Top 3 tips for foreign brands entering the Chinese market in 2022

China is unique in its pace of growth. It offers incredible opportunities for international brands, increasing numbers of which are seeking to tap into China’s massive domestic market. Such a move might look daunting — scare stories about the risks facing overseas investment are legion. Yet it need not be. Foreign companies need to pay attention to three elements of success: brand strategy, speed, and intellectual property.

The opportunities are clear. Post-pandemic, ‘Brand China’ is one of the most resilient national brands. Its value continues to close in on the long-standing global leader, the US: according to Brand Finance, China’s national brand value reached US$18.8 trillion in 2021, compared with $23.7 trillion for the US. The Chinese government’s quick response to Covid-19 and significant stimulus measures have fuelled a remarkable recovery from the shutdowns of early 2020 — it is the only G20 economy expected to have shown growth in 2021 — and the future is bright too. McKinsey identifies a consumption growth opportunity in China worth some $5 trillion over the next decade. How can foreign brands seize that opening?

1. Localized brand-first strategy

First, brands need to understand China’s multitudinous and complex markets. They should adopt localized strategies based on niche geographic and demographic segmentation. Key trends include an explosion in the number of upper-middle-income and above households, set to grow almost 70%, and the increasing power of young people born in the 1990s (aged 23–32 in 2022). This segment comprised 16% of China’s population in 2020 and, according to McKinsey, will account for more than 20% of total consumption growth over the decade to 2030 — more than any other segment.

This group of independent thinkers and globetrotters are most likely to engage with international brands on social media. Such brands can build awareness and trust by working with local key opinion leaders, or influencers. Bi-lingual, bi-cultural agencies can be valuable partners in developing localized strategies.

2. Go mobile-centric

In any effective localized strategy, the adoption of mobile technology is likely to be critical. China is one of the most mobile-centric societies in the world. Smaller domestic brands are bypassing building websites altogether and launching directly on mobile apps, e-commerce sites, or WeChat official accounts. Consumers can discover brands, browse products, purchase with WeChat Pay, and tell their friends, all without leaving the WeChat app. Brands can’t go wrong in China with a comprehensive digital strategy that focuses on mobile-centric marketing.

One highly successful marketing strategy that is less common outside China is the use of gamification through mobile apps to raise brand awareness. Luxury fashion brands like Hermès, Dior, and Guerlain have launched successful gaming campaigns on their official WeChat accounts. For example, Hermès has a horseshoe-throwing virtual game, not unlike throwing a poké ball in Pokémon Go. Brands have also adapted classic games such as Tetris and Candy Crush to include their branding and products. Game participants can win rewards by playing, achieving high rankings, or through lucky draws.

For brands, these campaigns mean higher brand engagement and higher conversion rates. Marketers can build shareable social interactions into games. And a mobile-centric strategy also helps generate valuable consumer data, enabling the development of better services and products.

3. Move at China speed

In September 2021, China’s two largest tech companies, Tencent and Alibaba, opened up their digital empires by unblocking all interoperability between their platforms. For consumers and marketers, it was excellent news, providing more options for different payment systems, and allowing outbound links from each platform to its competitors. For example, friends can now share a link to a Taobao store, owned by Alibaba, directly in WeChat (the most popular messaging app in China), owned by Tencent.

This change was the result of an order by China’s industry minister. The important thing to note is the lightning speed at which it was implemented. There were only three days between Beijing’s directive and implementation. In China, major policies can change at a moment’s notice. Companies should build teams that are ready to react and be prepared to work at ‘China speed’ to gain advantages over their competitors.

4. Protect intellectual property

A primary concern of foreign businesses operating in China is the theft of their intellectual property (IP), by cybersquatters, counterfeiters, or even the factories making their products. Given the multitude of past examples, which have hit world-leading brands such as Starbucks (pictured left) and Apple, this concern is justified. Yet the picture is improving. James Love, head of IP (UK) at Womble Bond Dickinson, says that there has been “radical improvement in the laws protecting legitimate IP” over the last 20 years.

China’s IP law is a ‘first-to-file’ system, however, and Love has seen an increasing incidence of trademark-squatting. While there is the possibility of canceling a squatter’s ‘bad faith’ registration against a legitimate claim, brands should prioritize the copyright registration of their logos, and English and Chinese versions of their brand name. Choosing an appropriate Chinese character version is critical: visual, oral, and meaning perspectives need to be considered, as well as trademark availability. Specialized branding consultancies can often help.

Working with a reputable Chinese IP law firm can also pay dividends in reducing risk, supporting early registration of rights, and robust contractual arrangements with Chinese partners. Where a product is made of multiple components, a sensible precaution is sourcing components from different factories, so the final product is less easily copied.

China offers unique opportunities for growth. Compete on brand, speed, and intellectual property while adopting a mobile-centric marketing strategy, and you have a winning approach.

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This article was written by Kaitlin Zhang and originally published in Dialogue Magazine in Nov 2021.

Dialogue is the official leadership journal of Duke Corporate Education (which has its roots in the Fuqua Business School at Duke University, North Carolina). It’s a quarterly title, reaching 1 million in global readership and 20,000 people in Duke CE’s direct network in leading global organizations. We’re proud to feature some of the best thinkers from leadership and business including Thinkers50 authors and key executives from major organizations, covering leadership, strategy, marketing, innovation and technology, and more.