How are foreign brands and local brands competing in the Chinese market?

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The madness and presales for this year’s Double-11 / Singles’ Day festival kicked off on 20th October. The 23-days of the festival will see 290,000 brands battling it out with more than 14 million deals just on Alibaba platforms, all hoping to earn their share of the sales spike that happens every November.

Like last year, live streaming looks set to contribute a large portion of sales. Livestream queen Viya’s 14-hour marathon show pre-sold about ¥8 billion (US$1.3 billion) worth of goods, while Cherie moved a very respectable ¥1.2 billion (US$188 million). But it was “lipstick brother” Austin Li who took the crown, pre-selling ¥12 billion (US$1.9 billion) during his 12-hour show, not including orders that were later cancelled. The pulling power of Double-11 was evident, with 250 million tuning in – more than a dozen times his usual 20 million-or viewers.

While Austin Li happily flogged foreign products ranging from Shiseido lotions to Apple AirPods, the former L’Oréal store advisor hopes to “let consumers know that ‘made in China’ is very powerful”, and “not second to any other countries”. It is a sentiment that has accelerated since Covid and is being nudged along by increasing pressure on China’s rich and famous to promote “cultural confidence”.

The sentiment is representative of the rising China Chic or Guochao which is shifting preferences towards domestic brands. As a consequence, foreign brands cannot just be on a shelf or screen and expect consumers to think they are better as they did a decade ago. To compete, foreign brands have to work harder, understand their target audience better and adapt quicker; because there will be a multitude of hungry Chinese competitors ready to eat their lunch.

Nevertheless, despite all of the hype around Guochao and rising domestic brands, there is still immense value in the perceived quality from foreign goods across many categories. The most obvious example is of the superior craftsmanship abroad in the luxury category, where foreign brands still account for all but a slither of sales in China despite a lot of talk of Chinese luxury brands. But the perception spans a plethora of categories from cars to coffee. China’s most awarded FMCG company, Yili, has invested billions of yuan in dairy in countries like New Zealand to capitalise on the safe, healthy and pure perceptions of foreign dairy.

Even in categories such as beauty, where ‘C-beauty’ is attracting a lot of attention, China’s most famous local brand, Chinese Perfect Diary uses many foreign OEMs to reinforce that its cosmetics brands are considered high quality. Collaborations with reputable foreign brands and institutions such as the British Museum, New York’s MOMA and National Geographic are symbolic of the aspirational reputation that foreignness still holds.

Whilst rising national pride is contributing to Chinese brands’ successes, much of their growth is coming from a better understanding of Chinese channels and consumers, and giving them what they want. Many of the perceived advantages domestic brands play to aren’t insurmountable for foreign brands. Take the beauty category for example: based on data from China Skinny’s Trackers, “suits Chinese skin” is both the most-desired trait from our consumer panels, and one of the most effective claims on e-commerce stores.

As a foreign beauty brand, you can accommodate this need by ensuring you have ingredients that consumers feel are relevant to their skin, including Traditional Chinese Medicine. You can ensure that you have Chinese models in your communications and have collaborations with reputable Chinese influencers and brands.

There remain plenty of subcategories where foreign brands still rule the roost, and they often are not that obvious.

Foreign brands continue to hold trump cards that many of the most famous Chinese brands still cannot match. Unfortunately many of them are using them in a way that is not as meaningful as it once was in China, and need to evolve.

(Source: China Skinny)

Source: retailinasia.com