WHAT BUSINESSES NEED TO CONSIDER WHEN ENTERING CHINA.
Updated: Apr 6, 2020
China is a dream market for many. With its booming business and rising consumer affluence, the country has become the single largest market for a lot of brands. Hence, everyone wants a piece of it.
However, China is also no simple market. Though it possesses a lot of opportunities that many companies want to take advantage of, its uniqueness and complexity have also made others commit fatal mistakes.
Here are five critical points to consider when entering and ensuring your success in China.
#1. Assess the market.
It is important to first assess the market before you even take the leap. Do you have a market for your product? Is there a product-market fit? Who are your local customers? What localisation should you do to ensure that customers will buy you? How strong is competition?
A lot of brands that have been successful for a long time would also tend to be very confident in thinking that they can easily capture the Chinese market. If you have a product that customers elsewhere have been buying – why won’t the Chinese?
Home Depot is a big name in the home improvement business. Since the 80s, they have been leading the US market. Of course, anyone would think that expanding to China will be an easy feat for the brand.
However, everything that worked for the Americans, unfortunately, did not work for the Chinese. To begin with, the Do-It-Yourself concept is not something that the Chinese are familiar with. In the US, it could even be seen honorable to do everything on your own. However, in China, people would tend to question or look down on you for not being able to afford help. Given the cheap labor, the local market is more likely to be into the Do-It-For-Me concept. And that in itself goes against the very core of Home Depot – the DIY king.
Yes, your success in China could be very important for your brand. However, before expanding, it is critical to make an assessment of the local market – is China the right market for your business? If not, what should you do to suit the local behavior and taste?
#2. Localise your product.
A lot of brands always want to create a “local version” of their product. However, what this usually means is just merely translating for China. And voila, they have a product perfect for the Chinese market. Or so they think.
They say that the Chinese consumer taste rapidly evolves. And with this understanding, Coca-Cola is aggressively coping with this.
That is why Coke has launched more than 30 new drink brands in 2008 and now has more than 250 in total. The portfolio ranges from regular Coke to Coke Plus (with fiber) to Coke with ginger to Spritea (a fusion of Sprite and tea). In China, Coke has also expanded to create its own tea line given the popularity of tea drinks in the country.
Coke is already a formidable global brand, yet it makes all these adjustments to create truly local products that cater to local consumer behavior, preference and rapidly-evolving taste. Again, merely translating your packaging text would no way give you a local product perfect for the Chinese.
#3. Know your Chinese customers.
Some of the most engaged and active shoppers are in China. And given the millennials’ growing demand for shopping, in general, the country has been a critical market for a lot of brands.
Especially for the younger generation, luxury shopping has been popular. And this could more likely because of social media influence. Hence, a lot of brands are focusing on social media marketing and experiential marketing events to ensure that they engage with the local customers.
Dior, for example, has been an early adopter of WeChat marketing. In one marketing effort, the brand launched unique handbags during the Qixi Festival (Chinese Valentines Day). It also allowed for customers to interact with brand representatives through WeChat even before placing their orders.
Just because a brand is big in other markets, it should never generalize that what works with their existing customers would also work in China. The Chinese have their own way of thinking, behavior and buying patterns – and it is the task of the brand to figure this out. As this is the only way to create an emotional connection to win their hearts. And pockets.
#4. Use local channels.
A lot of brands that want to enter the Chinese market would most likely have already set up their own marketing and sales channels. However, it is critical to note that local adaptation is not only limited to the product – it is also crucial to examine where the local customers buy and how they consume similar products and adapt to that format.
For example, if a brand sells products online, it is important to offer these products through popular channels such as Taobao, Alibaba, JD or TMall. And it would also be critical to work with a local partner, who is an expert in the local market. Also, even if a brand already has its own mobile application, it would also still need to create a WeChat application as its main engagement channel.
Why? Because that is just how it works in China.
It would not be smart to insist local customers to change their current behavior and use different channels – this could just result in higher marketing costs and would generate lower sales numbers. However, if a brand adapts to the local customer behavior, it immediately removes barriers for customer trial and purchase.
#5. Think and act local.
A lot of companies think of China as one big market. That if they have one big plan to win the market – they are in a good spot. But China is more complicated that one can expect.
Cities in China, for example, are divided into different tiers. Tier 1 cities (including Shanghai, Guangzhou and Beijing) are highly populated areas with a large middle class and income levels are above the national average. The cities in Tier 1 are usually the country’s most mature markets with regards to consumer behavior.
However, it is also important to also consider the other tiers. For example, Tier 2 boasts of rising incomes. This means that there is an increase in spending power creating a higher demand for manufactured goods and products.
Given the differences in behavior, mindset and buying patterns, it is critical for a brand to ensure that product, communication and marketing + sales efforts are relevant for the specific local customers that they target.
Again, thinking and acting locally within China is be a winning strategy to focus on.
Conquering China would be critical for any brand that wants to make it big globally. However, a lot have to be weighed and considered to ensure that one succeeds in this market. Achieving prior success elsewhere does not necessarily translate to also being successful with the Chinese customers.
Instead, truly localising the brand to connect with the local customers would be a good step at winning in the market.
What are you doing to make it (big) in China?
THEKRE8TIV BRAND STUDIO is a full-service agency that helps build your brand and accelerate the growth of your business. Aside from leading THEKRE8TIV, Andrea also instigates the #brandovercoffee conversations on Instagram where she helps individuals and businesses with their brand questions. Follow her at @andreaa.ferri.