Localization and “The War for China’s Wallet”

Ask anyone that has ever done business in China and they will have a story to tell.  It is a dynamic and unique business and consumer environment and the recent e-commerce explosion adds another layer of complexity – yet also opportunity.  HI-COM speaks with Shaun Rein, founder of CMR Consulting and international best-selling author, to find out how companies can successfully navigate their China strategy.  

HI-COM sat down for a chat with Shaun Rein, Managing Director of CMR Consulting and bestselling author, to find out how companies can successfully navigate their China strategy.  Shaun Rein is an expert on China’s economy and consumer market, is a published author and regular columnist in Forbes, the Wall Street Journal, Harvard Business Review, The Economist, Financial Times, Newsweek International, Bloomberg, Time, and the New York Times.

Mr Rein has recently published his third book “The War for China’s Wallet: Profiting from the New World Order”.

HI-COM:  In your experience, what have been the most common misconceptions about China held by foreign companies?

Shaun Rein: Companies entering China can over-localize or under-localize.  When I say over-localize, what I mean is that they can forget their core brand, their core DNA, and the result is that they have no clear direction or strategy when launching in China.  One example is [Mattel’s] Barbie.  When Barbie launched in China, they opened a Barbie themed store and Barbie themed café, avenues they had never pursued elsewhere in the world.  The result was that Barbie’s China entry appeared a bit confusing.  In another sense however Barbie under-localized; the outfits for Barbie sold in China were too ‘sexy’ and didn’t fit the local taste of young Chinese girls who generally prefer fashion that is more ‘cute’ and girly.

Another misconception foreign companies often hold when entering China is thinking there is no need for a local mainland Chinese on the management team.  Companies would be well advised to have a local Chinese on their team and empower this individual to be able to guide and steer strategy.  This local representative knows better than anyone the unique political, regulatory and consumer dynamics that are at play in China and can help steer or pivot your company as needs be.

HI-COM:  When it comes to a successful China market entry, what would you say are the critical elements companies should be aware of?

SR:  Understanding what consumers want through undertaking ongoing research that has regular feedback loops.  Consumer preferences and channels can change so quickly in China that it is vital to closely monitor what is happening on a quarterly, if not daily, basis.  Understand that e-commerce as a distribution channel is huge here.  You need to also get the right manager that is aware of government policies and can help you pivot strategies as needs be.  Politics and the market are so intrinsically tied in China, creating a unique ecosystem that is not found elsewhere in the world.

HI-COM:  In your latest book, “The War for China’s Wallet” you discuss China’s various initiatives to boost trading ties with other economies, such as One Belt, One Road.  What are the favored industries or sectors that are well-advised to seriously consider entering the China market now, based on China’s current political stance towards them?

SR: Players in the industrial sector are set to do very well under China’s current economic regime.  There is huge pride and groundswell of nationalism in China right now, with a focus on local manufacturing and engineering.  COMAC, China’s first State-owned aerospace manufacturer, is a good example of this.  While there is heavy investment and focus into local industry, this creates immense opportunity for foreign companies who can benefit from supply contracts; supplying componentry or software for example.  Chinese companies remain willing to cooperate with foreign companies.  Aside from aeronautics, opportunities exist for other industries such as automotive, nuclear power and tourism.  Chinese tourism is set to grow to 25-30% of all global tourism.

[In terms of the FMCG market] Chinese consumers are increasingly happy to buy locally produced dairy products.  Bright Food [a food and beverage company headquartered in Shanghai] has grown steadily and is now outperforming Nestle in some categories.

HI-COM:  Can you provide us an example of a company or brand that has been particularly successful in localizing their brand here in China, and why you think they resonated with Chinese consumers?

SR: One brand that has done exceedingly well is GNC, a US company producing vitamins and supplements.  GNC identified the booming trend amongst wealthy Chinese consumers to focus on health and wellness, and they have also been very smart with their distribution strategy both online and offline.  Their price point is also just right.

HI-COM: Contrastingly, can you provide us with an example of a company or brand that has missed the mark in localizing their ‘story’ to Chinese consumers, and why this was this case?

SR: Nestle is one brand that has missed the mark in the past with Chinese consumers.  Nestle were slow to maneuver in the face of their declining sales and failed to appreciate that there was a huge segment of the Chinese market that was willing to pay a premium for certain products.  There was a misguided understanding that selling cheap would work across the board in China.

Shaun Rein’s latest book, “The War for China’s Wallet” will help companies understand how to profit from China’s outbound economic plans as well as a shifting consumer base that is increasingly nationalistic.  It is available now on Amazon.