In market analysis conducted by HSBC, 78% of surveyed western brands planned to grow investment in China.
Why? Because the China market is huge and rapidly expanding – with steadfast supply chain systems.
During the global pandemic, China’s allure only increased. In 2020, over 38,000 foreign-invested enterprises were set up in China with total capital of RMB 999.90 billion. Whilst other markets stagnated, this represented a year-on-year increase of 6.2%.
Despite this expansion, Western brands don’t automatically succeed in the China market. Chinese consumers are notoriously discerning and foreign-funded companies frequently encounter bumps in the road.
So, what can we learn? Here we explore Pret A Manger’s tricky Chinese launch to understand potential pitfalls.
What can go wrong for Western brands?
In 2018, Pret A Manger closed their Shanghai stores after disappointing sales performance.
Four years earlier, the brand opened a flagship K11 store (central Shanghai), followed by a store in the Jing An Kerry Centre. The move was heralded as a shrewd strategic push, targeting Shanghai’s massive population of office-based workers.
What went wrong?
Pret A Manger didn’t understand the demands of its consumer base and failed to adapt its China strategy appropriately. The issues were two-fold:
1. Lack of localization
The international café chain attempted to “cut and paste” its existing business model for the Shanghai market. Their offering of soups and cold sandwiches didn’t appeal to Chinese consumers however, for whom Pret’s inability to heat-up sandwiches was a major barrier.
The company modified their menu for the Chinese market to some extent, but the changes weren’t comprehensive enough to attract new customers.
2. Inappropriate pricing
Pret A Manger’s high price point also meant they quickly lost market share.
Pret emphasises their products' healthy and ethical nature, meaning costs of production, processing, and staffing naturally increase. Whilst this is ultimately a positive step, it necessitates long-term education of customers, high-quality dishes appealing to local tastes and consistent brand building – so Chinese consumers feel the extra outlay is worthwhile.
How to successfully enter the Chinese market
To avoid similar stumbling blocks, here are three essential lessons for Western brands building their China strategy:
1. Understand Chinese consumers
In any market, you’ll never succeed if you don’t know and understand your customers. With this in mind, brands must invest in thorough market research and testing before launch.
There are so many seemingly small but fundamentally important differences between Chinese and Western consumers. Understanding these requirements in detail will help your business find “breakthrough points” and plan your China branding appropriately.
2. Localise your offering
China is a huge country with a population of over 1.4 billion. There are many different markets within China, each with its own specific needs and desires.
First Tier cities such as bustling Beijing, cultural Guangzhou, and Shanghai’s financial powerhouse offer great entry points, but unsurprisingly come with correspondingly high operational costs.
As well as geography, appropriately pitching your offering is vital. Whilst Chinese purchasing power has increased over the last decade, most middle classes are incredibly brand and price-conscious. Paying attention to the “four Ps” of price, place, product and promotion remains as important as ever.
The Swedish oat milk brand “Oatly” is a perfect example of localization done right. They focused on coffee shops as a China market opener.
Despite the recent explosion of coffee drinking in China, Oatly understood Chinese consumers often find coffee too bitter. When mixed with oat milk, however, the taste becomes smoother.
Oatly chose Shanghai as a perfect launch location; a coffee drinking mecca with thousands of boutique stores. As a result of this success, the brand is now stocked in over 3,000 cafes and restaurants across China.
Many coffee shops even feature Oatly prominently in their storefronts, as the product’s popularity has become a selling point in itself!
3. Capitalise on content marketing in China
The China market may be unique, but SEO and content marketing are still king. This means an organisation has to stay abreast of the latest Chinese social media trends.
To use Oatly as an example again, the company focused on a clever strategy of brand and KOL collaborations, as well as SEO optimization on Baidu.
Building on China’s history as a tea-drinking country, they collaborated with HEYTEA to avoid being pigeon-holed as a purely coffee brand. Oatly’s collaborations were also advertised across a wide range of social platforms such as Weibo, Zhihu and Xiaohongshu.
Consistent partnerships with KOLs and Chinese Gen Z “post milk generation ambassadors” (including yoga instructors, travel writers, chefs, café owners and marathon runners) built the brand’s aspirational and trusted image.
If your business is launching in China, download the Emerging Communications Retail Brand Guide to understand the potential pitfalls and secrets to building a successful Chinese strategy.
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