China’s Brands are Globally Born to Run

March 19, 2018
Industry News
Content Provided By:
Doreen Wang, Global Head of BrandZ

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Kantar Insights
Info.hk@kantarmillwardbrown.com

Made in China’ is becoming cool - If ‘Made in China’ makes you think of inexpensive, low quality goods, think again.
 
DJI, the first choice of millions of drone fans, is headquartered in Shenzhen and dominates the drone market – accounting for 70 percent of all drones sold in the world. Huawei, the telecom company that developed its first branded smartphone only five years ago, has already become the third largest brand in the sector with a 9.4 percent market share worldwide. Youzu and Elex are both young Chinese gaming companies that continue to gain more fans and more revenue in foreign markets.

Unlike the previous generation, many of whom have a negative perception of Chinese brands, today’s young generation of global consumers – especially those in established markets – are gradually becoming more positive.

China’s brands are particularly well regarded as ‘innovative’. Young people around the world are far more likely to make this association than older age groups. The signature proposition of China’s brands is to combine innovation with value for money, a recipe that is particularly attractive to young people.

For example, young consumers in Spain are happy to order ‘cool’ products from China even though they may have to wait up to 15 days for delivery. The value-propositions of Chinese brands are especially appealing in a country where nearly 40 percent of people under the age of 25 are unemployed.
 
No matter how well or poorly the local economy may be doing, young people in Europe and other established markets are turning to China’s brands – including Chinese global e-commerce platforms such as Alibaba and JD.com. No matter where in the world, the younger generation have quite a bit in common. And, they are all united by their love of affordable, ‘cool’ stuff regardless of its place of origin.

Three major challenges facing Chinese brands
Despite making tremendous headway, Chinese brands still need to overcome some significant hurdles on their road to globalization. Their three biggest challenges are: 
  • LIMITED AWARENESS TO SUPPORT PREMIUMIZATION
Awareness remains the number one barrier brands need to be overcome when ‘going global’. Many Chinese home appliance and electronics companies have disrupted at the low-end and gradually moved up the value chain. Increasing brand awareness among targeted segments will continue to be a top priority. Without a brand ‘point of difference’, products are vulnerable to the charge of being “too unremarkable”, and advantage disappears as soon as a competitor undercuts the price of similar products.  
  • PERCEPTION OF TRUST STILL NEEDS TO BE IMPROVED
Although young consumers are increasingly likely to think Chinese brands are innovative, the question of quality remains. There are, of course, Chinese brands that have excellent reputations for producing quality products. That’s not to say that many other Chinese brands are lower quality, leading to negative stereotypes of Chinese products. For example, Segway is widely regarded as a good quality brand, but few people know that Segway belongs to Ninebot. Therefore, when consumers consider buying Ninebot products they may have doubts about its durability and safety. It will take time for China’s brands to overcome these negative perceptions.
  • THIRD, LACK OF BRAND-BUILDING INVESTMENT.
The attitude used to be “Let’s test the water in international markets and see if it works and, if not, we can withdraw easily.” This led to a vicious cycle of low investment leading to low commitment and, consequently, ever-lower investment.
Thankfully for China’s brands, this is gradually changing. More companies are learning from China’s successful brands – notably, the ones that appear in the Top 50 Brand Power league table. Companies with aspirations to ‘go global’ are now realizing that commitment is one of the key success factors. They are also realizing that investment decisions need to be driven by local-market and local-consumer understanding, informed by the ‘best’ possible insights and data. Only then can opportunities be properly identified and effectively grasped. And only then can brands be built.
 
The Pioneers are gaining the upper hand
China’s Global Brand Builders are doing so well in international markets in recent years by focusing on their higher-end products. Many of China’s brands choose to be ‘born’ overseas before launching their products in China. Online-gaming brands are, by nature, born global because, to be truly successful, they need to establish their footprints in multiple country-markets simultaneously. So, it’s not surprising that the Cheetah and Elex brands continue to do better in foreign markets than they do in China.

Great strides, but China’s Global Brand Builders are only at the start of their long journey 
Brand building takes time and a significant shift in the consumer’s mindset.  China’s brands are working hard to achieve this by providing people globally with the ‘reasons to believe’ in their brands.  At the same time, every country-market is becoming increasingly competitive. Innovation’ is the key – while China’s brands are working hard on it, other countries, including the emerging innovation hubs of Israel and India are also raising the bar, and producing their own star brands. So, the young consumers – the people who are more likely to embrace new brands – are more receptive not just to China’s brands, but to any countries’ brands that can make a difference in their lives and their wallets.
So now is the time for the companies behind China’s brands to redouble their efforts. They need to do this, not only in terms of innovation, but also by employing great communications to drive home the emotional ‘brand advantage’ of the resulting product benefits.
 
In summary, China’s future Global Brand Builders must do four things:
  • Ensure their products are meaningfully different to local consumers
  • Ensure their advantage is sustainable
  • Commit to utilizing brilliantly effective brand-building communications to drive home their advantage – in both the short and long term
  • Delegate responsibility for the success of their company and their brand to the best talent in local markets.
 
 
About Kantar MillwardBrown
Kantar Millward Brown is a leading global research agency specialising in advertising effectiveness, strategic communication, media and digital, and brand equity research. The company helps clients grow great brands through comprehensive research-based qualitative and quantitative solutions. Kantar Millward Brown operates in more than 55 countries and is part of WPP’s Kantar group, one of the world’s leading data, insight and consultancy companies. Learn more at www.millwardbrown.com.