Will the new generation of Chinese brands break out of China?
Updated: Jan 23, 2020
Across the retail sector to technology and innovation, Chinese brands have gone from strength to strength. The past decade or so has borne witness to incredible domestic market expansion, a vast identity overhaul and a resurgence of cultural confidence amongst Chinese brands, or ‘guochao’ 国朝, and for many companies, their eyes are now set on taking on the rest of the world. Thus, despite success in local markets, the next challenge facing China’s new generation of brands is the hefty overseas competition, and the question begs as to whether many of them have the legs to make it outside of China. We have compiled some insights and reflections on how local brands have made it work in China and what we can expect from them.
Secrets to success
The current generation of contemporary Chinese retail brands is known for the likes of Ellassay, ICICLE, ZucZug and Bosideng, to name a few. Where Western brands have struggled, proximity to the local market and an understanding of Chinese consumer demands and buying behaviour has contributed to immense growth for local brands, who have been reaping the rewards in terms of sales. Furthermore, according to the latest figures from China’s ecommerce festivals, Chinese consumers have been opting for local brands over Western counterparts that is being attributed to rising patriotic sentiment along with growing brand confidence. This is also in part thanks to a focus on mid-range pricing, increasingly high quality and appearance, digital and ecommerce savvy and celebrity collaboration in the case of some bigger names. This, along with nationalist sentiments (more so now given the recent catastrophic blunders from Western brands), are all of which non-Chinese brands ought to take note of when competing with Chinese retailers.
Another rising star is Chinese fashion label Mo&Co who now has an estimated 900 stores across China, high street stores in Mayfair in London and in Paris, and an annual turnover of over £200 million (HKD 2.6 billion). An embedded understanding of local Chinese consumer demands and localised content has allowed them to stay ahead of the curve and driven domestic growth. Mo&Co’s collaboration with Yang Mi, one of China’s biggest rising stars is fitting given her reputation and young fanbase, along with a portfolio of Western luxury collaborations including Michael Kors. This celebrity partnership, as well as NeiWai and their appointment of Du Juan for example, proves Western celebrity star power is no longer a necessity for Chinese brands. Instead, leveraging the power of homegrown talent has helped piqued interest amongst consumers and made Mo&Co one to watch. On top of this, Chinese retail giants such as ICICLE and Ellassay have been busy expanding their global reach and buying out European fashion houses like Carven and IRO, which has set the record straight about China’s global influence and power. This has given them room to implement localisation services as the first point of call for any brand trying to increase their appeal overseas to develop a stronger presence and resonance with Western audiences.
In technology, Chinese companies including Miniso, Huawei and Xiaomi have cornered the phone market in China and a game of one-upmanship is afoot in the battle for the best new features and continuous innovation. Pitted as the ‘Apple of China’, Xiaomi has experienced rapid expansion into over 80 markets - most significantly in India - thanks to low price points and some striking similarities to Apple’s iPhone, yet still lacks the salience in the West despite a competitive pricing strategy. And for Huawei, arguably the biggest Chinese brand of the moment has been a victim of the trade war with the US but has outdone Apple in China and continues to grow in markets such as the UK (despite protests from America).
What can we expect next?
The next challenge for Chinese brands is staying relevant amidst the competition, particularly at this time of the year with key marketing opportunities like Chinese New Year coming up. Many industries are reaching maturity in the over-saturated marketplace that is China, and smaller retailers ought to look at how they can look for key growth opportunities, build their margins and secure foreign investment. There is growing demand for Chinese brands, so in order to translate this confidence overseas, key factors like maintaining a high quality of production and boosting their brand image which will help brands distinguish themselves. Chinese retailers should therefore look at employing stronger marketing and branding strategy. Furthermore, looking at new emerging opportunities in emerging Tier 2 and 3 cities would be a feasible option for mid-priced brands to compete for wallet share, before thinking before thinking about penetrating the West.
When the coin is flipped on domestic versus Western brands, larger and well-established Western brands have recognition and reputation on their side, and some Chinese consumers may still favour these features. If current luxury and retail forecasts are anything to go by, there will continue to be a shift towards buying local brands in China. Chinese retail and production is however still fighting some long-held negative perceptions from overseas consumers, and may therefore sometimes be met with doubts. Some commentary suggests that on home turf, there is no need to emphasise that the brand is Chinese - but for some consumers they may enjoy the associated confidence that comes from buying local. Therefore, shedding the associations of the 'Made in China' label is a key step towards overseas success, and brands need to consider their competitive environment, investment opportunities and leverage key selling points to help their brands stand out.