For all the recent talk of opportunities to ‘Anglosphere’ markets, the greatest gains for British brands over the next decade may hinge upon their ability to meet the demands of China’s new consumers. High on the government’s post-Brexit to-do-list will be to negotiate a comprehensive trade deal with China: currently the UK’s sixth largest export destination, and the world’s largest retail market having overtaken the US in 2016. It is predicted by the Economist Intelligence Unit that China’s base of middle-class consumers will more than treble over the next 15 years, from 132 million today to 480 million by 2030.
The British reputation
British brands already have a strong reputation in China, with those brands most closely associated with British heritage often seeing the greatest success. Jaguar Landrover is now the UK’s biggest exporter to China, recording a remarkable year-on-year growth of 40 percent in 2016. While partially this expansion in sales can be attributed to sterling’s sharp fall against the renminbi in June, the recent success of British brands in China, such as JLR, Dyson, and Burberry, is also a reflection of steadily rising incomes in China and an increasingly aspirational middle-class.
Jaguar Landrover is now the UK’s biggest exporter to China, recording a remarkable year-on-year growth of 40% in 2016
Yet Britishness alone is no guarantee of success, and many British brands outside the luxury category have found the Chinese market more challenging. Marks and Spencer’s recent decision to close all its China stores illustrates just how challenging the Chinese retail environment can be for overseas brands. China’s sheer geographical size and social diversity creates huge challenges for foreign brands; which demographic they should target, which products appeal to that group and the kind of marketing messages appropriate to those segments. Foreign brands operating in the mid-market retail sector run the risk of inadvertently appealing to nobody by attempting to cater for multiple socio-economic groups.
There are significant differences between different consumer groups in China, and the speed at which the market evolves also presents challenges. For example, the lifestyles and aspirations of China’s young millennials in its larger cities are often in polar contrast not just with older generations in China, but similar age groups in other countries. Unlike the more austere over 35 age-group, the 20-35 age group in China have higher levels of disposable incomes than ever before, and this increased spending power is fostering a growing impulse to express individuality through consumption. Yet changing trends among this notoriously fickle consumer segment also creates challenges for brands looking to develop a loyal following.
Rise in niche products
There will also be new opportunities for less well-known British brands offering niche products currently in scarce supply in China. Rising incomes are set to lead to a larger number of Chinese shoppers upgrading to premium brands, and searching out an increasingly diverse array of products and services. A growing minority of China’s middle-classes already regularly shop for unique products directly from overseas websites or during overseas trips, and are particularly attracted by British-manufactured products with a strong heritage or history. In this context, British brands with a unique product, a rich history or a compelling back-story are those most likely to see success in China.
With an average spend of £2,700 per head, Chinese shoppers spend more during their UK trips than tourists from any other country
Unlike consumers in Western markets, most Chinese consumers invest a significant amount of time in researching products or brands prior to making a purchase, whether purchasinga car, a suit, a handbag or a holiday. The association of being a ‘high quality’ British brand (or Made in Britain) is insufficient on its own: the new Chinese consumer needs to identify with the core essence of a brand, and so effort is often required to educate potential customers about the history, core values and the associated lifestyles a brand represents. For some British brands, this may mean even mean re-engineering brand positioning for China according to the needs of the specific target demographic.
The size of the China prize has tempted too many foreign brands to over-invest in China, and this seems to be giving way to a more cautious approach among many well-known British brands. The increasing popularity of cross-border e-commerce and the increasing importance of mobile platforms as marketing channels, is creating new opportunities to engage Chinese target groups without the need to overcommit resources to China. Utilising popular social media platforms such as WeChat and Weibo, and engaging local key opinion leaders in China to help promote a foreign brand to their followers, are just some of the hacks foreign brands can employ to build brand awareness with their target consumer groups.
Another good first step for many brands is to engage with the growing number of Chinese tourists visiting the UK each year. With an average spend of £2,700 per head, Chinese shoppers spend more during their UK trips than tourists from any other country. There is also a sizeable population of Chinese students and expats living in the UK, which provides UK companies a unique opportunity to raise brand awareness by targeting Chinese living in or travelling to the UK. This can also be a useful means of researching the popularity of an offering with a Chinese audience, to gather feedback and these customers can also help to promote brands indirectly through their own social networks and create prestige for the brand in China.
‘British brands – Winning China’s curious new consumers’ is a session at CBBC’s China Business Conference on 28 th March at the QEII Centre in London. More details can be found at www.chinabusinessconference.org