Branding in China: Do’s and Don’t’s

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Regardless of the recent economic slowdown, China is without a doubt an attractive market with a large commercial scale. The Chinese middle class is expected to number 630 million, comprising 76% or urban households and 45% of the entire population by 2022 according to McKinsey & Company. Opportunities arising from this major context change come hand in hand with challenges. Think-tanks are repeatedly reminding the multinationals that if they can’t succeed in China today, they may not be able to succeed anywhere tomorrow as China is becoming the cauldron of competition, according to the KPMG.

It goes without saying that the Chinese consumers are enormously different from their counterparts in the rest of the world. For example, the research by the Economist Intelligence Unit shows that 65% of the Chinese consumers are ready to switch brands immediately if they do not meet their needs, as compared to 25% of the Indian ones. On one hand, China’s middle class has grown very receptive of international brands: Nescafe and Starbucks were able to cultivate a thriving coffee culture in China. On the other hand, China is relentless and unforgiving for those who neglect the specificity of their markets and culture, or who simply come up short against the ambitious and fast-moving local competitors. Many big players such as eBay, Best Buy, Barbie, Lacoste and have encountered numerous obstacles in China.

Brands that have proven success in international markets often believe that their global positioning must work in China. China has a very customer base, from young millennials looking for experiences to status driven forty plus, from 1st tier to 6th tier cities with very unequal exposure to international brands. Therefore, it is very likely that a global positioning would work fine for Shanghai, Beijing or Guangzhou, but not appeal to consumers in 3rd or 4th tier cities at all. China also has a unique competitor structure – players from all over the world compete with strong local brands, often struggling to identify their value proposition that would help them connected to the local culture in the right way.

For example, Muji is originally a mass-market brand in Japan, sold in supermarkets at a low price. However, the brand’s “no-brand-good-quality” (the meaning of Muji’s Chinese/ Japanese name 无印良品) identity greatly appeals to China’s new generation of well-educated, middle class consumers. Muji is positioned as a mid-high end lifestyle brand in China and is sold exclusively in flagship stores located in prime locations.

Haagen-Dazs is a good example of a brand that managed to leverage the brand’s potentials to guarantee success.  In China, it is a dessert shop chain. Lovers and family gather at Haagen-Dazs stores all over the country for ice-cream fondues and cakes. Haagen-Dazs also has a considerate part of the business built on China’s gift culture. Their delicately designed “mooncake” gift sets are widely purchased by consumers and enterprises for during the traditional Chinese holidays. On the other hand, in 2009, Barbie launched a 6-floored flagship store, the world’s largest, in Shanghai. It closed it in just two years’ time. The reason is that the American nostalgia towards the Barbie does not echo in the Chinese consumer minds. They recognize only the Barbie dolls, but not the Barbie brand culture.

Although the Chinese consumers can recognize alphabetic letters, they do not use them to memorize the brands. For example, L’Oréal, a highly successful brand in China, is known as “欧莱雅” [ōu lái yǎ]. Even if shown the L’Oréal logo in its alphabetic form, consumers read it as “欧莱雅” because it is more natural for them to connect to a brand through the Chinese name. This means that although the Chinese consumers can understand alphabetic logos, they do not memorize alphabetical brands. Some international brands, however, decide not to have an official Chinese name such as Lacoste. Its crocodile shaped logo has been copied by many local brands with a different English and Chinese name like CARTELO or CROCODILE. Since “Lacoste” isn’t the easiest to read for Chinese consumers, the crocodile icon became the main distinguishing feature. Because of its decision not to have a Chinese brand name, Lacoste enabled the coexistence of many copycats.

In the fast-changing Chinese market, it is unrealistic to expect anything to be stable. Innovation is a must for the brands to become resilient and to keep adapting. In this ever-changing environment the global brands are competing not just with one another, but also against the increasingly ambitious, dynamic and successful homegrown brands. Amongst the Chinese global brands to be taken seriously Alibaba Group with the largest U.S. IPO ever in 2014 at $25 billion is just one of the many examples we are yet to see coming from China.

(Written by Vladimir Djurovic, Labbrand Brand Innovations)

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