The novelty of being able to buy a McDonalds in Beijing may have worn off some time ago but falling revenues for iconic international brands point to a wider trend for domestic consumers switching to Chinese-made products.
Sales of brands such as Laopu Gold and Songmont have surged this year while revenues for the likes of Gucci and Michael Kors have moved in the other direction. Cost is a major factor, with local alternatives to Max Mara coats or Hermes bags offering similar quality at a fraction of the price.
But there is a sense that Chinese companies are not just offering a cheaper alternative – they are creating a lifestyle story and a brand perception by using familiar cultural references that appeal to local consumers who, in many cases, now want to be seen to support domestic brands.
For example, the founder of Songmont, Fu Song, says the company has positioned itself as a Chinese brand rooted in local culture, which extends to integrating Chinese calligraphy into its store design.
It has also been suggested that Chinese manufacturers will look to ramp up production of the kind of goods western brands are already struggling to sell in the Chinese market.
However, Marco Not, Group Treasurer at Fantoni, an Italian based producer of MDF and chipboard panels, laminates and melamine papers, office systems and sound absorbent systems, is not convinced that flooding western markets would prove successful.
“It would be interesting to know who would be able to buy all those Chinese products in Europe if domestic companies went out of business and unemployment rose as a consequence,” he says. “When it comes to international trade it is important to achieve balance, otherwise some actions could have a boomerang effect.”
Perhaps the answer is for western brands to make more of an effort to embrace Chinese consumer culture, which has its own unique characteristics. Despite facing strong competition from domestic phone manufacturers, Apple has revived its brand in China by engaging with local social media platforms.
During the summer it established a presence on Xiaohongshu, a social commerce platform that integrates user generated content with podcast/video blogs and livestreaming and has become the go-to platform for high end consumer content.
In October, Apple CEO Tim Cook did an Apple Store livestream on Douyin, the original Chinese version of TikTok which, unlike the international video social media app, features e-commerce content tailored for the Chinese market.
Also in October, digital marketing agency WPIC Marketing + Technologies partnered with Tmall Global (Alibaba’s leading cross-border e-commerce platform) to host a China cross-border summit in Los Angeles for US brands, focusing on strategies for China’s booming e-commerce market.
The event featured insights, case studies, workshops and direct access to Tmall Global & WPIC leaders and discussed issues such as market entry, digital ecosystems, consumer trends and how to leverage cross-border e-commerce.
According to Stephen Tseng, who works with brands looking to expand across China, the decline of western brands in that country isn’t about politics – it’s about complacency meeting world class competition.
