese College-Student Staple Positioned as “Luxury” Good on Gilt.com

Let’s call it “reverse luxury arbitrage” with a delicious–and throat-searingly spicy–twist.

Luxury arbitrage, at least as it commonly relates to China, is the practice of Western brands charging more in China than they do in their home countries. For example, the cost-conscious drinker’s favorite beer, Pabst Blue Ribbon, positions itself as a luxury brand in China, even selling a special edition of the beer for US$44, according to Time online.

Recently, it appears that someone has engaged in a bit of turnabout. Lao Gan Ma Chili Crisp Sauce, which Tea Leaf Nation enthusiastically recommended to the Washington Post as a “taste of China’s heartland” during Christmas buying season, is now making its way to the West, with a huge markup.

Lao Gan Ma, which literally means “old godmother,” is just one of many brands of the fierce and unctuous spice beloved in the cuisines of Western China. The front of each bottle of Lao Gan Ma features the godmother’s stern but affectionate visage, seemingly exhorting users to eat their vegetables–provided they are slathered in several pints of red-hot chili oil.

The spice commonly sells in China for about 7.9RMB, or US$1.27. In the U.S., the import is perhaps understandably a bit more expensive, retailing for about US$4.00 on Amazon.com. But users of Tencent Weibo, a Chinese micro blogging platform, are having a hoot over chatter that American luxury flash-buying site Gilt.com’s spinoff Gilt Taste previously featured a pair of bottles for US$11.95. At just under US$6.00 per bottle, that’s a 471% markup over the Chinese price.

As Sohu Business reports, the Gilt sale of Chinese chili sauce became a hot topic on Tencent Weibo yesterday, resulting in over 10,000 posts on the subject. Sohu reports that users enjoyed the contrast between Gilt’s slick presentation of the product and its reputation in China as a staple for college students looking to dress up their instant noodles.

A current Gilt Taste page presents the sauce in a more alluring light:

Left to your own fruition we doubt you’d conjure up this combination of soybeans and chili oil. Its aroma is at once reminiscent of ripe pineapple and savory fermented fish. The beans have a surprisingly crispy texture and a lingering clean heat. Try it as one stop shop for adding punch to pork or plain rice. You can also use it in tandem with other typical Asian flavors like ginger, scallions, and soy sauce.

Of course, an average American consumer makes far more per capita than an average Chinese consumer, so the comparison is perhaps unfair. On the Sina microblogging platform, user @小宇0314 took a stab at the math: “In China, where the average income is 30,000RMB, it’s 7.9 RMB/bottle. In the U.S., where the average income is US$40,000, [$4.00/bottle] is … a ‘luxury item’? Are you testing our IQ?”

It’s not exactly clear why this topic has only recently gained steam in the Chinese blogosphere. Chatter pegs the Gilt sale as occurring July 2012. Meanwhile, comments on this Gilt page featuring the saucy godmother date from September 2011. Many of them are in Chinese. The most recent, translated, reads: “Lao Gan Ma now selling on gilt.com…WTF.”

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David Wertime

David is the co-founder and co-editor of Tea Leaf Nation. He first encountered China as a Peace Corps Volunteer in 2001 and has lived and worked in Fuling, Chongqing, Beijing, and Hong Kong. He is a ChinaFile fellow at the Asia Society and an associate fellow at the Truman National Security Project.