China is expected to be the world’s largest consumer market in 2019. Foreign brands will continue to invest in China, but the golden age of easy growth for foreign brands is over. Seeking Chinese equivalents of Western marketing approaches no longer works. My latest report, “A Guide To Marketing Into China,” helps global marketers customize their marketing strategies and approaches in China.

 

Foreign brands are losing their charm in the world’s largest consumer market

Foreign brands are losing market share to domestic competitors in various categories including consumer packaged goods, consumer electronics, retail, digital media, and travel and hospitality — even those traditionally dominated by foreign companies, like cosmetics. This is happening because:

  • Foreign brands are failing to keep pace with savvy consumers. Online adults in China are more oriented toward novelty than their counterparts in the US, while many foreign brands have failed to keep pace.
  • Domestic brands’ products and marketing are maturing strongly. Chinese firms have improved their brand value significantly in recent years. Higher-quality products, better responsiveness to local desires, and aggressive marketing have shaped the success of domestic brands.
  • Consumer preferences shift amid growing national pride. Chinese consumer confidence has been rising continuously. So has their confidence in homegrown brands. The growing preference for domestic brands is even more evident among young consumers.

Foreign brands are making basic marketing mistakes in China

Developing a local marketing capability is one of the greatest challenges for foreign firms in China. Many foreign brands are making basic marketing mistakes and losing competitive advantage to domestic competitors. Foreign brands:

  • Lack deep consumer understanding to localize products. Foreign brands that prioritize global product and marketing strategies tend to make this mistake. Apple has consistently lagged its domestic competitors in meeting the unique demands Chinese consumers have for smartphones, such as extra-large screens, multilens cameras, and dual SIM cards.
  • Charge premium prices without delivering equivalent value. Foreign brands that entered China early took advantage of the limited options available at the time to gain a higher market position than in the West. After enjoying the benefit of charging premium prices just because of their foreignness or pure brand name value, some brands haven’t kept up with the new reality that Chinese consumers are now more sophisticated and less willing to pay a premium for products don’t deliver.
  • Fail to adapt promotions to a fast-changing digital ecosystem. Foreign brands, especially those that are just entering China, face the challenge of navigating an unfamiliar ecosystem and adapting to rapid, constant change. Decision-making can take a long time when every local decision needs to be vetted by global headquarters.
  • Are slow to adapt their place strategy to the New Retail boom. It’s no longer enough to have a presence in major cities and eCommerce channels. It’s not easy to match Chinese consumers’ rising expectations for convenience and immediacy when they’ve been spoiled by seamless experiences from local shopping and delivery apps.

Foreign brands struggle in China when they simply replace their existing Western marketing approaches with Chinese equivalents. Deep localization is global marketers’ only way out. To learn how, Forrester client can read the full report.