By Nicole Zhao, Managing Director of InVizible
Consumer spending in China could more than double over the next 10 years, according to Morgan Stanley. But Chinese consumers are already buoying retailers that offer compelling products. Retail sales in China reached $6.2 trillion in 2019, only about $200 billion shy of American consumer spending that year. In fact, despite the country’s income gap, its economic growth rate has surpassed pre-pandemic levels.
If you’ve been thinking about expanding your business into China, starting now will allow you to ride the projected growth wave. But launching your brand in China involves a lot more than translating your current marketing materials into Chinese. Businesses need to consider everything from distribution to media planning to customer segmentation and targeting.
Here are five key areas to consider before launching your brand in China:
Before doing anything else, determine your budget and more importantly, your desired cash flow projection. How much are you willing to invest to test the market, build brand awareness, and establish your presence before your P&L moves from red to green? This will help determine how sale-oriented your initial marketing campaign needs to be.
Distribution, online and off
Your distribution strategy will drive your marketing strategy, so you’ll need to determine how you want to go to market online as well as offline. Decide whether selling on sites such as Taobao/Tmall, JD.com, and even Pinduoduo should factor into your plans. (Chinese consumers rarely go to a brand’s official website to shop, instead, they prefer to go straight to e-commerce sites.)
For potential offline sales, working with local distributors is one option. Another is to work with a bi-cultural firm that can serve as your bridge from the U.S. to China across on- and offline distribution channels.
If you’re going to sell in China, you need a local presence. Who will run operations on the ground? What is your customer support strategy for serving local customers? You also need to consider your supply chain and logistics options, including how you’ll manufacture and ship your products. And don’t forget to get some quality legal help with registering trademarks and navigating regulations on selling your products. For example, the process of getting licenses to sell cosmetics as a foreign brand is fairly complicated.
For many brands, their manufacturing partners are already in China. If that’s the case for your brand, will you, for example, import and then export your products?
Most traditional media outlets in China are state-owned and have an online presence. There is also a growing landscape of mobile-centric online media—but Alibaba, Baidu, and Tencent account for more than 70% of mobile usage among the Chinese population. The biggest consideration, however, is that paid versus earned media is quite different in China than in the U.S. Most media placements in China are paid and aren’t always cited as such. So, you’ll need to determine how much you’re comfortable spending—and on what.
Similar to the U.S., social media marketing is essential because you can cater to specific consumers’ needs versus investing in a big TV or print campaign. Plus, encouraging social sharing and other advocacy behaviors among your target customers on social media can be a boon to companies with less to invest in their brand launch. Just keep in mind that all the major U.S. social giants (including Facebook, Instagram and Twitter) are banned in China, so you will really have to grow your presence from the ground up.
Although many Chinese consumers still lean toward well-known luxury brands, a growing number of younger shoppers prefer unique brands from smaller companies. These consumers are looking to carve out their own identity, which is best served by midsize and small brands. Chinese consumers tend to constantly look for the next new thing, and typically aren’t loyal to any one brand. So, it’s important to offer better quality and drop new styles more often than you would in the U.S. Many Chinese consumers are also looking for authenticity from brands. They want straight talk about the value you’ll deliver, not fluff and empty promises.
Only after you’ve completed all of this prep work can you finalize the marketing plan that will support your brand launch. So, leave your preconceived notions about selling in China behind and, instead, come in with an open mind. If you do, the opportunities are limitless.