In January this year, the Economist announced that “retailers everywhere should look at China.” Such advice was hardly surprising.
As the only economy to have grown in 2020, with an Ecommerce market set to hit $3 trillion by 2024, China was seen by many businesses as an opportunity to relieve challenges at home. The ‘China dream’ however, hasn’t turned out to be quite so simple. Empowered by its own financial resilience, China’s self-image has altered significantly, reflected in the prominence of local brands and changing consumer behaviour.
In just 9 months, The Economist had rewritten the narrative, with an article entitled “The vanishing allure of doing business in China”. Such rapid shifts in sentiment and behaviour has left many decision makers sitting on the fence. Should entering China still be a priority for them? Or has the window of opportunity already been closed?
In the following article, Hot Pot Strategist Pippa Ebel analyses the China opportunity as it stands today for international brands, and the implications of new trends and changing consumer behaviour.
Xinde Ding is a fashion expert, magazine editor, Influencer and serial entrepreneur. There is very little this dynamic visionary from Shanghai hasn’t tried his hand at. In this article, Hot Pot Strategist Pippa shares some of the insights gained during her conversation with Xinde, which focused on China’s evolving fashion industry, broaching the top of international brands’ future in China, the rise of local designers and the perception of British brands in 2021.
The rise of ‘Made in China’
Over the past eighteen months, we have seen a significant rise of patriotism within China. The government’s decisive handling of the pandemic, along with stunning wins during this year’s Tokyo Olympics, have left many Chinese feeling empowered and emboldened. This has had a direct impact on the retail industry and consumer behaviour in China. Whereas previously international brands have dominated retail and luxury, today, emerging local brands compete aggressively with global household names. In the sports sector, Anta and Lining have been closing in on Nike and Adidas’s market share. Amongst wearables, Fitbit has long been overtaken by local brands, Huami (now Zeff) and Huawei, who have toppled global rankings this year.
Xinde explains that whereas “in the past Chinese customers only liked international brands, now there is approval of Chinese brands and designers.” Shanghai’s design community is bursting at the seams, with the work of Pronounce and Shushu/Tong changing the reputation of China’s design scene. This reputation isn’t limited to China either, as international brands such as Nike, Estée Lauder and Shiseido are fighting to secure the hottest collaborations with local brands to enhance their appeal amongst Chinese consumers.
So what does the rise of local names mean for international brands? Can they still compete in China’s increasingly competitive market?
Dynamic collaborations between international leading international brands and local designers, such as Diesel x Pronounce, welcomes in a new age of Chinese design.
[Source: Fashion Network]
Global brands must fight smarter and harder
Xinde emphasised the domestic advantage: “Chinese brands are in China. They have first-hand knowledge of Chinese customers.” Local brands have a commercial and social advantage. This doesn’t however mean that international brands looking to enter China are fighting a losing battle. It simply means they need to fight smarter, and harder.
The recent market entry of New Zealand footwear brand Allbirds reflects how successful international brands - even those starting from scratch - can be in China. Although they entered in 2019 with virtually no brand awareness in China, their Tmall results during 11.11 far exceeded expectations, and today 138,000 Chinese consumers actively follow their store.
Their success, founder Eric Haskell explains, depends on recognising and adapting to the distinct needs of Chinese consumers, and establishing a commercial and marketing strategy that reflects that. “[W]e did a comprehensive study of what Chinese consumers were thinking about our brand”, Haskell says, “what we heard repeatedly from consumers was that they viewed our shoes as a new technology, an innovation.” Staying engaged with consumers and reflecting their feedback in product and marketing adaptations has remained central to Allbirds business in China, reflected in their flexibility and agility when approaching China’s major shopping holidays.
In 2019, Allbirds entered China with virtually no existing brand awareness whatsoever. Today, they are selling over 2000 of their WoolRunner shoes every month and have 138,000 fans on their TMall store.
[Source: Allbird’s Little Red Book and Tmall Official Store]
What does localisation actually mean for international brands?
Entering the Chinese market isn’t about trying to be more Chinese. As Xinde explains, “at the beginning, the most important thing is to show you are international. But maybe after a few years you can start to do collaborations with local communities, local brands, local artists. At the beginning, you shouldn’t go too far in trying to be a ‘Chinese’ brand.”
Increasingly savvy Chinese consumers recognise brands that are “trying too hard” to ingratiate themselves in China, and do not look on it favourably. When Balenciaga launched a new collection of bags last year, attempting to capture Chinese buyers during China’s Qixi or Valentine's Day period, they were accused of insulting Chinese culture. Their bags, splashed with the phrases “he loves you” in Mandarin, were deemed crass and try-hard.
International brands that are flexible and adaptable whilst preserving their core brand DNA are more likely to succeed in the China market. Consistency and clarity are crucial in persuading increasingly discerning consumers that your brand is high quality. However, Chinese consumers appreciate efforts to understand and engage with Chinese culture. This is best done with the help of people who really understand China. “It’s hard for [international brands] to communicate with the Chinese customer.” Xinde explains. “They need a strong team with Chinese people. It is about engaging Chinese social media, following a local marketing strategy, but also knowing how to operate in China.” It is important to strike the right balance between retaining your core global brand identity whilst taking into account the needs and preferences of Chinese customers.
What can British brands offer Chinese consumers?
In an era where market competition is stronger than ever in China, it is increasingly important for brands to reflect on what they can bring to the Chinese market and how their core brand DNA and story might resonate with Chinese audiences. British products for instance, still have significant appeal amongst consumers and as a British brand, it is important to engage with existing preconceptions around the UK and UK goods.
When asked what they think about the UK, many Chinese consumers still think of the UK in terms of its rich history and tradition as well as its vibrant cultural scene. Xinde affirms this notion, commenting “People think brands from the UK are royal, high quality and aesthetically appealing”. Notions around “history and craftsmanship” still resonate with Chinese consumers. For Xinde, opportunities are particularly significant in terms of retail sales, beauty and luxury. He returns to Burberry as an example. “It represents the picture of British fashion”.
Speaking of Burberry’s success in the Chinese market, Xinde once again explains it in terms of their efforts to localise. “Their success lies in their marketing strategy, they know how to localise... They know how to communicate with Chinese consumers.” Xinde spoke of the direct correlation between an independently operating China marketing team and a brand’s success in the local market. “Brands need to listen to the China team”, he notes, rather than purely following the voice of global HQ.
Products from the UK still appeal to Chinese consumers. They associate British brands with history and craftsmanship.
[Source: Best of British]
Three things to bear in mind when entering China
There is still room for international brands in this increasingly crowded, but ever expanding space, however, there is more risk than before. There are several things we recommend that brands do before setting off on their China journey.
1. Reflect Critically: Go back to core principles and reflect on what your brand means in a China context. Your brand being successful on home turf does not guarantee its success in the China sales market. Look at your proposition for the China market with fresh eyes and ask what will it bring that doesn’t already exist? What about your brand DNA and story resonates and appeals to Chinese consumers?
2. Engage and Commit to China: to activate your China voice, you need to first identify the core facets that appeal to Chinese consumers through in-depth market research and social listening. Only then can you begin to plot a roadmap that reflects developments across brand, social and commercial. Realism is essential when devising this map. Things may take more time than you expect in China, so plan for the long-term.
3. Be Bold: Chinese audiences are increasingly discerning and demanding when it comes to both product quality and brand marketing. They expect high standards, and they want a new experience. As Xinde summarises neatly “You need to shock your audience. You need to make them say “wow”. You have to create a moment.” Ambition and bravery is well-received in China, with consumers being curious and adventurous. But remember to make sure the curation of your brand’s special ‘moment’ is in line with China policy and consumer sentiment!
Food for thought
All too often, international brands mistakenly see China as a “quick win” that will prop up global sales figures. However, as Allbirds proves, thorough strategy and planning is essential to a successful entry into China. Brands who commit to understanding exactly who their consumers are and their needs, are best placed to reach them through the appropriate channels and platforms. With an increasingly complex technological ecosystem, it is more important than ever to take a focused approach that is unique to your brand.
At Hot Pot, we support your brand to develop its unique China roadmap, whether you are starting from scratch, or trying to expand your reach in the market. Get in touch with us today for expert support from seasoned China strategists and marketers.