Sam Test

By BizClik Admin
Share

Dominic Walsh is CEO of Cowan Australia, an independent, international design agency, expert in Asia, retail and consumer brands, which has worked with some of Australia’s biggest brands to help them succeed in China. Amongst their clients are Coca Cola, VB, Heinz and Carlton Draught. Here, he shares his insight with us on how to progress and succeed within the Chinese economy.


***


Building a brand in China is not easy. Credit Suisse research tells us that Chinese consumers, particularly young ones, prefer local brands to foreign alternatives across many product sectors. And three quarters of multinationals operating in Asia say local companies are more effective competition than other multinationals.
But with retail sales expected to reach 40 trillion yuan (US$6.35tn) in 2018, which represents an annual growth rate of around 10% – the same as the last three years – the Chinese market is still an attractive proposition.
And it’s only going to get more attractive. By 2022, it’s predicted that more than 550 million of China’s 730 million urban population will be considered middle class. And Boston Consulting Group predicts that Chinese consumption will grow by 9% a year until at least 2020.
Western brands should not fall into the trap of assuming Chinese consumers are clamouring for them – they’re not. As the quality and safety and innovation of Chinese brands continues to improve, import prestige alone is no longer enough.
So how do you make a success of your brand in China? Here are seven points to consider.

1. Forget one size fits all
China’s middle class might be growing but there are still vast differences in income disparity, lifestyle and cultural values between cosmopolitan urban areas of China, such as Shanghai or Beijing, provincial cities, regions and the rural hinterlands.
There are also significant regional differences. The contrasts between Guangdong and Guizhou are as stark as those between Sydney and Darwin – it’s certainly not a one-size-fits-all solution.
Consider generational differences too. Chinese millennials have a strong desire to consume. They also have the money thanks to rapid economic growth and the rise of Little Emperor or Empress Syndrome. The one child per family policy in China, in place until 2015, means only-children may have two working parents and two sets of grandparents, all eager to spoil them. And while buying a house might be out of reach for many, they are still willing to spend more on daily affordable luxuries.

2. Back to basics
Your home market or global product and proposition is unlikely to be a slam dunk in China, so you should start by going back to marketing basics. You need to behave as though you are launching an entirely new brand. 
To bring your brand to life in a new and relevant way, you need to find out how these consumers live, how they shop, what they want and most importantly why they want your brand. A brand has to prove its right to thrive in a new market; if it fails to communicate its points of difference, it will fail.
Hermes met this challenge by launching the uniquely Chinese luxury fashion brand Shang Xia to better appeal to Chinese consumers rather than simply rely on adapting its global brand to China.

3. Guanxi rules
Although some Chinese companies are moving away from Guanxi – the culture of relationship building – it’s still vital to understand it. Without it, even the simplest administrative task can take forever.
To build business relationships in China, you need to get to know your business partners, take them out for dinner and help them out, to gain their trust. And you need Chinese staff with enough Guanxi to get things done. And beware of making promises you can’t keep to new Chinese business partners – whatever Guanxi you had will rapidly disappear.

4. China is connected
China may be emerging in some senses, but digitally it is as advanced as anyone. Digital and e-commerce are huge. There are 900 million users on Chinese social media app WeChat. In China your brand must live digitally or it will not live at all. Just look at the spectacular online sales figures on online retailer Tmall for Singles Day – they reached 168.2 billion yuan. You don’t want to miss out on a slice of that action.
Interestingly, digital and e-commerce play a bigger role in tier 3 and 4 cities, which have a lower GDP, because their inhabitants have a strong desire to get to know the world. This is less pronounced in tier 1 cities, which have the highest GDP in China, as these affluent consumers are already world citizens who have travelled and explored.   
China has been the biggest e-commerce market in the world since 2015, accounting for 83% of all online retail sales in the Asia Pacific region. In fact, by 2022, it’s forecast that China’s $1.8tn online retail market will be more than twice as big as that of the US.

5. Shoppers are spoilt for choice
New channels emerge all the time, thanks to an incredibly energetic start-up culture. Consequently, there are no real channel experts, so shoppers and brands are spoilt for choice. Take just one of China’s latest billion-dollar start-ups, Xiao Hong Shu, which translates as The Little Red Book. It’s an online shopping channel for foreign products where visitors can also leave reviews, with an audience mostly under the age of 30 and mostly women.
Consider Singles Day too, or Double Eleven. The annual festival of shopping takes the nation by storm on November 11th, with huge discounts and offers. It usually begins at the start of November and it has become extremely popular since Alibaba launched it in 2009.

6. Ask the right questions
It’s crucial to ask the right questions before launching a brand into any emerging market. At what stage is the market for your product? Does the category even exist yet? If the market is at an early stage people won’t know how or when to use the product, so you need to play a category education role. Early entrant Jacob’s Creek educated China about Australia’s New World wine and the brand has since benefited from wine consumption doubling twice in the last five years.
If the market is at a more developed stage and the category already exists, you can start talking about what makes your product better than the competition and dial up an emotional connection.

7. Adopt an iterative business model
Asian companies have no time for the Western model of conducting research for years before introducing a product to market. They pursue an iterative business model, where they launch a less-than-perfect product and tweak it as they go, beating Western competition to the punch.
There aren’t any shortcuts to success so it’s important to be patient. Don’t underestimate the strong local competition, such as smartphone makers Xiaomi or Huawei. Even if you don’t rate their product compared to yours, they understand their market, have become increasingly competitive and have existing distribution and relationships. What if your product is too easy to copy? The best advice we have is to go premium.

8. No room for complacency
A glance around Australian food and drink shops reveals some Chinese brands – such as Amoy or Tsingtao – are already here but there aren’t many Chinese food, drink or FMCG brands yet. Surely it won’t be long before we see many more of them arrive on our shelves.
And that’s another reason to succeed in China. Brands we are marketing alongside are already confident, coherent and flexible. If we can’t join them, eventually we’ll be beaten by them, not just in China, but in our home market too.

(image: Cowan Australia)

Share

Featured Videos

View all
Featured

Schneider Electric - Global Specialist in Energy Management

Digital Strategy

Allianz Malaysia: Closer to customers through digital