China, the country that often comes with its own set of clichés: different, big, unique. However, I feel it is just diverse and the rules are different. Understanding the market’s idiosyncrasies before jumping in will help
Cater to local tastes and have a robust innovation pipeline
In the food category specifically, like for every market, from Australia to South East Asia, to China, the palette is different and you need to ensure that the taste appeals to the consumers in the market. However, what is more important, is there must be something differentiating that allows for sustained interest in your product – in the ingredients, the product format or the packaging.
However, nothing stays new for long in China, and when building the products, one needs to have a robust innovation pipeline for at least the next 18-24 months to continue innovation. It is a market constantly hungry for more. Fade is very high, consumers won’t forgive the long innovation rates of traditional consumer packaged goods companies.
Use influencers effectively
While there are some doubts on the effectiveness of influencer marketing, using a celebrity in China is an absolute necessity to get visibility and awareness. They are expensive and won’t necessarily drive conversions and immediate ROI, as a celebrity’s fans won’t be looking to buy your product straight away.
Converting these fans into your brand advocates needs effort, time, content and continuous engagement. You need a robust plan to monetize the fans and build a robust model for social commerce. While in other countries, you build your brand before thinking about the deploy model, in China you start thinking about execution while conceptualizing the idea.
Don’t overlook local brands
Competition in China is rarely with multinational companies. Chinese local brands don’t look or feel local. Brands like Be-n-Cherry or Bestore are great brands with innovative products and sophisticated packaging. The challenge is getting information about these brands while doing market assessments, as there is little information available on these companies outside of China. You need real local insights to understand the business.
Price is still key, unless you are a luxury brand
Like every market, e-consumers are bargain hunters. China has a rising middle class with significant disposable income, but that doesn’t mean shoppers are willing to pay a premium for everything. A brand must work hard to justify a higher price tag.
Specifically, on e-commerce, brands are almost always discounted, meaning you need to be clear on how you are going to build a premium and more importantly justify the price value equation to consumers. For example, the success of Luckin coffee shows that with quality products at a competitive price and aggressive promotions and sampling, a local Chinese company can prosper against a foreign behemoth like Starbucks.
No conversation is complete without distribution
Distribution is as key in the e-commerce world, as it is in the offline world. The e-commerce channel typically has three main distribution channels: flagship store, which is the equivalent of an exclusive brand store, think Apple. Second, Tmall Supermarket, which is the equivalent of the Walmarts and finally the sub-distributors, your local grocer. Sub-distributors are critical to driving penetration for your brand, as they have loyal traffic with high purchase frequency of lower basket sizes. The average price point of the products is much lower here and usually heavily discounted. The key is, therefore, to be able to enter this channel and drive awareness, trials and penetration for your brand.
Roshni Chatterjee is head of White Space Innovations, APAC, at The Kraft Heinz Company.