If one thing is clear from our recent survey of 10,000 Chinese consumers – Double-clicking on the Chinese consumer – it’s that Chinese consumers’ attitudes towards brands have shifted significantly in recent years.
Today, it’s harder to understand what drives Chinese consumers’ attitudes towards the brands they choose but, on the surface, their preference seems to skew towards local brands. This is not a new trend; our 2016 China Consumer Report saw a rise in brand preference - given similar quality and price - from 42 to 62 percent over a six-year period. Also, trust in local brands had increased from 44 to 62 percent over the same period.
In 2017, we’ve delved deeper into this trend than ever before to ‘double-click’ on Chinese consumption trends.
Foreign or imported?
The reality is that Chinese consumers can often not tell the difference between local and foreign brands. This is clearly demonstrated if we look at beer, which was ranked among the top of the ‘preferred local’ category when, in fact, it’s one of the few categories in which foreign brands have outperformed for several years.
So why the confusion? One reason is that consumers often mistake foreign-branded products that are either made in China, or have a longstanding presence in China, for local ones. For example, 45 percent of consumers thought that Danone, from France, is a Chinese brand, and 48 percent thought the same of Yakult, which is from Japan. The same was true for US skincare brand Olay, which consumers mistook for a Chinese brand.
On the other hand, Chinese brands are often mistaken as foreign. Forty-five percent of respondents thought that Beingmate, which makes infant milk powder, is foreign when in fact it’s Chinese.
What’s clear is that there is increasing ambiguity regarding both the country of origin and the country of manufacture.
The only exception to this rule can be found for brands in categories with a high share of imported products. Our survey showed overwhelming preference for ‘foreign’ brands across three categories – cosmetics, wine and infant milk powder; all of which have a high share of imports. In the case of infant milk powder, this is due to concerns over safety. This category still suffers from safety fears after the 2008 milk powder scandal. Cosmetic products and wine, however, benefit from the perception that import means premium and, therefore, better quality. In the case of cosmetics, local brands are actually gaining share from foreign brands when it comes to products “made in China”.
The real story behind consumer behavior
It’s clear from this year’s survey that a more nuanced set of factors underpin consumer decisions. While it’s true that local brands are gaining share, it’s not the result of nationalistic favor. Local brands are winning because they better address consumer needs in three areas: value for money, quality and aftersales service, which our survey highlighted as the key considerations among Chinese consumers today. Put simply, because local brands are often perceived to better tick these three boxes, they are preferred.
Often, this is a result of faster innovation; their decision-making process is comparatively nimble when compared with foreign companies that often need to go through a multi-layered approval process before launching a new product. And foreign cost structures are often less competitive in China.
Many companies, local and foreign, are desperately trying to understand whether Chinese consumers prefer foreign or local brands in order to tailor their marketing and messaging. Consumers cannot tell the difference. They want the best product and, in most cases, have no clue whether the manufacturer behind it is a global company or a Chinese company.
This, for me, is one of the most fascinating insights from this year’s survey and a real marker of what’s shaping the modern Chinese consumer’s shopping habits.