Best Way Into China? Stay Out.
- September 8th, 2015
- in The Chinese Consumer
Culture shock? Language barrier? Heck no. Jessica is one of those fearlessly chipper, boundlessly energetic Chinese women who can move mountains. Moving to a new country – not a problem.
The problem is her friends back in China. Pre-Internet, your duty as a Chinese traveler was to both bring over and return with a few suitcases of otherwise unobtainable goods for friends and family.
Today Jessica, and thousands of Chinese like her, are obliged to move up the value chain from suitcase carriers to logistics providers.
As the mother of an infant, Jessica has a network of Chinese friends, and friends of friends, who are all new moms. Dozens of them want German infant formula, on the reg. As a friend in Germany, Jessica is more or less obliged to send it over. She can refuse, but politely refusing is a part-time job in itself, especially in the age of WeChat.
So whenever Jessica goes to the supermarket in Heidelberg, she picks up at least a case of infant formula. Then she arranges shipping. She adds a healthy fee for her trouble, which her friends are only too happy to pay, just to know they’re getting the real deal, right from Germany.
Just what is this German brand infant formula that Chinese consumers are willing to pay such a premium for, then wait a couple of weeks for, to boot?
Now if there’s a company that has invested in omni-channel…no, omni-presence in China, it’s Aptamil’s parent company, Danone. No one understands the potential in China’s staggering demand for safe formula and dairy better than Danone. You can find Aptamil on Tmall, Taobao, JD, Yihaodian, right on down the line. Or if you care to stand in line, at any China supermarket lacking corrugated roofing and concrete floors.
So why don’t Jessica’s friends take a pause from their WeChat Moments and order their German formula locally?
Because if it’s available locally, they don’t trust it.
Forgive the repeated rhetorical questions, but this is an incredibly important point to understand about Chinese consumers, one that goes ripping across the grain of all the conventional wisdom about Mandarin labels, competitive pricing, quick delivery, and so on.
Given the disposable income, and the connections, Chinese mothers will pay double, and wait quadruple for authenticity, even if the authentic brand is already available on the mainland.
This hypothesis does not necessarily hold up across all product categories, but must be figured into the strategy for any product that goes into consumers’ mouths, especially the only child’s. Your media-induced mistrust of all things China is but a passing qualm, compared to the visceral anxiety the Chinese have about obtaining safe food to feed themselves and their children.
There’s a new story every week to compound the anxiety. Paper rice!? Easy to imagine cooties on anything that doesn’t come right from the dock to your apartment, unopened.
It’s doubtful any western companies accurately gauged the depth of this anxiety, to the point of considering that making themselves available locally in China would cost them authenticity points, and sales.
This is all just a minor dilemma for Danone, who can dry their eyes with some of the newer euro notes among the $4.4b they earned in early life nutrition for 2014.
Instead, this story is for the SME who believes that successful brand building must involve full market entry and localization. Especially the many SMEs with food and supplement products based on purity and safety, who are positioning for the Chinese market based on authenticity.
Is the answer cross border? Most likely, but keep in mind none of Jessica’s friends are reassured by Tmall or JD Global’s delivering the goods out of Hong Kong. A key point to consider is that these moms are paying more and waiting longer because it’s coming from someone they know.
Finally, none of the foregoing is meant to suggest you can’t sell well or otherwise benefit from being available in China. Rather, it’s meant as good news for the SME that wants to approach China scalably. If you’re banking on safety and authenticity, and if you can find them, Chinese consumers might like you more when you’re not here.