The Chinese economy is flourishing, with it being the only global superpower to close out 2020 in the green. It also recorded record GDP growth of 18.3% in Q1 of 2021, which has upended Chinese consumption trends. One of these changes has been a growth in preference for domestic brands.
Albus Yu, an investment manager at China Growth Capital, said: “Foreign brands used to have an edge in the China market by representing a superior western lifestyle. But Chinese consumers are now more confident in ‘China style.’”
Chinese consumers have significantly more spending power than before and they are upgrading their consumption patterns to spend on quality brands they identify with. Previously, foreign products were viewed as safer and higher quality, but now Chinese customers care about Chinese brands. This trend is reflected in the increased social media coverage and the 47% increase in the total value of the top 50 brands in China, a list now dominated by Chinese brands: Tencent increased 89% and Alibaba Group increased 97%.
As the domestic market recovers, and with it the infrastructure that allows suppliers to rapidly expand, it drives demand for domestic brands, leading multinationals to look to China for growth.
Why are Chinese brands overtaking western brands?
Improvements in quality of living and the wide availability of products and services in modern Chinese society means higher demand for quality products, regardless of their country of origin. Chinese gen Z in particular are market leaders in this regard as they have a high purchasing power and gravitate toward brands that are consistent with their values.
Chinese brands are paying attention to these domestic trends, leaving aside their previous focus on cost-effectiveness and paying attention to product quality and authentic branding. According to Fitch ratings, many Chinese brands are better than foreign brands at online marketing and designing products to appeal to younger buyers. This is driving success for the brands that call on their local heritage to resonate with their audience.
As the influence of gen Z has grown in the market, the Chinese no longer blindly pursue big brands, instead buying, using and selling domestic products. According to the ‘2020 China Consumer Brand Development Report’ released by the Ali Research Institute, the online market share of Chinese brands has reached 72%. Support and enthusiasm for domestic Chinese products from the younger generation, and by proxy the wider population, has never been higher.
Huaxizi Beauty: learning the key to success from a Chinese brand
As China’s fastest-growing domestic makeup brand, Huaxizi reached sales of more than 4bn in just three years (from 2017 to 2020). The key to its success? Integrating classical Chinese aesthetics and stories into its products and effectively adopting the ‘Guochao’ (national pride) trend.
Huaxizi’s marketing is purposeful – its brand story incorporates wisdom from ancient Chinese on the use of plants, flowers and animal fats to change appearance and bases whole product launches on traditional Chinese stories. Its strategy isn’t sales focused – instead it relies on marketing to build brand reputation, winning it many gen Z fans.
Some of Huaxizi’s tactics include:
The use of popular stars and top livestreaming anchors to attract gen Z. Its marketing efforts in the livestreaming space brought over 20m yuan in sales.
Building a WeChat community to solidify the fan base and collect feedback, building trust with consumers.
A through competitor analysis, allowing it to avoid channels and key opinion leaders (KOLs) already saturated by other beauty brands, instead focusing on livestreaming with mid-level KOLs to reach its target audience.
An integrated online-to-offline campaign using a KOL to direct customers to its offline event to experience the brand, try out products and give feedback.
It is not enough to be present on Chinese channels – your content must resonate authentically with your audience. Incorporating aspects of Chinese culture in a respectful way can be a powerful tactic when taken seriously and done right.
How can western brands tap into China’s consumption trends?
The Dior Fall 2021 Menswear Collection campaign was highly praised by Jing Digital for incorporating the ‘Guochao’ trend while avoiding ‘cultural clichés,’ bringing traditional Chinese culture together with modernity. The key to this campaign’s success was incorporating emblems of Chinese culture in a subtler way than other Chinese New Year collections and including a 2000-year-old technique of seed embroidery.
Pepsi achieved similar success collaborating with LiXian on Weibo, with its Peach Oolong Cola flavor and giving the classic Chinese song A Moonlit Night on the Spring River a makeover to appeal to younger consumers. This campaign worked because of the collaboration with Chinese creators, in-depth cultural/historical understanding and Pepsi ensuring its content would resonate with its intended audience.
China has changed. Against the backdrop of rising national pride, it is no longer a selling point to simply be a western brand. Instead you must make sure your brand resonates with modern Chinese audiences by linking your brand to China in an authentic way.
Download the Essential Retail Lessons from China Guide from Emerging Communications for tips on how to crack the Chinese market or check out the Chinese Influencer Guide for information about the benefits of working with Chinese KOLs, KOCs and other influencers.
Emily Hassett, business development executive at Emerging Communications, with editiorial input from Michaela Zhu.