U.S., Europe brands take on the Chinese consumer

BEIJING — China’s economic slowdown is not discouraging U.S. and European brands from revamping their methods to achieve Chinese customers.

Instead, the attract of the world’s second-largest consumer market is forcing firms to adapt in the face of rising competitors from native brands.

In the case of Kraft Heinz, getting extra folks in China to purchase ketchup this 12 months additionally meant hiring an area company to assist create catchy campaigns — adorning subway station columns to imitate ketchup bottles and selling the condiment as a contemporary twist on a well-liked dish: stir-fried eggs and tomatoes.

It’s a tough market to deal with, even for Shanghai-based advertising and marketing agency Good Idea Growth Network (GGN). The company has witnessed at the least 5 completely different waves of consumer tendencies in its 14-year historical past, founder Stephy Liu, stated in Mandarin, translated by CNBC. “The gameplay keeps on changing.”

But GGN has succeeded even after rejecting an acquisition supply from British promoting large WPP, Liu stated, noting that about half of her purchasers are overseas brands.

While Kraft Heinz is not completed with its China ketchup marketing campaign but, the firm reported second-quarter web gross sales in rising markets climbed by 4.2% from a 12 months in the past, serving to offset declines in North America.

WPP explored a possible acquisition of GGN however didn’t find yourself going far in the course of, in accordance with an individual accustomed to the discussions.

Kraft Heinz didn’t instantly reply to requests for remark.

From Starbucks’ struggles to Lululemon’s successes in China, it is turn out to be clear that the correct mix of localization is important.

“Among international brands in China, the winners are often dedicating more than 40% of revenue to marketing, especially content and platform-first marketing, while also iterating products locally based on market data,” stated Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, which helps overseas brands promote in China.

This 12 months, Cooke stated that Under Armour has created merchandise underneath 100 yuan ($14) with a view to entice a mass of consumers on-line, whereas utilizing livestreams with devoted customers to then construct health communities and promote extra premium merchandise offline.

ByteDance-owned Douyin has turn out to be an e-commerce power in the previous few years since celebrities and corporations began utilizing the app for livestreaming sales throughout the pandemic. And by the numbers, there’s little query that leaping into the Xiaohongshu and Douyin world is worth it for companies.

Adapting to that new social commerce ecosystem has turn out to be the greatest problem for brands in the final two years, GGN’s Liu stated. “Foreign brands will think, ‘Isn’t this just TikTok?'”

She warned that success requires a fancy technique that may contain altering every thing from how a group is structured to the sorts of merchandise bought. But the payoff is critical.

“In half a 12 months, it could actually enable you promote greater than you bought on [Alibaba‘s] Tmall in two years,” Liu stated.

Chinese e-commerce platforms, together with Alibaba’s Tmall, share way more knowledge on what’s widespread than Amazon.com does, WPIC’s Cooke stated. In China, “people generally know what their competitors are selling and what they’re selling for.”

With that granular knowledge, Chinese make-up model Perfect Diary was in a position to succeed by figuring out a market ache level and making a lipstick focused at that cheaper price phase, Cooke stated. He famous that is pressured overseas brands to create China-specific merchandise as effectively, a giant shift over the final 5 years.

E-commerce platforms in China additionally usually present tough figures on what number of orders have been positioned per product, whereas third-party firms comparable to Syntun supply important quantities of product rankings and different on-line gross sales knowledge without spending a dime.

In the case of Apple‘s iPhone 17 launch on Sept. 19, it was Chinese e-commerce firm JD.com that launched gross sales knowledge for mainland China. The electronics-focused platform introduced that the first minute of iPhone 17 sequence preorders surpassed the first-day preorder quantity of final 12 months’s iPhone 16 sequence.

Apple’s story additionally underscores the way it’s doable to reignite local interest regardless of shedding market share to home competitors. Some clients in Beijing instructed CNBC that they favored the iPhone’s new cosmic orange coloration, and that extra locals meant to purchase their first iPhone this 12 months since they’d heard about new enticing options comparable to bigger inside storage.

China’s factories have been fast to leap on the development, releasing iPhone instances with an identical orange hue even earlier than the 17 mannequin was out.

“Winning brands are those that have established local R&D centers and on-the-ground product teams,” stated Ashley Dudarenok, founding father of ChoZan, a China advertising and marketing consultancy. “This allows them to spot trends early, develop products tailored to local needs, and launch them in months, not years. This is a significant departure from the past, where global products were often simply rolled out in the Chinese market.”

Even with the proper knowledge and social media platforms, cultural integration is changing into more and more necessary, particularly as Chinese brands find success in tapping the nation’s personal historical past of artisanal craftsmanship.

“Brands are moving beyond superficial nods to Chinese culture,” Dudarenok stated. She identified that Loewe partnered with jade carving masters, whereas Burberry teamed up with bamboo-weaving artists.

And regardless of declining sales in China’s luxury market, LVMH this summer season opened an attention grabbing ship-shaped retailer in Shanghai — instantly producing a lot native buzz.

In distinction to LVMH’s luggage-shaped retailer in Manhattan, the Shanghai location faucets into the Chinese metropolis’s historical past as a port of entry for worldwide vacationers to Asia roughly a century in the past.

The new retailer additionally captures the European model’s roots in hand-crafted journey trunks — which contrasts with Chinese brands’ lack of ability to supply the similar emotional attraction, Joe Ngai, chairman of higher China at McKinsey, identified in a LinkedIn post.

“As Chinese customers grow in their confidence and desire for local elements,” he stated, “creating more crossovers between West and East is one of the unique opportunities for multinationals in China.”

— CNBC’s Eunice Yoon contributed to this report.