‘Made In China’ Makes It Tough For Brands To Crack Middle Kingdom

Chinese consumers’ penchant for local brands is proving to be one of the greatest hurdles for international brands in China.

Watch out, Apple: More than a billion people in China are quickly responding to what could be a better, cheaper solution to the iPhone.

Could this be a sign of the times?

Yes, according to a 2016 McKinsey study, which found that Chinese consumers believe homegrown brands are already a match for overseas competitors, especially in the tech industry. Meanwhile, Chinese e-commerce brands are seducing international consumers thanks to the pervasiveness of Jack Ma’s Alibaba platform.

Over the past year, domestic smartphone manufacturers, such as Huawei, Oppo, and Vivo, saw dramatic increases in shipments and ate into the market share of foreign competitors like Apple and Samsung.

The diversified Chinese consumer believes locally manufactured smartphones are just as good as their foreign counterparts and are sometimes better value for money. This is likely due to a range of culturally specific factors, according to Hans Hendrischke, a professor at the University of Sydney Business School.

“There is no single answer to what influences Chinese consumers. The market is huge and diversified along regional lines, incomes, climate, and cultural preferences, among other things,” Hendrischke said. “Chinese consumer markets are highly dynamic and easily influenced by rapidly changing fashions as consumers interact in large numbers and their perceptions change quickly.”

Locals Have Upper Hand

Indeed, Chinese consumers’ penchant for local brands is proving to be one of the greatest hurdles for international brands in China. According to Andrew Collins, CEO at Chinese media agency Mailman Group, foreign brands have such a tough time gaining a foothold in the market because expansion relies heavily on local partnerships.

He warned any brand looking to expand into the Middle Kingdom: “Expect you’ll lose. Expect it’s going to be difficult. Expect that you won’t win without local support. Expect that the market is not designed for you. It’s designed for them.”

Another reason foreign brands face an uphill climb when entering the Chinese market? Chinese companies have become extremely versatile in bringing new products to market, which, in turn, is making it harder for international brands to compete, said University of Sydney Business School professor Wei Li.

Li suggested international brands “must have communication strategies that suit China’s mobile-connected consumers.” Community building and logistics are another two hurdles that must be factored in before brands find commercial success.

Alibaba Boost

Not only are Chinese brands taking over market share from foreign competitors, they are now staking out new turf abroad, largely thanks to Jack Ma’s Alibaba platform, which is providing Chinese brands with the means to target local communities overseas.

With $US700 billion in sales last year, Alibaba is the most lucrative e-commerce market in the world, but it’s predominantly local brands finding new methods to leverage the trading platform.

Vic Edwards, marketing expert and visiting fellow at the University of New South Wales, said he believes Chinese e-commerce and its business social media channels have very strong potential to grow compared with their Western counterparts.

“Chinese consumers leapt to the forefront of using social media to access products and make payments via telephone and platforms, such as WeChat and AliPay,” Edwards said. “The ‘developed’ Western economies had no such parallels and were left in China’s wake.”