There is no doubt that the Chinese economy is soaring these years, especially in the manufacturing and retail sectors. This also points out where China’s economy is heading, jumping more than 10% from 70% to 81%. Meanwhile, the services sector lagged at 65% a 7% decline from last year citing growing domestic competition and rising costs as key challenges.
As for Chinese people, there are more than 1 million Chinese with assets over $1.5 million, and the number is increasing rapidly. Rich consumers (generally 20-60 years old) are fairly concentrated in large urban areas, with Beijing, Guangdong, and Shanghai housing about half of this group. These individuals are successful entrepreneurs, top managers, and business owners. They purchase the best products available, particularly imports, and are the perfect candidates for marketing new products. Premium supermarkets have already emerged in China to provide high-quality products to wealthy consumers (see Choosing the Right Retail Format).
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Chinese Consumers chase luxury brands
For many Chinese consumers, luxury brands from Europe and the U.S. are seen as prestigious. In fact, labels such as Louis Vuitton, Chanel, Cartier, Burberry, and Apple were among the favorites for gift-giving by wealthy Chinese consumers since 2013.
In recent years, “Made in the USA” brands, including Tory Burch, Kate Spade, and Michael Kors, become increasingly popular in China. U.S. export businesses expanding into China can benefit from a halo effect from these products by emphasizing their own U.S. origins, particularly if they are marketing luxury items. In marketing materials, international businesses might emphasize that their U.S. exports are high quality and that customers feel good about themselves when they use them.
Global business owners can also benefit by focusing on luxury brand products that Chinese consumers are more likely to use in public. This is because some rich customers will pay for luxury smartphones and handbags without any concern of money.
Star products effect
Nothing is more important to a brand than its products. Stars products of a brand can be its best sellers, award-winning products, or the most popular products. In the collectivistic culture of China, an individual’s purchase decision is easily influenced by others, and consumers tend to buy products widely talked about.
Skincare brands are adopting to knowing how a star product can make a brand. For example, Clinique 3-Step System Kit, which includes three products to cleanse, tone, and moisturize the facial skin, has been very popular in China for years. “Three steps, three minutes” offers users a simple but effective way of daily skincare, which has helped Clinique to achieve great revenue and long-lasting fame in China. Some sought-after skincare products have nicknames by their Chinese buyers. For example, Lancôme ‘Advanced Génifique’ Youth Activating Concentrate is known as the “little black bottle” in China, and Erno Laszlo ‘Phelityl’ Night Cream is “tofu cream”.
Star products also play a significant role in clothing & footwear brands. Stuart Weitzman has won the favor of Chinese spenders thanks to its 5050 boots. This iconic up-to-the-knee boot has a uniquely stylish design of half micro stretch and leather, which is comfy and makes your calves look slim. So, Chinese women who try everything to lose weight and stay slim are crazy about the boot. To attract more Chinese buyers, Stuart Weitzman carries the boots in small sizes like 4 and 5.
Daigou helps to break into the Chinese market
It is important for some rich consumers to acquire certain luxury items or products because some collections and items are exclusively sold overseas. Daigou (middleman buyers) helps US brands attract Chinese rich consumers efficiently. Even though it is unlikely that chasing down any products even for Chinese rich consumers, Daigou provides a more convenient method to purchase the products or items they like. Actually for some Chinese rich consumers, providing a platform or way to get what they want is much important than money.
Product safety mistakes can be devastating
If there is no concern about price and discount, products safety would be the top concern for Chinese rich consumers. Food and product safety problems exposed in the media can strongly influence Chinese consumers. For example, media reports in March revealed that clenbuterol, a drug that accelerates growth, was found in pork from the Shuanghui Group, a local leading pork manufacturer. The following month, Shuanghui’s retail sales dropped 45 percent, and many consumers interviewed would not buy its products.
As we take about above, Chinese consumers generally favor foreign brands. As product safety incidents and lack of government supervision have scared Chinese consumers away from certain domestic products. Consumers will often pay a premium for foreign brands to ensure quality, especially among rich consumers. To increase their products’ appeal, many Chinese companies register an office in the United States or Europe and brand their products as “foreign.” This has made it increasingly difficult for consumers to discern domestic from foreign brands, and they thus turn to famous and leading brands instead. Foreign companies should devote resources to ensure Chinese consumers know their products’ true origin.
Localization is the key
Facing such a unique group of consumers, foreign companies should focus on localizing operations. It is not easy for many US brands or other global brands to do marketing in China if they still think in an original way, even for local rich consumers who still have their own particular taste.
Localization does not simply involve opening an office and using Chinese packaging, but it also includes marketing, maintaining patience, and investing in research and development. Though the PRC government no longer requires foreign retailers to form joint ventures with local companies, many foreign retailers still favor partnering with local companies, which have more regional knowledge.
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