These Leading Lifestyle Brands Are Failing in China…Why?

Is this lucrative market becoming increasingly hostile to foreign brands? Yes and no. Here’s what you need to know to keep your brand safe and prospering in the golden land of opportunity.

If you’re reading this, chances are you know very well just how much China’s market can offer your brand. And, it’s probably not working out so well for you. Well, you’ve come to the right place. Today, we’re going to find out just why successful brands fail in China.

In this article, you will learn some of the crucial reasons why global brands do not succeed in China:

Brand Philosophy and Campaign Messaging Does Not Resonate With Chinese Consumers

Chinese consumers have different values, aspirations and social influences than their Western counterparts. This needs to be reflected in brand advertising and messaging, especially on social media. Furthermore, brands also need to speak Chinese correctly (yes, really). What linguistically makes sense in English does not necessarily translate in Chinese, so simply transplanting an excellent English advert will most likely not lead to good results.

One good example is that of diamond company De Beers. De Beers executed a strong, emotion-based messaging that had achieved success in the US, but failed to resonate with consumers in Chinese. The slogan, “A diamond is a symbol of commitment,” meant significantly less in China where engagement and wedding rings are not the cultural norm. More than half of the diamonds sold in Shanghai were purchased by women buying for themselves and the jewellery is considered a status symbol, not necessarily a message of love and devotion.

Lack of Brand and Product Localisation Due to Insufficient Cultural Competence

Many fresh brands that enter China fail to adapt their business and product development strategies to domestic market conditions. A typical mistake we often see is brands attempting to transfer methodologies that were successful in America to China with little effort to localise product offerings. At the same time, forward-thinking companies that actually try to localise product offerings, often struggle with cultural and linguistic barriers.

A very recent example: in 2020, Jo Malone managed to get itself deep into a race-related controversy. In the British market, the brand released a commercial featuring actor John Boyega and ended up receiving kudos for its authenticity and diversity. Wanting to repeat this success in China, the brand copied the entire commercial, replacing Boyega with Liu Haoran and removing all the black actors. This resulted in strong backlash in both markets for the brand.

Other brands have made similar faux pas, with Victoria’s Secret derided for its attempt to launch a line of dragon-themed lingerie, featuring a campaign with a blonde model wearing the products on the catwalk draped in a large dragon puppet. This campaign was widely criticised for being out of touch and culturally insensitive.

Regulatory Obstacles

As most businesses are well aware, China is one of the most challenging global markets to operate in and has remained a mystery yet to be cracked by many of the uninitiated. Although the country’s open-door economic policies present tremendous room for opportunity and growth, foreign brands are still faced with many challenges, most ostensibly the ongoing guochao trend that continues to sweep across China. Even the most competent foreign brands can and have become perplexed by the lack of concrete regulatory procedures in areas ranging from business registration to dispute resolution.  All these factors pose a unique set of challenges for foreign brands that can only be reliably solved with localised intelligence and guidance through a partnership with an experienced China brand acclerator.

Intellectual property rights (IPR) protection is by far the most challenging government-related obstacle foreign brands face when they enter the Chinese market. As the amount of literature regarding this topic indicates, IP protection in China is a substantial headache for global businesses. There is good news, though; China is making new strides in technology and innovation, which has helped to create a stronger demand for IP protection. According to a report from Thomson Reuters, China’s goal is to transform its exports from “made in China” to “designed in China”. The report also found that China has become the world’s top filer of patents since 2011. As more Chinese firms become patent holders, they too, will have a vested interest in protecting their intellectual property just like their foreign counterparts. Although this trend will drive the future of IP rights in China, until it becomes more commonplace, foreign businesses will need to keep a close eye on competitor activity. This is an extremely important yet difficult process to manage, but with the right China brand accelerator, foreign business owners can put their minds at ease.

Global brands that wish to make it in China must familiarise themselves with the nuances of Beijing’s loosely defined and inconsistently enforced laws while at the same time abiding by those laws. Ultimately, this gives companies two options: learn, adapt, and compromise, or leave the market.

Underestimating Domestic Competition

A common mistake many foreign companies make when entering China is that they severely underestimate the domestic competition in China, thinking that Chinese firms lack strategic organisational management, sales and marketing. Furthermore, foreign brands put too much faith in the “foreign card” when entering China, relying on the false belief that they will succeed on account of being foreign. Sure, at one point this was the case, way back when foreign brands began making their mark in China almost 30 years ago. However, times have changed and the narrative is changing as Chinese brands have gradually evolved and have built stronger sales and marketing competencies. As China continues to shift away from a manufacturing-based economy to a services-based economy, Chinese businesses are also becoming increasingly competitive when it comes to product quality, innovation and branding. Last but not least, the oft-mentioned Guochao wave is further tipping the scales in favour of domestic brands.

Assuming E-commerce in China is the Same as E-commerce in the Rest of the World

China’s e-commerce ecosystem is evolving at a breakneck pace, with exponential growth year after year. It can even be said that online shopping in China is not only a trend, but more of a cultural phenomenon. The fact is that no other market in the world has been able to replicate the success and maturity of China’s e-commerce landscape.

Taobao and rule the vast majority of China’s e-commerce market, leveraging their scale and competitive pricing. However, more and more contenders are popping up, some of which offer e-commerce convenience combined with niche functionality not offered by Taobao or JD. For example, Douyin, the original TikTok, has been in the headlines recently with news breaking of its intention to launch its own e-commerce marketplace integrated directly within its short-video social network. Everything from product live-streams to browsing items to making payments is handled right from within the Douyin app — no logging into Paypal or entering credit card numbers.

Compared to the relatively weak e-commerce infrastructure in the rest of the world, which to this day is still led by Amazon, eBay and Shopify along with their limited functionality and integration, China is light years ahead of the pack. And brands entering China need to be aware of this. Everything from e-commerce stores to customer service to shipping needs to be thoughtfully considered and planned with the help of a trustworthy China brand accelerator.

Once an online marketplace presence is established, culturally adept, localised foreign brands should take proactive measures to enhance their pre-sales support channels. It is important to bear in mind that counterfeit goods and tainted consumables is still business as usual in China. This has resulted in the emergence of a low-trust society where e-commerce shoppers seek an additional level of product support and go above and beyond to conduct thorough product research. One industry-tested way of establishing the trust of Chinese consumers is to boost pre-sales customer service and launch influencer KOLC marketing campaigns across all the major social media platforms in China.

Too many foreign brands have over-confidently entered China only to emerge a few years later perplexed, battered and defeated. Their confidence from prior successes in other markets often evaporates quickly once they arrive in a market they know little about, often severely ill-equipped upon entry. To maximise their chances for success in China, foreign firms must consciously make their best effort to learn from the mistakes of the many brands that have failed in the past, while at the same time paying close attention to the underlying success factors of brands that have prevailed in the most challenging, most misunderstood marketplace in the world.

But there’s a simpler approach that is guaranteed to bring your brand the success you seek. When you enter China with a seasoned brand accelerator like KFD, you are essentially driving into a deep tunnel with autopilot at your fingertips. You do not have to fret over how fast you should drive or where you should turn, because the autopilot system knows the terrain, where each obstacle lies and the best way to navigate around those obstacles.