The desire to attract the new and growing Chinese middle-class has become the main goal of local and foreign brands.
Over the last years, local and foreign companies have been fighting in order to increase their market share in China.
The Chinese market has become the largest battleground in the world for both foreign and local brands which strongly compete for attract buyers in order to increase their sales.
Over the last years the China economy has rapidly grown in unprecedented figures. This incredible growth has involved rising disposable incomes, an increase of Chinese middle-class and a biggest purchasing power. In addition, the internet and mobile penetration in the Chinese daily life has boosted purchases through online platforms.
These factors have caused the massive entrance of foreign brands with the aim to take advantage of this profitable market. However, due to the growing popularity of e-commerce platforms, the competitors number has increased because of the facilities that e-commerce provides to penetrate the Chinese market.
Nowadays the situation is increasingly harder for foreign companies in the Chinese market caused by the weakening of the economy growth and the increase of costs.
In addition, over the last years local brands have entered the fray with a strong knowledge of both the Chinese market and consumers. In addition, they have developed products which are very popular among Chinese consumers.
Chinese companies are on the rise
Chinese companies are strong competitors for foreign brands due to the good quality of their products and lower prices. For instance, Xiaomi and Huawei have become successful smartphone makers in China because of the leading technology and good price of their devices. The reality is that Chinese shoppers will no longer pay more money just because a brand is foreign.
Chinese are the most demanding customers in the world due to its lack of brand loyalty and its deep knowledge about internet to find cheaper brands with better results.They are very fickle and will only go where they can have what fits their needs best.
Those days many foreign brands are leaving the Chinese market such as Revlon and L’Oréal. L’Oréal is the largest beauty brand in the world and has stopped to sell Garnier, one of its principal brands.
The Chinese market has become increasingly Chinese
Other companies such as the electronics retailers Best Buy and Media Markt or the internet giant Yahoo have retired of the Chinese market.
Nonetheless, many other foreign brands are struggling to stay in China despite of difficulties. For example, IBM revenues have decreased by 23% during the last quarter of 2013 and Rémy Cointreau’s revenues have reduced more than 30% during the first three quarters of 2013.
Foreign brands are falling behind local companies in exploiting of e-commerce and smartphone platforms and Chinese consumers are more willing than other shoppers in other markets to purchase products online through their computer and smartphones.
With the booming e-commerce in China, the battle between foreign and local brands has become harder. Growing competition and the Chinese shoppers’ discount-seeking mentality are major obstacles for foreign brands wanting to sell their products online.
About 60% of foreign companies in China have lost market share last year. Therefore, those companies which want to stay in the Chinese market will have to increase their efforts and even change their strategy.
If you are interested to have the chance to be part of the Chinese market, contact us.