Chinese brands are more popular with Chinese consumers than Western brands because they are better at servicing their customers, according to a survey by AlixPartners.
The survey claims that several domestic Chinese brands are doing a better job of fulfilling Chinese consumers’ demand for service than are their foreign counterparts, and that four of the eight most-powerful brands by category in China today are domestic.
These findings could have far-reaching ramifications for Western firms who are trying to tap into the Chinese market, or are contemplating doing so.
Fred Crawford, chief executive officer of AlixPartners, warns, “In terms of actual profitability, China has been a hard nut to crack for many foreign companies of all kinds, including retailers and consumer-goods companies, and the results of our survey confirm that you cannot simply transfer a Western model to China and expect it to work. It has long been assumed by many foreign brands that their product will sell, despite a lack of aggressive marketing, because it is ‘foreign’ and therefore perceived as better quality. But that is no longer necessarily the case.”
“Chinese consumers today want manufacturers to give them honest and consistent service and persuasive information on why to buy particular brands, and domestic Chinese companies are increasingly delivering just that, gaining much higher trust from consumers. Clearly, their foreign counterparts need to react quickly if they ever hope to achieve their desired returns in this market,” says Crawford.
Nearly 5,000 consumers were surveyed in the inaugural AlixPartners China Brand Power IndexSM. The survey questioned consumers in five cities (Beijing, Shanghai, Guangzhou, Chongqing and Shenyang) and asked them to rank five marketing attributes in order of importance: product, price, service, (store and in-store) access and (shopping) experience.
In five of the eight sectors, product was ranked the most important factor, with service a close second, and in three sectors — namely home products, consumer durables and home technology – service ranked top.
Importantly, in four of those sectors, domestic Chinese brands were found to be “most trusted”: Tsingtao in alcoholic beverages, Haier in consumer durables, Hearttex in home products and Master Kong in non-alcoholic beverages.
The remaining brands were Olay (cosmetics), Nike (casual clothing), Safeguard (personal hygiene) and Sony (home technology) – all foreign brands.
“Make no mistake,” says Ivo Naumann, managing director of AlixPartners in Shanghai, “profitability in China has become such a severe issue that we expect to see some foreign companies reconsidering their investments here. On the other hand, China remains a market of incredible opportunity for foreign companies of all kinds. However, turning investments into profits is going to take a renewed push on operational excellence at all levels.”