Rapidly Changing Chinese Market Requires Analysis and Understanding

Retail in China has seen phenomenal change in a tremendously short period of time. But those who think they can enter the market from their familiar Western mindset and find instant success will be in for some surprises.

As Export Now founder and CEO Frank Lavin said, it’s not just “one big Ohio.”

“It’s worth a little bit of analysis,” Lavin said. “It’s worth a little bit of street truth, a little bit of diagnostics, a little bit of competitive awareness.”

At Retail’s Digital Summit last week in Dallas, Lavin and David Roth, CEO of advertising giant WPP’s retail group The Store, shared numerous insights about the size of the market and its rapid changes.

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See more insights from Retail’s Digital Summit: Check out the event recap.

Exponential growth in social networks and mobile, growing parity between Western and Chinese brands, a shift from an internal focus to a global focus and other factors all have impacted the Chinese market. Lavin spoke of two drivers: the “law of large numbers”— that it’s easy to be happy with even “small” results when the base is large enough — and the “law of convergence” — that consumers around the world tend to converge in taste, preferences and brands. It’s no surprise, then, that global brands that have made the lives of consumers elsewhere would also do well in China, if presented in the right way.  

Roth shared numbers from the BrandZ Top 100 Most Valuable Global Brands study over the years. In 2006, only one Chinese brand made the list. In 2016, there were 15. This year, market-driven brands overtook state-owned brands among the leading 100 Chinese brands for the first time.

“You are not going to be a global brand… unless you come to terms with a China strategy.”

Frank Lavin
Export Now founder and CEO

One of the most compelling aspects of the market is China’s “ubiquitous” connectivity and the fact that there’s still growth to come. China has 668 million total internet users, and nearly 9 out of 10 of them — 594 million — use the internet on mobile devices. In addition, Roth said, mobile takes a 56 percent share of overall daily screen time in China, followed by desktop at 23 percent and TV at 22 percent.

“China is a very, very digital-enabled, highly connected market, where if you’re not using digital — digital communication and digital channels — you won’t make an impact at all,” Roth said.

Those wanting to reach the Chinese market would also do well to understand the importance of differentiation. Even as Chinese brands have grown, he said, Chinese consumers say these brands are less different than multinational brands. A differentiated product, offer and proposition are all key. 

The speakers also covered the Singles Day phenomena, which takes place on “11.11,” or November 11. Alibaba’s exceeded $14 billion in sales on Singles Day 2015, more than double the total U.S. sales for Black Friday and Cyber Monday combined. Distribution and logistics, likewise, have continued to improve.

Chinese consumers may still be learning how to be consumers — but they also have much to teach.

Video of How to Compete and Win in China E-Commerce