Market changes challenge brands to act with insight
Consumers trade up
and they trade down
These are interesting times in China—but challenging for brands. As the market becomes more sophisticated it also becomes more complicated. Consumers have new concerns, including the slower economy, geopolitical tensions, and the high cost of housing, which reduces disposable income in major cities. But consumers continue to spend. And they are willing to pay premium prices when merited by quality or lifestyle needs. They are also ready to trade down when it makes sense. Consumers might buy imported, premium-priced skin care products because of the brand prestige. For less ego-intensive purchases, they might click on Pinduoduo, the online e-commerce site that promotes group buying and other discounts. Kantar Worldpanel discovered this Yin Yang spending phenomenon in fast moving consumer goods and calls it Stratified Spending. As the market becomes more complicate, brands that understand the nuances will find opportunities.
Brands must deliver
the goods, rapidly
Chinese consumers have come to expect a level of convenience that exists nowhere else in the world. They can order just about any product or service, online or in a physical store, and expect fulfillment almost instantaneously. With extensive online offerings and offline logistic capabilities, e-commerce leaders, like Alibaba and JD, drove this O2O trend and its cousin New Retail. And brands like the Meituan, Ele.com, and Didi Chuxing, newcomers to the BrandZ™ China Top 100, have broadened the trend into services, such as food delivery. This extreme convenience phenomenon relies on a combination of factors that is unique to China, including: over 800 million consumers accessing the internet mostly on mobile phones; broad availability and acceptance of online payment; and extensive logistical infrastructure, including a vast pool of low-cost labor, to facilitate rapid delivery. Extreme convenience has redefined customer experience in China and raised expectations for brands to deliver—in every sense of the word.
requires access to data
The rapid growth of e-commerce and online competition has made it critically important for brands to offer a differentiating experience, personalized as possible for the individual customer. Paradoxically, the structure of e-commerce has impeded progress toward this goal. The purchasing, delivery, and social engagement data that can yield profiles of individual customers are controlled by the major e-commerce platforms. Recently, the platforms have developed various approaches for sharing data with brands. The Alibaba program is called Uni-marketing. Tencent has a program called Blackdragon. And brands also use the mini program option of Tencent’s WeChat to access customer data. These initiatives can help improve customer experience and accelerate brand building.
shift in Chinese economy
The presence of technology, and-technology-related brands, in the 2019 BrandZ™ China Top 100 demonstrates the shift of China’s economy toward the consumer sector, and the impact of priorities set by the Chinese government to accelerate digitization and the growth of certain technologies, including artificial intelligence and robotics.
All but two of the 11 technology brands in the BrandZ™ China Top 100 rose in value. Technology led the ranking both in number of brands and in contribution to total value, 26 percent. Of the 17 brands that entered the ranking for the first time this year, four are in the technology category. Three of the newcomers—smartphone maker Xiaomi; DJI, the world’s leading drone developer; and UBTECH, a robotics company—also rank in the Top 10 brands in Overseas Presence. The other technology category newcomer is Meizu, a smartphone maker.
Technology is fundamental to many of the other newcomer brands in other categories. Among these brands are: Didi Chuxing, the ride hailing app; and the lifestyle service platforms Meituan and Dianping; and Lufax, an online financial services brand. In addition, the robotics company ECOVACS is listed in the home appliances category, and the education brand VIPKid depends on its online platform to connect students with English language teachers in North America.
ever vital, now trickier
With over 800 million people accessing the internet, most of them with their mobile phone, it is relatively easy to reach individuals with brand-marketing messages. The challenge is reaching them at the right time with the right message. Most members of this vast online audience, particularly young people, want a message that is personalized and consistent with whatever content they are engaged with. Increasingly, that may be a game or a short video, often user-generated. In these instances, creative contextual content is more likely to engage more than a traditional brand message, according to Kantar Media. Social media continues to evolve, opening more possibilities for brands to make progress—or mistakes.
As brands expand overseas,
they need to build awareness
This year, six of the Top 10 in Overseas Presence are in the technology category, illustrating how Chinese brands continue to move along a continuum from “made in China” to “comes from China” to “innovated in China.” To accelerate overseas recognition, Lightspeed recommends that Chinese brands emphasize the unique features of their products and promote a “star” product. In addition, Chinese brands need to strengthen their Brand Power, a BrandZ™ metric of brand equity, particularly their distinctiveness, and they need to improve awareness, especially among young people, according to recent BrandZ™ research completed with Google. Other challenges facing Chinese brands expanding abroad include: gaining local insight, finding the right balance between local and global management, and establishing a long-term communications strategy, according to the Outbound practice at Ogilvy.