What Innate Advantages Do Western Brands Have In China - Part II - The Rise of the Chinese Brands
In the first part of this series, we learned that western brands have intrinsic advantages in China, such as being associated with creative, original, and high-quality products. While this still holds true, we must also appreciate how quickly the China marketplace moves, and the pace of its development. Chinese consumers don't stand still and this is clearly evident in how brands are perceived.
In the recently released 2018 Brand Relevance Index (BRI) survey by Prophet, a brand consultancy, conclusions point to a growing Chinese confidence in Chinese brands. Two years ago the index held 32 multinational (MNC) brands in its top 50. Today, 30 are Chinese. These mainland brands are in consumer electronics, retail, digital media, travel & hospitality.
In fact local brands have done well on the measurement of "pervasive innovation", with this apparent in the offerings by the likes of Tencent, Alibaba, Huawei, and Xiaomi. The latter two companies' smartphones have been a hit with Chinese consumers with bezel-less screens and the Huawei P20 series the first smartphones to sport three cameras.
Apple, meanwhile, appears to be losing its luster in China, and even drawing sneers from some quarters. The Cupertino titan's announcement of its new iPhone models "was received with considerably less enthusiasm," according to Shanghai-based Sixth Tone, a respected English-language news publication, due to a perceived lack of innovation and high prices.
However, a silver lining for western brands remains, with local brands still regarded as lacking "distinctive inspiration", indicating a lack of "long-term brand purpose", and its advantages of consumer loyalty and price premiums. Longterm strategic branding has been a weak spot for Chinese companies. Doreen Wang, global head of BrandZ, a unit of the market research firm Millward Brown, has said Chinese brands are still selling products but not their brands, missing out on the price premiums of branded products.
For brands wishing to make a mark, this can be significant. "If you go on Huawei's European or US website, the landing page says Huawei's purpose: 'Building a better-connected world.' That's Huawei's purpose, its brand ideal. But a lot of Chinese companies have no brand purpose - their goal is to increase sales by 25 percent next year," Wang said.
Tom Doctoroff, Prophet's "chief cultural insights officer", observed that Chinese are no longer delighted and surprised by the lifestyle enrichments that platforms can offer. They demand them. This demand is bolstered by the normalization of apps that seamlessly combine functions turning them into lifestyle platforms and mini-internets of their own. Meituan, for example, a popular food delivery and restaurant review app, recently merged with Dianping, and now offers travel booking turning it instantly into a one-stop app for experiential decision making.
Another facet of Chinese consumers' ever higher expectations and growing sophistication is the increasing worldliness of Chinese people. This year, 140 million Chinese are expected to take trips abroad, an increase of 15% from the previous year. As a percentage this is twice as much as Japan when the latter country was at a similar level of per capita consumption. The Chinese are hungry to see the world - "Travel has blossomed from an undimensional badge of status ('I've been to Paris') to a portal of multidimensional experience and cultural discovery," writes Doctoroff.
As more and more Chinese travel (and study) abroad and encounter new brands, foreign ideas and styles, they can bring these new ways of thinking home. Streetwear is a prime example, with the cult US streetwear brand Supreme having significant kudos among young Chinese people, especially in first-tier cities. This has led to local brands aping the style, with unique Chinese characteristics, sometimes combining the style of luxury brands such as Gucci with that of skate and street fashion styles.
What all this means is that although western brands can still enjoy some cachet, especially in less urbane areas, relying on this western brand cachet as the main propellor of your product or service is hubristic. Complacency is never a good idea, and entering the China market means more consideration than ever before.
- Expensive brands such as Apple face increasing competition from Chinese rivals.
- Chinese rivals are in multiple cases out-innovating their foreign competition with greater understanding of Chinese consumers' demanding expectations.
- Western brands can still win with clear brand purposes and distinctiveness.
- Chinese consumers are becoming more worldly and knowledgeable as they travel more widely.
- Western brands such as Adidas offer connected lifestyle platforms to support their customers and deliver benefits beyond their products.