Sitting here in Los Angeles, California, I often find myself fixated on one single deliberate thought of my role here at METAN – how to get into China. My usual Monday morning rants start off with a “what if we did this…” or “we need to do that…”, but never do my thoughts deviate far from what needs to be done in China (as evident in nearly all my past newsletters). However, China is a two-way street. And as much as we see this golden opportunity to and make a splash, Chinese companies see us nearly the same – how to get into the US market. Sure, Chinese brands have made their way outside of China to their Asian neighbors or even further west to pockets of Europe. But the United States – this is the major leagues for these companies. This is where they can make a real name for themselves outside of their four walls in China. Whether through an acquisition or just creating a better global marketing presence, Chinese brands making the leap to the US should not take anybody by surprise. The sagging US economy is struggling to pull itself out of this current recession while the booming China market is clearly on the uptick. Think of this as the ‘perfect storm’ for Chinese brands to enter the US market while the price is right. Still, there will inevitably be hurdles with Chinese brands entering the US market and expecting immediate (or any) results. In a recent article by the China Market Research Group, it reports several issues Chinese brands will face when entering the US market.
BRANDING It’s no mystery that Chinese companies have traditionally not been great at branding / marketing. Part of this can be attributed to China’s disconcerting view of brand value as a whole. Take a stroll in Beijing’s silk road market and the streets are lined with fake luxury bags, watches, and wallets. A $5,000 designer hand bag can be conveniently yours for a mere price of $5 if you haggle enough with the street merchant. Fundamentally, China business has operated under one rule of thumb – you compete on price. And when costs become the main driver in the business model, the idea of building value in a brand becomes low on the priority list. To succeed in the US, Chinese brands need to recognize (and quickly) that the long-term requires brand value and not just growing revenues at marginal profits.