Article

Ernie Diaz
Ernie Diaz 9 July 2015

5 China Market Myths

Discover the truth about five market myths for business success in China

MYTH 1: The Chinese Need ’Education’


Truth: The Chinese already know, or can figure it out on their own.


Evidence:

Ten years ago, experts were calling China a “traditional tea culture”, where coffee would appeal only to international, first tier consumers. Today, China is the 2nd biggest market for Starbucks, and café culture is firmly ensconced in 2nd & 3rd tier cities.

Red wine – same fast journey, except China is the largest market in the world today.

NBA, planes & yachts, Antarctic vacations…the list of niche brands and offerings with China as a key market grows faster than any efforts to “educate” could claim credit for.

MYTH 2: Western Brands Should Focus On 1st Tier Cities



Truth: 2nd & 3rd tier cities hold the keys to sustainable growth in the China market.


Evidence:

China’s 4 first tier cities (Beijing/Shanghai/Guangzhou/Shenzhen) have less than 10% of China’s population, but are saturated with international malls and high streets. 2nd & 3rd tier citizens buy 27% of their goods online, more than double the 1st tier rate. Online spending averages are growing fastest where incomes are rising without attendant retail infrastructure, in over 130 Chinese cities with populations equal to our greater than Berlin’s.

MYTH 3: You Must Take Into Account The Many Regional Cultures In China For Marketing



Truth: You must communicate your value proposition clearly and consistently.

Evidence:
China is indeed marvelously diverse, but does that mean a cosmetics brand should position differently for the hearty hill dwellers of Guizhou than for the industrious river folk of Jiangsu? Dialects, traditions, and of course individual tastes, vary widely.

Desire for quality, authentic foreign goods does not. Heat maps for buyers of popular foreign products on Taobao analytics reveal that mothers in Urumqi love Japanese diapers as much as mothers in Shanghai.

MYTH 4: China Is Cheap



Truth: The competition is spending big, to match the opportunity.

Counter-Evidence: “Weibo and WeChat are free!”

Evidence:
Reaching people at the right time and place, not just with the right message, is an ever-costlier proposition online in China, especially for competitive industries. Bid rates for new car terms on Baidu often exceed Google’s. Premium placed banners on major portals match and often exceed western rates, too. The days of leveraging big Chinese IT brains with small salaries are long gone. You get what you pay for.

The good news: savvy research and analysis can reveal arbitrage ad opportunities and other low hanging fruit.

MYTH 5: Chinese Brands Will Out-Position You




Truth: They may outspend and outmaneuver you, but are hindered from out-positioning.


Evidence:
West is best for the Chinese consumer, not always fairly so. Nonetheless, Chinese brands almost always choose the ‘international’ approach to branding, hiding their domestic status.
Just look at the homepage of Chinese brand OChirly.

Not a lot of play to Chinese culture and values on display, rather an innate understanding that the more ‘international’ a brand appears, the more Chinese consumers like it.


Look at the stores in the world’s biggest building for further proof, or read why Western Brands are #1 in China.

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