The Chinese market is a seductive golden ticket for many foreign brands seeking their next global sales pitch. China’s place in the global retail market has positioned it as a lucrative opportunity for foreign brands, yet the barriers to entry are still second to none. Overlooking the intricate cultural elements that come hand in hand with doing business in China can make it tricky to leverage your brands’ true potential, and has left many key players bewilderedly scratching their heads.
Thus, the master key for a successful China market entry is born in the form of the partner model, which aims to help foreign brands build an understanding of local attitudes and guānxi 关系. Guānxi loosely translates to the networks and connections that facilitate business and developmental partnerships, and this operates on all levels from political to interpersonal and social relationships. It may sound straightforward and somewhat old school from a business perspective, but the implications of overlooking the foundations of Chinese business etiquette can severely affect businesses on a global scale, and not just for retail.
Soft powers and Chinese business dynamics
Take ‘Swinegate’; aka the UBS employee back in June who lost a bond deal with Haitong international securities after his ‘Chinese pig’ quip in response to China’s swine flu epidemic for example. Arguably the reaction to this comment was blown out of proportion but nonetheless it cost the company their reputation in China, their relationship with China Railway Construction Corp, and with Haitong.
Or Dolce & Gabbana’s now infamous, insensitive pizza and chopsticks advertisement faux pas that forced them to issue a public apology to the Chinese people and saw their brand health plummet from a modest +3.3 to -11.4 (and subsequently drove their competitors brand identity in China). Over a year on and D&G remains a cautionary tale for foreign brands that even the biggest global luxury leaders are not immune to disaster. working in China, these sorts of PR disasters are imminent and can cause failure to launch.
For fast fashion players, Forever 21’s withdrawal from the Chinese market earlier this year was a result of poor marketing and localised service provision. Despite their phenomenal success in the West, without adequate prior experience of the Chinese market, and without proper advisory services or joint ventures in place suggests that they were doomed to fail.
Some may call Chinese consumers hypersensitive, but China’s place in the global market is a constantly growing soft power in terms of global influence and consumer spending power. The statistics speak for themselves - online retail sales in China grew almost 24% in 2018 at $1.33 trillion, more than double that in the USA at $517 billion. Not to mention China’s $16 trillion mobile payments market, which beat PayPal out of the water valued at $15 billion last year. This is just one of the many ways in which China is outpacing the West in terms of innovation and influence in the retail industry, and it would be loathe for brands to ignore this.
Key takeaways
China is reliant on foreign investment and welcomes new opportunities but cultural ignorance can turn this into a costly venture in more ways than one. It takes more than just piloting a promotion on China’s extensive list of ecommerce platforms; well-thought-out campaign strategy, market positioning and partnerships are the real answers to winning the ferocious competition that is China’s retail space.
Keeping in favour with Chinese values mitigates risk and builds trust in cross-cultural business relations. Successful outreach requires trusted partners on the ground who are familiar with the Chinese market are a necessary investment for long term results. The ways in which Chinese consumers interact with digital platforms are progressively sophisticated, however offline presence is still a fundamental step, which any partner will tell you.
Thus, partnerships maintain an important part of a brands integrity and overall growth in China as online and offline concepts have begun to merge. If you are looking to leverage your China strategy, unless you have the budget, strategy, preparation and willingness to sacrifice all sense of familiarity, finding distributors and operators on the ground is the real priority to avoid more than a PR disaster.
Oriental Retail Ventures (ORV) offers partnership solutions for brands looking to enter the Chinese market. With 15+ years of experience living and working in China, ORV can help you secure the right distributors, operators and real estate to fully leverage your brands presence in this ever-competitive and vibrant market. For more information on how we can help your brand succeed in China, reach out at miquel.cardona@orientalretailventures.com.