Branded in China - The Long Term View

Is Brand Management in China a waste of time? Recent research is starting to show that this is no longer the case. Brands have always been important for the Chinese but in the past this had more to do with status which in turn is more connected to price and exclusiveness.  The Chinese have begun to discover that good Brands come with attributes such as authenticity, quality and distinction. This change opens a road to building Brand Equity for Chinese and non-Chinese Brands alike. A recent visit to Beijing made it clear that there is a change from "Made in China" to "Branded in China".




In a market fraud with counterfeits anyone can have a Louis Vuitton bag. So the next thing is to have something genuine from a Brand or to adopt a lifestyle that gives the items an new dimension. But as one can read in the excellent study: The Rise of Chinese Brand Equity by Swiss Brand Valuation Experts BV4, there are a number of reasons behing the rising importance of Brands in China. Some of them are quite obvious and come with economical and social changes. The Chinese middle class is growing and is more and affluent. Contrary to the more collective behavior most Chinese grew up with there is a new tendency towards individualism. Partially this has to do with the one-child policy but being part of a growing middle class there is an increased desire to develop and position oneself as an individual.

The view from within China
On a recent visit to China I spoke about these changes with a good MBA friend, Alex Lin, CEO of Chinavalue.net, China's most influential Business Blog. He confirmed that a growing part of the Chinese are Brand Sensitive and Brand Aware. The German car brands come to mind but also the French luxury Brands are of growing importance. At the same time he acknowledged that local Chinese Brands are beginning to see that national but also internationally there is value in developing a clear Brand Strategy. 
Brand significance is not only important in Consumer Products. The Chinese travel easier not only because they are more affluent but also because travel regulations have been simplified over the past two decades. This means that the Chinese are also looking at education elsewhere in the world, specifically in the US and Europe. Also here they search for the better Brands, using the familiar rankings such as the one from the FT.

A European Brand coming to China
My brother Alain Vermeulen is CMO of Vitaminstore.nl. He decided two years ago to move closer to his IT-supplier who happens to be based in Xiamen, a city of 3 Million inhabitants close to Taiwan. 
In the mean time he has opened a webshop for his Vitamins and Food Supplement products and a first retail store in Xiamen. His experience is that the Chinese are sensitive to security that Brands could offer. This is specifically true for e.g. Baby Nutrition where a couple of major scandals have tainted the national food brands in China for years to come. The obvious step has been to start selling foreign Baby Nutrition, e.g. Milk Powder from New Zealand.
Yet there is still a lot of exploring to do according to Alain. The Chinese try things out but are less loyal which leads to fluctuations in demand. The optimal mix of Branded products under the Vitaminstore China Brand is still under close scrutiny but the first results are promising.


From China into the rest of the world
There are a great many Chinese Brands that we hardly know or see outside China. Yet Brands like Midea, Haier and Geely are well established in China. They now start to eye the rest of the world. A Brand like Geely 'bought' itself a ticket into the foreign car industry through the acquisition of Volvo. Volvo in return got itself a platform into China. On both sides this partnership still has to grow but one thing is sure. Once the Chinese have mastered safety and reliability issues a bit better they will become an important global player and with that a global brand. For both the Vitaminstore Brand on a small scale and Geely as a corporate giant one thing is true though; only trial and error will show these businesses how to build their Brands for both China and the rest of the world.

Social Media
In the end it is amazing how important Social Media is in China. Although almost none of the Western channels (Youtube, Facebook, Twitter) are officially accessible from within China, the local platforms such as Sina Weibo, are immensely important for the Chinese. They research Brands and Products, look at recommendations but also share experiences and if necessary the occasional warning for dangerous or counterfeited products and services.
The fact that in a society with so many cultural and historical differences Social Media are of equal importance shows one more time how Brands should embrace this channel instead of ignoring it.

The long term view for both sides
The Chinese government has started to address the importance of IP Rights. When building Brand Equity having some form of protection through Trademark Registrations and Patents can be vital. Increased legal action and control of counterfeiting helps the Chinese market also to gain a reputation as more brand friendly environment. This does not mean that it is all of a sudden very easy to establish a brand in China. The cultural and language barriers remain important. The Chinese on the other side will find it hard getting rid of the 'cheap and low quality' image of 'Made in China'. A Brand like Lenovo has managed by simply acquiring the IBM Thinkpad Brand. But the opportunities to buy your way into a Western market are scarce and should be carefully managed.
Fact is that we will have more Chinese Brands coming over, also of good quality with probably an exceptional price/quality ratio. And as for Branding in China itself, I think we're just at the start of an enormous task with an immense upside.
Brand Managers and Agencies, stay tuned!