Over the years we’ve encountered many false preconceptions about the Chinese market, foreign businesses naturally develop a whole host of ideas about what the Chinese market is like yet so often they are incorrect. Here are some of the key, mistaken assumptions foreign businesses tend to make:
False – The Chinese market is underdeveloped and in some sense requires further ‘education’.
True – The Chinese market is very developed and progressively international.
This is a complete fallacy, the market is one of the most innovative, vibrant, and creative places to do business in the world, there is so much opportunity and the sky really is the limit in China. The rising middle class in China has demonstrated its continued preference for quality. The state has additionally launched strong initiatives to move from a manufacturing economy to a more tertiary service and creative-based economy and they seem to be succeeding with a host of hugely successful digital platforms, start-ups as well own brands. Think WeChat. Alibaba, Mobike, and Huawei/Vivo for example. These are all now world-leading market leaders in their respective fields.
The market has proved to be adaptive and flexible to foreign ideas, not resistant and closed as was speculated 10 years ago. For example; China was labeled a ‘traditional tea market’, in fact now China is the 2nd largest market for Starbucks with coffee and café culture spreading to the majority of tier 2 and tier 3 cities like wildfire. Red Wine is the same story, except China is now the largest wine market in the world today.
Consumers have a strong desire for luxury goods and quality products just like in every developed market in the world. No amount of ‘further education is required. With such a vast population there is potential for almost every product and service in the world.
False – Domestic, Chinese companies are simply ‘copycats’.
True – Chinese companies are original and innovative, do not underestimate this competition!
This is certainly no longer true. Youku (the largest video streaming platform in China) launched its own critically acclaimed original content service before the concept was even a twinkle in Youtube’s eye. Chinese social media platforms such as WeChat or Weibo are world-leading with micro-commerce, e-wallet/payment, and geo-localization services some of the best in the world. QQ’s music streaming service now has a wider database of music than Spotify. Alibaba is the largest e-commerce company in the world that has developed the largest delivery infrastructure on the planet as well as the most successful sales event, ‘Singles Day’ ever conceived, their cross-border platforms such as Tmall are now opening up Chinese e-retail like never before. The latest big-name start-up ‘Mobike’ has created the revolutionary biking version of ‘uber’ which is truly mobile, users leave their bikes wherever they finish the ride and locate the closest bike to them based on their location. The Chinese firm is already setting up its sites in the European market.
And the list goes on… Domestic companies are surely not copycats anymore but innovative and original business propositions to be taken seriously on the world stage.
False – You need to completely re-brand your business in China
True – You need to tailor your branding but keep your sense of identity, especially as a western brand.
This is not strictly true, you do need to tailor and adapt your business proposition to this different easternized market whilst ensuring you retain a unique sense of identity when it comes to branding. It is not necessary to completely rebrand and wholly embrace the more typical Chinese aesthetic of vivid color palettes and the more cartoon, anime style of image. In fact, what consumers desire is authentic western products, this is how you can differentiate yourself in such a crowded market. Additionally, the label ‘western’ in China connotes quality and authenticity in a market often associated with fakes.. which leads to the next point.
False – Any business launching in China will struggle with counterfeits and fakes
Truth – This is often blown out of proportion with a huge and profitable consumer segment desiring genuine article.
For most businesses launching in China, this is not an issue, companies, and brands need to be hugely successful before they start being actively copied. Counterfeit goods do not circulate for the majority of western brands in China as much as reporters make out. Yes, there is a strong culture and issue surrounding this but the backlash against fakery in China is also very strong and reported on far less.
Alibaba’s Tmall was partly set up to address this, brands can open official stores which are hosted by the platform which guarantees authenticity. The rising middle classes in China (of which there are now over 300 million people) desire quality, authentic products and are prepared to pay a premium for this for imported goods that are genuine. In a sense, the issues presented by counterfeits are balanced by the strong desire from such a huge consumer segment for authentic products. Alibaba as the largest eCommerce company is now taking steps to reduce fakery on their other platform Taobao by closing down illicit companies and restricting seller access to the site.
False – The focus in China should only be on major tier-1 cities on the east coast.
True – In fact tier 2 and 3 cities are the keys to sustainable growth in China.
Again perhaps five to ten years ago this was true but now tier 2 and 3 cities present an enormous market opportunity, southern and central China have become connected with the growth of e-commerce online and digital marketing able to reach such a broad range of provinces through greater levels of online engagement nationwide.
China’s 4 first-tier cities (Beijing/Shanghai/Guangzhou/Shenzhen) have less than 10% of China’s population but are saturated with international malls and high streets.2nd & 3rd-tier citizens buy 27% of their goods online, more than double the 1st-tier rate. Online spending averages are growing fastest where incomes are rising without attendant retail infrastructure, in over 130 Chinese cities with populations equal to or greater than Berlin’s.
There is currently a 55% internet penetration rate but this increasing by 5-10 % year on year and showing no signs of stopping. The largest growth rates are in the western, southern, and central provinces. The physical infrastructure largely set up through Alibaba’s nationwide delivery network has improved access for market growth all across China.
False – To enter the Chinese market I need investment vast sums of money.
True – Digital marketing has significantly reduced the overall cost producing a better ROI for businesses.
In fact, as Chinese marketing expert Olivier has regularly pointed out; ‘It is not the biggest fish in China who survive.. but the fastest and most adaptable”. In the digital age, lower initial costs for market entry are required, and most businesses if they pursue an intelligent and comprehensive strategy will see a significant return on investment within a small number of years.
Flexibility and adaption are the keys to success, rather than pumping money into expensive advertising focus on long terms sustainable strategies such as natural search optimization, social media, and forum reputation as well as PR and Chinese content. This pays dividends in the long run for a fraction of the cost of an expensive traditional media campaign, build traction online with a digital campaign first.
We are a specialist Chinese digital agency that can be your partner in this market, with our wealth of experience in search engine optimization, social media marketing, forums, influencer posting, and e-reputation control we are perfectly placed to facilitate your success.
If you have any more questions or a project in mind, don’t hesitate to contact us.