From data to culture: How international brands are trying to crack the code on the fickle Chinese consumer

BEIJING — China’s financial slowdown is not discouraging U.S. and European manufacturers from revamping their methods to achieve Chinese language buyers.

As a substitute, the attract of the world’s second-largest shopper market is forcing firms to adapt within the face of rising competitors from native manufacturers.

Within the case of Kraft Heinz, getting extra individuals in China to purchase ketchup this yr additionally meant hiring a neighborhood company to assist create catchy campaigns — adorning subway station columns to imitate ketchup bottles and selling the condiment as a contemporary twist on a preferred dish: stir-fried eggs and tomatoes.

It is a exhausting market to deal with, even for Shanghai-based advertising and marketing agency Good Thought Progress Community (GGN). The company has witnessed no less than 5 completely different waves of shopper developments in its 14-year historical past, founder Stephy Liu, mentioned in Mandarin, translated by CNBC. “The gameplay retains on altering.”

However GGN has succeeded even after rejecting an acquisition provide from British promoting big WPP, Liu mentioned, noting that about half of her shoppers are overseas manufacturers.

Whereas Kraft Heinz is not completed with its China ketchup marketing campaign but, the corporate reported second-quarter web gross sales in rising markets climbed by 4.2% from a yr in the past, serving to offset declines in North America.

WPP explored a possible acquisition of GGN however didn’t find yourself going far within the course of, in response to an individual conversant in the discussions.

Kraft Heinz didn’t instantly reply to requests for remark.

From Starbucks’ struggles to Lululemon’s successes in China, it is change into clear that the correct mix of localization is important.

“Amongst worldwide manufacturers in China, the winners are sometimes dedicating greater than 40% of income to advertising and marketing, particularly content material and platform-first advertising and marketing, whereas additionally iterating merchandise regionally based mostly on market information,” mentioned Jacob Cooke, co-founder and CEO of WPIC Advertising + Applied sciences, which helps overseas manufacturers promote in China.

This yr, Cooke mentioned that Beneath Armour has created merchandise below 100 yuan ($14) with the intention to appeal to a mass of consumers on-line, whereas utilizing livestreams with devoted customers to then construct health communities and promote extra premium merchandise offline.

ByteDance-owned Douyin has change into an e-commerce pressure in the previous few years since celebrities and corporations began utilizing the app for livestreaming gross sales throughout the pandemic. And by the numbers, there’s little query that leaping into the Xiaohongshu and Douyin world is worth it for companies.

Adapting to that new social commerce ecosystem has change into the largest problem for manufacturers within the final two years, GGN’s Liu mentioned. “International manufacturers will suppose, ‘Is not this simply TikTok?'”

She warned that success requires a fancy technique that may contain altering the whole lot from how a crew is structured to the sorts of merchandise bought. However the payoff is important.

“In half a yr, it may enable you promote greater than you bought on [Alibaba‘s] Tmall in two years,” Liu mentioned.

Along with social media, a crucial think about many firms’ methods is entry to hordes of knowledge on what shoppers in China are shopping for.

Chinese language e-commerce platforms, together with Alibaba’s Tmall, share much more information on what’s fashionable than Amazon.com does, WPIC’s Cooke mentioned. In China, “individuals usually know what their opponents are promoting and what they’re promoting for.”

With that granular information, Chinese language make-up model Good Diary was in a position to succeed by figuring out a market ache level and making a lipstick focused at that cheaper price phase, Cooke mentioned. He famous that is pressured overseas manufacturers to create China-specific merchandise as nicely, a giant shift during the last 5 years.

E-commerce platforms in China additionally typically present tough figures on what number of orders had been positioned per product, whereas third-party firms reminiscent of Syntun provide important quantities of product rankings and different on-line gross sales information at no cost.

Within the case of Apple‘s iPhone 17 launch on Sept. 19, it was Chinese language e-commerce firm JD.com that launched gross sales information for mainland China. The electronics-focused platform introduced that the primary minute of iPhone 17 collection preorders surpassed the first-day preorder quantity of final yr’s iPhone 16 collection.

Apple’s story additionally underscores the way it’s potential to reignite native curiosity regardless of shedding market share to home competitors. Some prospects in Beijing informed CNBC that they appreciated the iPhone’s new cosmic orange coloration, and that extra locals meant to purchase their first iPhone this yr since they’d heard about new engaging options reminiscent of bigger inside storage.

China’s factories had been fast to leap on the pattern, releasing iPhone circumstances with an analogous orange hue even earlier than the 17 mannequin was out.

“Successful manufacturers are people who have established native R&D facilities and on-the-ground product groups,” mentioned Ashley Dudarenok, founding father of ChoZan, a China advertising and marketing consultancy. “This permits them to identify developments early, develop merchandise tailor-made to native wants, and launch them in months, not years. It is a important departure from the previous, the place international merchandise had been typically merely rolled out within the Chinese language market.”

Even with the appropriate information and social media platforms, cultural integration is changing into more and more essential, particularly as Chinese language manufacturers discover success in tapping the nation’s personal historical past of artisanal craftsmanship.

“Manufacturers are transferring past superficial nods to Chinese language tradition,” Dudarenok mentioned. She identified that Loewe partnered with jade carving masters, whereas Burberry teamed up with bamboo-weaving artists.

And regardless of declining gross sales in China’s luxurious market, LVMH this summer time opened an eye catching ship-shaped retailer in Shanghai — instantly producing a lot native buzz.

In distinction to LVMH’s luggage-shaped retailer in Manhattan, the Shanghai location faucets into the Chinese language metropolis’s historical past as a port of entry for worldwide vacationers to Asia roughly a century in the past.

The brand new retailer additionally captures the European model’s roots in hand-crafted journey trunks — which contrasts with Chinese language manufacturers’ incapacity to supply the identical emotional enchantment, Joe Ngai, chairman of larger China at McKinsey, identified in a LinkedIn put up.

“As Chinese language prospects develop of their confidence and need for native parts,” he mentioned, “creating extra crossovers between West and East is among the distinctive alternatives for multinationals in China.”

— CNBC’s Eunice Yoon contributed to this report.