The opportunity to ‘go east’ has never been greater. So why aren’t more brands making the move? Post-Brexit, businesses will need to look to different places if they are to attract consumers into the UK and build brands beyond Europe, says Puzzle’s Dan Beasley.
“I expect there will be a concerted push by our trade bodies and government to make Britain a go-to place for Chinese tourists,” says founder and chief executive officer of Puzzle, Dan Beasley. “This means UK brands need to ensure they are ready to engage and deliver to this new market.”
Over the past few years, the Chinese government has relaxed a number of rules and regulations around trade and business (as well as reducing tariffs) to make selling in China easier and more attractive for foreign brands.“There are two main reasons brands are reluctant to invest in growing their presence in China,” says Beasley. “The first is lack of knowledge about the market and understanding of the risks involved. The second is the perception that for a foreign brand going into this market, politics isn’t on their side. This just isn’t the case any more.”
China’s changing landscape
In the Economist report The Chinese Consumer in 2030, analysts state that income distribution is “set to change radically over the next 15 years as more consumers move into the middle-class income bracket”. The report adds that nearly 35% of the population, or around 480 million consumers, will meet the definitions of upper-middle income and high income by 2030.
As these income levels rise, so will consumption habits and expectations of brands. “The brands that have done well are the luxury ones – the likes of Burberry, Mulberry and Prada. Those that haven’t done well are the more value-based brands such as Asos and Topshop, because they’ve failed to grasp what Chinese consumers want,” says Beasley.
“We see the same mistakes happen, from not understanding localization or how Chinese shoppers will interact with a brand, right down to not understanding the supply chain or being able to deliver all the right products at the right time. You cannot go in with a western approach and expect it to work.”
A digital native world
China has become a leading global force in the digital economy – it is fast-paced and rapidly evolving. With Facebook and Instagram blocked, there is a range of different tools that are specific to the Chinese audience. The country’s most popular messaging app, WeChat, is used for everything in daily life – reading and sharing content, payment through WeChat Pay, communication and e-commerce.
The online payment landscape is also dramatically different to that in the west and is dominated by three main players: Alipay, WeChat Pay and Union Pay. “In the west, if you set up a brand you set up your Facebook, Twitter, Instagram. You choose your URL and decide on a name. In China, that set of social platforms is completely different.
“None of the channels cross over. Find the channels that are culturally relevant to your brand. It’s not enough to understand the various tools and platforms – you have to comprehend the linguistic and cultural differences that make them popular,” says Beasley.
Home and away
For brands to stand out, they need to be in the same place as Chinese consumers – and, of course, that isn’t always necessarily in China.
“There is limited difference between the Chinese domestic market and the Chinese consumer as a whole, for example Chinese students abroad or expat communities. If you can prove a business model that works with Chinese students and travelers in the UK with a lower risk investment, this can be taken into the wider Chinese audience to reach the Chinese consumer, whether in China or abroad,” says Alpha Xu, founder and chairman of ASAP+.
“Big travel moments such as Chinese New Year, Summer Holiday and Golden Week pose a significant opportunity. Creating China-specific campaigns during these times will help brands differentiate themselves from the competition. It comes back to the essential point of brands needing to understand the Chinese audience and produce campaigns that resonate on a cultural level,” concludes Alpha.
Hear more from Puzzle and ASAP+ at The Drum's Made In China breakfast on Thursday 28th February. Sign up here.