Opinion

Are you China ready?

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Claire Dean, Head of Strategy Worldwide, shares three key areas that marketers need to consider to take advantage of the opportunity China presents for global businesses.

China is the world number two media market and the second largest consumer spending market. Yet the rise of China is not over: China’s importance on the world stage will only continue to increase in the coming years.

There are two key reasons why global businesses should be particularly interested in China in 2022: firstly, it offers tremendous growth opportunities across a range of categories.

For example, in luxury, China is already one-third of the global market and is driving two-thirds of the global growth. In automotive, China is now responsible for 29% of global sales and headroom is enormous – China’s vehicle per person rate is a fifth of that in the US - 173 v 837 per 1,000 people (Euromonitor, 2021 and McKinsey, 2020)

Even more growth will come from China’s exploding middle-class population. The number of middle-class consumers is set to grow to 35% of the population by 2030, up from just 10% in 2015.

In short, China will add an extra 340 million middle-class consumers – more than the entire US population – during this decade. The Economist estimates that these new middle-class consumers will contribute an additional US$1.2 trillion per year in consumer spending power. That’s the equivalent of Brazil’s total consumer spend.

The second reason global businesses should be interested in China is that it is a window to the future. China’s social media, payments, commerce and use of data is years ahead of other markets in terms of sophistication.

Already 87% of the media spend in China is digital. While the rest of the world is just discovering the wonders of TikTok, China already has many well-established short-form video platforms with sophisticated commerce capabilities not seen in any other market. And it doesn’t stop there, the market’s live commerce capability, and shopping festivals are far more advanced than those beyond its borders.

For these reasons, global businesses should be building a comprehensive China strategy.

Part of the challenge for many is that despite the fact that Asia is driving a staggering 90% of the global growth in middle-class consumers, the overwhelming majority of global organisations are still headquartered and managed from outside of Asia. Consequently, their teams, whilst becoming more diverse, can lack intimate knowledge of the real opportunities in China and other markets in the region. Many global agency partners are also structured in a similar way, with teams based in Europe and the US creating content for the world.

The importance of China and the growth opportunity it represents combined with the comparative lack of Asia experience in many global leadership teams, means now is the time that companies should be asking – “Are we China Ready?”

There are three key areas that Global businesses need to consider:

1) Talent: Getting this right means hiring diverse talent. It means hiring talent with diverse experience. This doesn’t automatically mean hiring people from Asia or who have worked in Asia, although that may be the solution for some. An alternative could be an investment in upskilling existing talent.

Part of the motivation behind MediaCom launching their China Passport Program in 2019, was to improve China knowledge amongst global teams. Global employees spend three months in market providing hands-on specialist support to the market, upskilling global employees on China and building strong relationships with local teams.

Spending three months in market isn’t realistic for everyone, so we wanted to great something available to a broader audience.

Our China Ready training covers media, digital and commerce topics, but it also includes other equally critical topics such as Chinese business culture. We plan to roll-out this programme to our global clients later in 2022, many of whom have shown great interest in learning more about China.

2) Geography: China is a huge and diverse country. Advertisers and their agency partners need to identify the best cities in which to launch or expand, and the future growth audiences. A huge proportion of the China opportunity exists outside Beijing, Shanghai and Guangzhou.

Category growth rates in China are often expanding so rapidly that just being there will deliver you impressive results. But why be happy with 5% growth if you can grow by 10%?

Working with one global client, we identified that their average category growth rate of 6% was only marginally higher than the global average of 5.5%. However, identifying urbanisation as the driver of category growth in China, we were able to focus in on the future growth cities, localise the product range to focus on city living, and specific needs of the audience demographics driving that urbanisation, which were younger than the global category average. This unlocked double-digit growth potential.

3) Localisation: The localisation requirements for brands and products in China is very different to other markets. Not only because of the scale, the cultural and structural differences of the market but also because of the strong preference for local brands.

For example, the annual WPP BAV Best Country Study identified China as the top of the list of countries with a preference for local brands with 82% of consumers preferring to buy from a local Chinese brand – more than double the rate of US or UK consumers.

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The global businesses that succeed over the next five years will be the ones that invest in Asia – starting with China. To begin with, this means upskilling global teams on the Asia opportunity and having a clear China and emerging Asia growth strategy.

2022 is the Year of the Tiger. Tigers are competitive, ambitious, pioneering and brave. That is the attitude that will help brands succeed in China, emerging Asia and beyond in 2022.

To find out more about getting China Ready, contact MediaCom’s dedicated division Incite Consulting, which specialises in working with global brands on market entry or expansion strategy: [email protected]

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