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Marketing in China Insights

When “Made in” matters less – the rise and fall of foreign brands in China

Posted by Olivia Plotnick on Nov 18, 2016 12:30:32 PM

 

How does country of origin impact foreign brands who are marketing in China? The changing Chinese economy puts pressure on foreign brands to adapt their China marketing strategy.   

 

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I recently found myself browsing through the cosmetics store Sephora.com, and if you don’t know the site, it’s bright, flashy, and has enough product choices to paralyze even the most seasoned shopper. I didn’t know exactly what I was looking for, but I knew I wanted a brand I could trust to be of high quality, and I needed to type something into the search bar before I wasted an hour of my life. The first keywords that seemed appropriate were “Korean skin care.”

 

Without knowing a brand, or product name, I associated Korea with premium skin care products. Korea, like many other countries has successfully established themselves as experts in a certain product category, just like Sweden has bolstered its reputation for design with brands like IKEA and H&M. Over the years, as globalization has spread to the furthest corners of the earth, country of origin branding has been evolving just as quickly, shaping the way consumers gravitate towards or away from certain brands.

 

Country of origin branding has been especially significant in China. When China first opened its doors in the early 80s, foreign brands were embraced, and flourished under a favorable combination of socio-cultural and economic factors. Marketing in China was not about proving your brand was the best, it was more about educating consumers why they needed your product in the first place.

 

People saw foreign brands as high quality, safe, diverse, and as a symbol of status. While these sentiments still exist today, the prominence and status foreign brands once enjoyed is beginning to erode. Chinese consumers are now more willing to purchase a domestic brand, given similar quality and price.

 

Many foreign brands have seen their growth go from skyrocketing sales to snail pace, or worse. This slow-down of spending on foreign products can be attributed to a number of factors, including:

  • Government anti-corruption campaigns, discouraging luxury spending
  • An increase in the number of diverse, high quality Chinese brands
  • Decreased spending on products, and a shift towards services and experiences

 

The overall growth in China seems to be slowing down, however household incomes are still rising, and this could bode well for foreign brands. There are still several categories where foreign brands are continuing to outperform domestic Chinese brands:

  • Health and vitamin brands
  • “Affordable luxury” brands
  • Sports apparel brands
  • German Machinery/Engineering brands

 

A report by McKinsey, published last year, concludes that foreign brands still reign supreme in the premium segment of these categories, so how do they keep this foothold?

 

Foreign brands already in China, or considering entering China, need to know their target market, and more importantly how to get in front of their target market. They not only need to retain their long time customers, but appeal to a new generation of middle-class consumers, with a higher purchasing power and a greater choice of domestic brands. Data suggests that consumer confidence is growing, and the Chinese will continue to trade up for more premium, quality brands. Foreign brands that wish to remain relevant should have a marketing strategy to appeal to this growing, diverse market.

 

Chinese consumers are adopting new trends much faster, such as e-commerce and online services. Foreign brands should tailor their marketing towards creating engaging, unique, online experiences for their Chinese consumers. This means;

  • Creating content that engages your audience and offers them experiences
  • Communicate your brand’s story; even B2B brands should be able to connect with consumers on a personal level.
  • Optimizing your content for mobile, specifically mobile apps such as WeChat

 

The world moves at a fast pace in China, and foreign brands can no longer rely on just their country of origin to do the marketing for them. Foreign brands need to abandon the strategy that worked so well in past, and meet consumers where they are, building trust and experience.

 

 

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Topics: china, b2b marketing, branding, international marketing

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