“China is a big story in the growth and rise of the middle class. The Chinese consumers are looking at products that they didn’t have the luxury of using before,” explains Oscar Yuan, vice president of Millward Brown Optimor, the recent success of international brands in China.
Trust and prestige key for brands in ChinaTwo reasons stick out when looking at the Chinese consumers turning to international brands rather than home-grown ones: “One is trust. In the last three years, the trust for Chinese brands has eroded as scandals and quality issues have impacted some Chinese products. Secondly, international brands are a symbol of prestige and good taste, appealing to the rapidly growing middle class in China,” said Yuan.
But there are other factors that the Top 20 – KFC, Pampers, Colgate, Olay, Crest, Apple, McDonald’s, Omo, Coca-Cola, Carrefour, Pantene, Gillette, Johnson’s Baby, Adidas, L’Oreal, Samsung Electronics, Nike, Head & Shoulders, Volkswagen and Armani, in this order – have in common. For once, they all started investing in China early – Coca-Cola even in 1927; Nike in 1981 but and all others at least by 2000.
Change is the only constant in Chinese marketAnother key factor is understanding the Chinese market and that it is changing quickly and adapting to that change. “Never assume what works for your mature markets will work for China. Success comes for those who stay relevant to the needs of the Chinese consumer," comments McDonald’s.
Being bold and attacking in terms of store openings also helps rather than being tentative and looking beyond the big cities like Beijing and Shanghai. Sportswear giant Adidas for example confirmed that half of the 800 stores it opened in China during the last year were in so-called ‘lower-tier’ cities. Last but not least, many international brands attributed their success to finding “the best Chinese talent and joint venture partners”, which also helps them understand their customers better.
Louis Vuitton, Hermès, Gucci and Prada top luxury categoryAs part of their research that included almost 60,000 face-to-face interviews of Chinese consumers in ten cities between 2011 and 2013, Millward Brown also compiled a list of the top ten ‘most valuable global brands’ in the luxury category, which are Louis Vuitton, Hermès, Gucci, Prada, Rolex, Chanel, Cartier, Burberry, Fendi and Coach. In the same category, the top ten apparel brands were Zara, Nike, H&M, Ralph Lauren, Adidas, Uniqlo, Next, Lululemon, Hugo Boss and Calvin Klein.
"Our research shows that in the last three years, trust in Chinese brands has eroded quite dramatically.This is an opportunity for well-known and well-supported international brands to make their move as consumers start to value quality and experience as much as price," sums up Peter Walshe, global account director at Millward Brown the findings.
Image: Adidas store in Beijing / James Saper