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For Western companies such as Coca-Cola, Maybelline and Nestlé, centuries-old brands have long offered a formidable advantage over local rivals in China.
But these consolidated groups are increasingly threatened by Chinese companies whose growth has been turbocharged by smart social media marketing and optimized supply chains.
This change was highlighted during this month’s “618” e-commerce festival, China’s second largest annual shopping event, as local brand Babycare outperformed Procter & Gamble’s Pampers in terms of sales volumes, according to data released by the Alibaba Internet group.
It wasn’t timely: Genki Forest, a Chinese beverage company, surpassed Coca-Cola and Pepsi in online sales last year. “Singles Day”, A multimillion-dollar extravaganza that is the country’s largest shopping festival.
A year earlier, Perfect Diary, a homemade cosmetics brand, jumped on Maybelline and Estée Lauder to become the number one singles day, while in 2019, the Three Squirrels snack brand surpassed Nestlé.
“Foreign brands used to have advantages in the Chinese market by representing a superior Western lifestyle. But Chinese consumers now have more confidence in China’s style, ”said Albus Yu, investment manager at China Growth Capital, a venture capital fund that has supported brands such as Maia Active, a Chinese challenger of Lululemon.
The preeminence of Chinese brands marks a turning point in a country where foreign products have historically been considered safer and of higher quality. It is also a great challenge for multinationals that are becoming more and more so looking for growth in China.
It also addresses China’s political priorities. President Xi Jinping has urged the country to do so focus on domestic demand for growth.
“The next decade will be the decade of Chinese brands,” said Elijah Whaley, vice president of Asia-Pacific marketing for Launchmetrics, an analytics firm. “Domestic brands will take a large share of China’s growing consumer market.”
In the first three quarters of 2020, domestic sales of Chinese consumer brands rose rapidly by 2%, while those of foreign brands fell by 6% year-on-year, according to a report by Kantar Worldpanel and Bain.
Much of the recent success of local brands is due to strong investments in marketing, especially on social media, analysts said. This has been fueled by strong risk capital support.
“Marketing has cooled Chinese products. They don’t have any heritage brand assets that they’re trying to protect, which means they’re willing to take risks and move forward quickly, ”said Mark Tanner, managing director of Skinny China, a marketing company.
According to Launchmetrics, marketing can account for more than 60% of Chinese consumer emerging companies ’spending, compared to 15-25% of foreign brands in China.
“Overseas brands are much more organic in their marketing approach, they want to grow slowly and that’s how it works in other markets. But here everything accelerates because there’s a lot of venture capital,” said Jenny Chen, co-founder of WalkTheChat , a cross-border marketing software agency.
Chinese brands have also been agile in terms of developing their supply chains. Being close to manufacturing clusters in China, they have cultivated relationships with suppliers, which allows them to accelerate the development of new products and reduce costs. Often, these suppliers are the same through which premium foreign brand products come.
“The magic is in the sorting by small batches. You can produce thousands of items and see what sticks, ”said Rui Ma, China’s technical analyst at TechBuzz.
Shanghai Chicmax, a cosmetics brand, went from designing to selling a face mask in three days. This process took three years for a foreign brand of shampoo, noted Skinny China’s Tanner.
Variety and speed matter because young Chinese consumers have eclectic tastes and have a more intense desire to pursue trends than their Western counterparts, analysts said. While GlaxoSmithKline had 400 products for European clients in an oral care category, it had 12,000 for China, Tanner added.
Young Chinese consumers are also expecting one sophisticated e-commerce experience. When buying a lipstick, they can first see how an influencer promotes it to Douyin, the Chinese version of TikTok, and then switch to the Xiaohongshu social networking platform for reviews from professional beauty bloggers before finally buying it from Taobao. of Alibaba after consulting with customers.
Some Chinese influencers have amassed huge fan bases, such as “King Lipstick King” Li Jiaqi, who has 45 million followers of Douyin. A guarantee from Li can cause a product to run out in a matter of minutes and has previously criticized foreign brands such as Hermès and Chanel.
It was watching Li’s live broadcasts that Zhang Qiping, a 28-year-old professional from a foreign company in China, discovered the national brands Florasis and Perfect Diary.
“I thought the lipsticks looked great and then I went on with Xiaohongshu and found that there were a lot of people recommending them, so I went on and bought them,” said Zhang, who had previously bought the lipsticks by Dior and Yves Saint Laurent.
But the “microinfluencers,” who have a much lower reach of less than 10,000 followers, are also a major group for brand marketing. They are often regular customers that companies have turned into brand advocates by giving them free products or small payments.
“In China’s influencer industry, you can find a price for just about anything: a sponsored campaign that looks like natural content or a small post from a microinfluencer,” Chen told WalkTheChat.
Another effective way for brands to reach customers in China is through groups of messaging platforms like Tencent’s WeChat, where they are limited to 500 users. This allows brands to interact with consumers in a more intimate environment, but some Western companies consider them to offer an uncertain return on investment.
“Chinese brands are more willing to take risks,” Whaley said.
Chinese media have documented how Perfect Diary has opened thousands of WeChat groups led by “Xiaowanzi” or “Abby”, a virtual beauty influencer with the support of a great marketing team.
Over the last weekend of 618 promotions, one of Abby’s 200-person WeChat groups was inundated with brand promotions, while shoppers posted pictures, asked questions and gave feedback.
When asked for an interview via WeChat, Abby responded that a dedicated staff member would respond and sent her a photo of the cartoon mouse Jerry who had a flower.
Asked how international brands could get it back, Zhang, the consumer who works for a foreign company, replied: “When it comes to brand change, I usually look at reviews from Douyin and Xiaohongshu. It all depends on whether the brands they can get beauty bloggers to promote them “.
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