On a recent trip to Brazil Doreen Wang, global head of BrandZ Millward Brown, asked 150 CEOs what they thought of as the world’s number one e-commerce brand. They said Amazon. Following a close second was Chinese ecommerce giant Alibaba. “That shows how familiar the brand is in markets like Brazil and Indonesia,” says Wang.
Alibaba, one might argue, should be number one. It already deals in more transactions on an annual basis then both Amazon and eBay put together. Founder Jack Ma has bigger ambitions still: in June he declared he wants Alibaba to become the fifth-largest “economy” globally by 2036, serving 2 billion customers.
Chinese technology and digital brands—from Alibaba to social media and gaming goliath Tencent to hardware producers Huawei and Xiaomi—are giving Silicon Valley brands a run for their money. With the once fast-growing mainland market becoming saturated, brands in China are expanding quickly into emerging markets in Asia and, more challengingly, North America, Europe and elsewhere.
Fueling these exports is innovation—world-leading products and, increasingly, marketing strategy. And while this is helping those individual brands go global (not always something that Chinese brands have found easy), innovation is having a knock-on effect. It is helping to transform external perceptions of China from a country churning out copycat products to one whose products will soon be copied across the globe. “The last three years have gained a lot of positive momentum in order for China to stand up and showcase to the world what they’re capable of,” says Singapore-based consultant Martin Roll, author of Asian Brand Strategy.
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Xiaomi, which has moved from making smartphones to smart homes, is a good example of a Chinese company broadening its footprint. Products from smart vacuum cleaners to smart toothbrushes within the new ‘Mi Ecoystem’ are sold both online and in physical Mi Home stores, offering a total lifestyle overhaul at competitive prices. While Mi Home is still expanding fast in China (with plans to open an additional 1,000 stores nationwide), it is also making moves into India, where it now the leading online provider: one hundred stores will open there over the next three years.
It’s clear Chinese brands have become a source of burgeoning national pride within China and—in the tech space at least—there is growing trust in homegrown products. In 2015, 46% of consumers in China said they preferred homegrown brands, according to a survey conducted by the World Economic Forum—up from 37% back in 2007.
China’s smartphones are smarter
Smartphones, in particular, showcase this shift. The top four brands in China are all domestic names—Vivo, Oppo, Huawei and Xiaomi—which together command the vast majority of market share. Foreign competitors Apple and Samsung trail well behind. Apple’s weak iPhone 8 had a particularly lukewarm reception in China. In Hangzhou, only two customers bothered to show up at the flagship store on launch day. A Penguin Intelligence survey found that only 65.7% of iPhone users said they were likely to choose Apple again compared with 72.8% of Huawei users, receiving better features for less cost.
“Apps within WeChat are making the need to buy an iPhone 8 or X less compelling, especially when other brands in China can offer features like larger screens, cameras, face recognition security et cetera even before Apple rolls them out,” says Duncan Clark, chairman of BDA China.
Innovations—such as Xiaomi’s Mi Mix 2, slickly developed by celebrity designer Philippe Starck or Huawei’s dual-camera setup, released before Apple’s—have broadened the appeal of Chinese phones abroad. Counterpoint Technology says Chinese brands now hold a 48% smartphone share globally.
Neil Mawston, executive director of Wireless Devices Strategies (WDS) at Strategy Analytics, has seen a shift from “Chinese brands [marketing] themselves as ‘value’ smartphones for low-end users [to phones] increasingly marketed as ‘tech-leaders’ for high-end consumers.”
Meanwhile in India Oppo launched its Selfie Expert F1 Plus phone last year with Indian cricketer Yuvraj Singh as its ambassador.
Recognising a gap in the market, Chinese brands are increasingly focusing on developing countries in Asia and South America. The question remains, however, can tech companies make the same inroads in the harder-to-crack West? And if so, how long will that take?
Chinese brands still, on the whole, lack name recognition in the West. Beijing, however, is eager to move from a manufacturing to innovation and service-based economy. The government-led One Belt, One Road infrastructure initiative, with 68 countries on board and a promise of US $150 billion a year spending by China, “shows that China wants to connect to the world. It will help to communicate that China is opening up and aspires to sit at the table. They want to be an equal player,” says Roll.
THE STARS ALIGN FOR HUAWEI
Huawei is perhaps the most visible example of a Chinese brand that has successfully launched abroad. In a bid to enter the West, Huawei become Arsenal Football Club’s official smartphone partner in 2014. And in order to promote the P9 phone last year, the brand enlisted mega-star Scarlett Johansson, dressed in a skin-tight cowgirl costume, sending snapshots to a suave Henry Cavill.
Both campaigns work because the “celebrities are not just in advertising and outdoor and print, but also have a lot of interaction with Huawei,” says Wang. “They share their experience with the phone on all their digital media. It’s a very in-depth collaboration with a celebrity. In the meantime Huawei’s outdoor campaigns in the airport, retailers, shopping malls are very comprehensive. [It’s all about] having very cutting edge content and the right celebrity.”
Clark points to the US $300 billion Made in China plan, in which China wants to become self-sufficient in tech by 2025, and Beijing’s ambitions in AI, in which the country has promised to become the world leader by 2030, as signs of “how quickly they propose to close the gap. Key is to allow private sector innovation to dominate [and to] avoid risks of inefficiency or corruption from state owned enterprise driven efforts.”
Still, negative perceptions of ‘Made in China’ are deeply entrenched, not helped by continuing scandals over food safety and the ubiquity of fake goods. ‘Made in China’ “comes with luggage, it comes with certain negative perceptions—government interference, maybe military links. [Consumers ask] Can we trust the quality?” notes Roll.
“There is a national pride amongst Chinese for Chinese firms and rightly so,” he continues. “It’s another matter when you go abroad. You are fighting what is called ‘country of origin’. How do you form that country’s perception? It’s not advertising on CNN; it’s a much deeper reconstruct where Chinese global brands are coming from. The starting point is product quality.”
The next wave
The Korean Wave or “hallyu” helped elevate trust of Korean products, particularly across Asia. Promoting soft power, whilst also providing government support, such as spearheading tech education and growth and opening up export drives, is critical says Roll: “We had the Bollywood wave, we had the Cantonese pop stars, Japanese has always being hot, but we haven’t yet really seen a true Chinese wave.”
“We haven’t at a broader level had exposure to Chinese popular culture. That ought to happen and I think it will happen. Once they get that coupled with great technology, customer services I can talk to, transparent companies [and] products I can trust ‘Made in China’ will change.”
Innovation will help make this happen. “Tech brands need to provide products in new categories—tomorrow’s categories,” explains Roll. “They’re up against the Facebooks and the Apples. They are going to have to create thought leadership—the best brands in the world are thought leaders in their own space.”
Baidu, for example, is investing heavily in artificial intelligence, stating earlier this year “we can improve the power of this nation” using AI. The company has promised to launch a driverless car by next year.
But innovation alone is not enough. Marketing is critical, as a cautionary tale shows. In the year 2000 Haier Group entered North America. One of their killer products was the then new idea of a compact refrigerator. Haier “believed that as long as my products are on the shelf, my brand will build automatically,” says Wang. With no brand investment, it didn’t happen. Instead, other better-known brands started to produce similar products, leaving Haier in the dust. Today, after nearly 20 years in the West, it’s still largely unknown.
An often-seen mistake is to relegate marketing to the sidelines says Roll. “There is a need to construct organisations in a way that they can take them truly global—force them to hire the best of the best talent, not only within Asia but globally.” Baidu, recognising this, is pushing its first overseas recruitment drive from top American universities. But there is some way to go.
“This generation in China are entrepreneurs: strong on technology, strong on innovation but they are not strong on marketing and branding,” cautions Wang. “Timing is critical. For the next ten years the world is open to you — but it is also open to Indonesian brands, Indian brands. Innovation is nothing if it is not endorsed by consumers.” Ultimately, “who is going to be the first next Silicon Valley depends on this group of brands and they’re branding effort.”