The ongoing Trade War, HK protests, NBA, Huawei and other geopolitical issues continue to accelerate the rise of nationalism in China and, as a result, growing consumer preference for domestic brands. We only need to look at Tmall as an indicator, where three-quarters of brands have incorporated the phrase “Made in China” on their product pages – up from less than half in 2017.
Yet, like much media about China, ‘fears of mass boycotts‘ of US and other foreign brands are fiercely overstated. Whilst many commentators cite the fall of Apple in China as a pin up example of nationalist-consumption, the reality is much more multi-faceted. For a start, Apple phones have become quite common in China, meaning its long-held appeal as a status symbol no longer resides. Budding status-seeking Chinese are much less likely to blindly buy the most expensive product on the shelf or screen, instead becoming more focused on value – the new status in China comes from being ‘in-the-know’. For many Chinese, Apple’s features are no longer considered innovative, often behind or inferior to local brands such as Huawei, and don’t justify their premium price. This has seen Apple’s market share in China halve over the past four years.
Apple’s sinking share is in contrast to the fortunes of many other foreign brands in China. Chinese consumers still appear to embrace good quality and thoughtfully-marketed western products. Several US and European luxury brands, including giants Kering, Louis Vuitton, Hermès and others have reported strong growth for their goods in China. Although there are a few local luxury brands rising in China, the majority still value foreign brands for their craftsmanship, design and heritage.
At the other end of the affordability-spectrum, fast food remains dominated by American (but quite localised) brands KFC, McDonalds and Burger King, who only entered the market in 2005, but had opened over 1,000 restaurant in China by 2018. Although domestic brands are growing fast, the three US brands remain the most popular in the category which grew 9.4% in the first half of this year.
Even more interesting is the NBA, which has been villainised by many Chinese nationalists. Nevertheless, 25 million Chinese were simultaneously glued to their devices for Tencent’s stream of the Los Angeles Lakers opening match against the Clippers, despite the full force of state media urging consumers to boycott.
While university campuses in China ban cuddling, dying hair and access to dorms during the day, young Chinese are unlikely to blindly consider everything better in China. Foreign brands that have localised their strategies such as brand purpose, and remember that origin – whether domestic or foreign – continues to be just one piece of the puzzle for brands, can still be well-placed to win in China. There remains plenty of other moving parts needed to create strategies that will win the hearts of Chinese consumers – something China Skinny would love to chat to you about.
On the subject of building the optimal strategy for China, our British readers looking to learn from the best practice case studies about how to win in China should sign up to join China Skinny’s Andrew Atkinson sharing his nuggets of wisdom. The interactive and insightful event is on 25 November in London in association with CBBC. More info here. Go to Page 2 to see this week’s China news and highlights.