The China Skinny on Marketing Your Product or Service to China

China marketing
China marketing. Things change.

The China Skinny newsletter is one of the few China newsletters I actually read and I do so because it is rife with good information, mostly on marketing. Its writers accurately claim that their newsletter will help you “make informed decisions about China” and that “even if you’re not a marketer, our newsletter is one of the best ways to understand China.”

I found one of its recent newsletters particularly interesting because it discussed how much marketing to Chinese consumers has changed of late. This piece was written by Mark Tanner, China Skinny’s Founder and Managing Director and the below is the portion I liked so much — both because it reflects the changes my firm’s China lawyers are seeing and because it helps companies figure out how to market in China going forward. I also like how it reflects what is happening in China as a whole: China is rapidly developing on all sorts of fronts and as it does so, it is “borrowing” less and less from overseas.

The strategies and recommendations China Skinny developed five years ago were quite different than today. When we cited the best examples of marketing in China, we would typically look to foreign brands. Back then, most Chinese domestic companies’ marketing plans were focused on price promotions and discounts.

Things have changed in recent years. The allure of overseas origins remains attractive with many Chinese consumers and there are some great case studies of foreign brands backing that up with a smart marketing strategy, yet our recommendations are increasingly drawing on lessons from Chinese domestic brands. We only need look at the dairy category where imported brands have a natural perceived advantage for health and safety, yet domestic players still manage a 38% premium per liter for online sales. This is due to slicker marketing and usually a better understanding of the market overall. A recent Austcham survey confirmed that exporters are increasingly waking up to this, with domestic brands seen as more of a source of competition than foreign brands – 50.7% versus 49.1%.

Domestic brands are also much more likely to have stronger distribution networks and a greater appetite for lower tier cities, which are the fastest growing markets in China. Of the 50 million new households expected to enter China’s middle and upper classes between 2016-2020, half will likely be located outside China’s top-100 cities, according to a BCG-Alibaba study. Though incomes in smaller cities are less than in larger cities, the lower cost of living in China’s smaller cities means more cash is available for discretionary purchases. Rising property prices and increased indebtedness help fund consumption from consumers starved of the choice available in China’s high-tier cities.

Traditional Chinese domestic brands are not the only source of local competition for foreign brands in China. Key opinion leaders  are getting added to the mix — these are the same people foreign and local brands pay hundreds of thousands of dollars to endorse their brands. In much the same way as George Clooney built his billion dollar tequila brand and Gwyneth Paltrow built her GOOP “modern lifestyle brand,” China’s influencers are launching their own brands such as Zhang Dayi’s fashion label and Mi Zijun’s snack shop.

The most potent new string of competition is likely to come from China’s online giants who are becoming increasingly powerful in both the online and offline world. Though China has been late to adopt private-label brands, it is another area the big ecommerce platforms are likely to lead. Netease is the latest platform to launch its own private label, Xanyuan, selling clothing, furniture, and appliances from the same Chinese suppliers who manufacture for international brands like Kering’s Gucci, Burberry, and Deckers’ UGG. It follows Taobao’s Xinxuan, which launched last year, and JD’s Jingzao, which launched in January.

The ecommerce platforms have the data to evaluate the attractiveness of their private label products and the ability to test them with little risk. Though Alibaba may be best known for its multi-billion-dollar acquisitions of companies like RT Mart and food delivery Ele.me, it is making plenty of smaller purchases that could add to its arsenal of home brands..

New sources of competition cement China’s position as the most competitive marketplace on the planet and brands need to know their competition to carve out their unique place in the market and not become too reliant on one channel.

What are you seeing out there?

This article was written by Dan Harris and published on China Law Blog. Original Post: https://www.chinalawblog.com/2018/05/the-china-skinny-on-marketing-your-product-or-service-to-china.html      

View the original article here.

Dan Harris

Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.