China is proving to be a ripe market across a range of sectors, but is this market so self serving that brands will have to elbow their way in?
When it comes to the growth of China’s economy, the stats speak for themselves. You’ll be able to read more in next week’s cover feature, out on Thursday, but news broke in February that China had become the world’s second largest economy and was on track to become the biggest in the next 10 years.
This is certainly big news for brands in terms of the opportunities that exist in the new consumer power of the Chinese shopper – or should I say the various Chinese shopping markets, as dictated by the cultural and climatic differences across this vast landscape.
Chinese incomes are rising and in turn, so is demand for branded products. According to research firm Millward Brown, in 2010, 53% of Chinese consumers shopped with a short list of brands compared to only 41% in 2006. Only 39% reported that their purchase decisions were driven by price in 2010 compared with 47% in 2006.
And according to statistics from TGI’s Brand Building in the BRICs report, car ownership in China increased 200% from 3% to 9% between 2000 and 2010, while credit and debit card ownership also jumped 115% from 40% in 2000 to 86% in 2010.
TGI has also introduced us to the Super Consumer, the top 10% of the country’s earners who are more likely to purchase and engage with global brands and are thus a prime audience. For example, 52% of China’s Super Consumers have been to McDonald’s compared with 31% of the average population.
But, before brand marketers rush to book the next flight to Beijing, they should be warned that Chinese brands aren’t exactly unaware of what’s happening in their own backyard. The Chinese might not be renowned for being experts in innovation or brand building, challenged by culture steeped in tradition and businesses fraught with complicated structures. But to their credit, they are fast learners, and Chinese brands are quickly getting in on their own game.
In Millward Brown’s annual BrandZ global brand valuation ranking, seven Chinese brands made the list in 2010, while in 2006, just one was present. Delving even further into the world of Chinese brands, the BrandZ ranking was done exclusively for China for the first time in 2006, and results were released earlier this year for 2011.
In its simplest form, the list spells out who will be the biggest competitors for Western brands coming out of China. On the list might be ones you’ve heard of, such as mobile manufacturer ZTE, which has built its business around supplying low cost handsets not only to the Chinese but to the growing African mobile market. PC manufacturer Lenovo is also looking to grab a bigger slice of the PC market, and in an interview with Marketing Week, admits that it is now time for its brand to take centre stage in its expansion strategy.
Chinese footwear brand Li Ning is giving the likes of Nike a literal run for its money, as the brand’s namesake, Olympic gymnast Li Ning himself has shown that he isn’t scared to push the boundaries of branding. During the Beijing Olympics, Li Ning swooped down on wires into the stadium to light the torch, much to the chagrin of official sponsors Adidas, who had paid $200 million for the privilege.
Millward Brown’s Chinese BrandZ list also mentions Mou Tai liquor and Chang Yu wine, areas that traditionally would be dominated by Western brands, but are growing in strength amongst local brand loyalists.
But by the same token, marketers shouldn’t be quaking in their boots at this information, but simply take it in their stride. While Chinese brands are tuning into the power of branding, they aren’t branding experts yet. In Millward Brown’s discussion paper, Tom Doctoroff, CEO of JWT Greater China, claims it will be a decade yet before Chinese brands will “represent China proudly on the global stage”.
So now you know, and it won’t take you a decade to formulate your plans for China, will it?