Eric Lin is the Executive Director, Pacific Rim at Siegel+Gale. Eric Lin is the Executive Director, Pacific Rim at Siegel+Gale.
Eric Lin is the Executive Director, Pacific Rim at Siegel+Gale.
Despite the recent slowdown, China still presents significant growth opportunities for global brands. With an expanding middle class, continued urbanization and rising consumption, China gives global brands access to a vast audience with an insatiable desire for new products, services and experiences.
Yet while China’s growth opportunities abound, so do its challenges. The nascent days of its economic growth where the mere availability of a foreign brand in the market was enough to generate excitement and sales are over. A more sophisticated audience and intense competition have raised the bar for success, in what is arguably the world’s most dynamic marketplace for brands.
For global brands considering an entry into the China market, here are three key questions to ask yourself:
1. Do you have a compelling purpose for entering?
While the market once clamored for new products and services, the rapid development we’ve seen over recent decades has resulted in an overwhelming array of products and services across virtually every sector. Competition is intense with global players continuing to invest in the market as well as highly ambitious and fast-moving local competitors closing the gap on innovation and quality.
To be successful, global brands have to clearly define the purpose they bring to the market. What is the unmet need that you fill? How will China uniquely benefit from your offering? Beyond the functional value that you provide, what is the broader social or emotional value that you bring?
If your organization has difficulty answering that question now, it will have an even more challenging time convincing audiences once you’re on the ground. Moreover, the government is increasingly demanding that foreign companies contribute to the market—not just profit from it.
Those organizations that can serve a higher order purpose— improving quality of life, developing industries, impacting communities—will look favorably in the eyes of the government and regulators.
2. Will your brand resonate locally?
Global brands that have been successful in China all have one thing in common: each of them has localized aspects of their brand to resonate with local culture, preferences and behaviors. From KFC localizing its menu, to the Gap tailoring its sizing for Chinese audiences, there are many great examples of brands that understand success in China requires a unique approach that respects local tastes and needs.
Yet effective brand localization is about more than just product or service adaptation. It starts with localizing your brand story—who you are and why you matter. Your brand story, while likely defined quite clearly in your home market, may need to be adapted for Chinese audiences to account for cultural differences, unique target audiences and competitive dynamics.
When North Face first entered China, it struggled as it communicated its same global brand story, empowering individuals to push the boundaries of exploration and outdoor performance. After better understanding the market, it localized its brand story to be about experiencing the balance and harmony of nature with friends— a nod to a cultural understanding of how the Chinese prefer to enjoy the outdoors.
Today, this culturally relevant story drives everything they do and say in the market, from their communications to their retail outlets to the online communities they have created for Chinese consumers looking to experience the outdoors “the Chinese way.”
3. Are you willing to commit for the long haul?
You will undoubtedly spend a great deal of time doing your due diligence and mapping out a methodical market entry.
But the reality is very little with go the way you plan. You’ll make mistakes. You’ll find your assumptions were off. You’ll discover what works in other markets might not work here. And you’ll quickly discover the classic adage from China veterans—in China, anything is possible, but everything is difficult. If near-term financial returns are your primary motivation for enteringChina, it’s best to turn away now.
Build your business like any important relationship—commit for the long-term. Embrace the country, the people and the culture.
While it’s easy to be motivated by two decades of double-digit growth and expect near-term returns, the reality is that China’s supersonic growth is starting to cool. It will continue to be a major growth opportunity for multinationals for years to come, but it will take a strong foundation, patience and careful execution.
Companies like Coca-Cola, Nike and KFC that are reaping the rewards today have planted the flag in China years ago. Likewise for any new or recent entrant, it’s important to understand that success in China will be a long-term journey.
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