What the ‘BrandZ Top 100’ Tells Us About China’s Luxury Market

This year’s BrandZ Top 100 Most Valuable Chinese Brands report saw Alibaba leapfrog Tencent for the title of China’s most valuable brand, and more importantly, the combined brand value of the Top 100 grew over the year by a healthy 30 percent to $889.7 billion.

Commissioned by WPP, a creative transformation company, and based on research carried out by London-based consultancy Kantar, the BrandZ Top 100 Most Valuable Chinese Brands ranks the estimated “brand value” of 100 prominent Chinese companies. The report is based on data from Bloomberg and insights from over 3.7 million consumers worldwide. That figure includes almost 290,000 Chinese consumers who are surveyed on more than 1,100 brands across 75 categories. Kantar then narrows the field down to the Top 100, with 24 industry categories represented in the final cut.

Alibaba claimed the top spot for the first time since joining the BrandZ Top 100 in 2015, ending Tencent’s four-year run at the top, with its brand value increasing by 59 percent year-on-year to arrive at a total of $141 billion. In contrast, Tencent only grew year-on-year by 4 percent. It’s worth noting that the combined $279.1 billion brand value of these two companies alone account for more than 30 percent of the total value of the entire BrandZ Top 100.

The BrandZ Top 100 employs a range of metrics to evaluate brand value. For example, the authors pointed to Alibaba’s performance in the “Brand Power” metric, and particularly the perception among consumers that Alibaba’s brand was “meaningful.” They suggested that the e-commerce giant’s success in pioneering the “New Retail” concept had helped deepen consumers’ connection to the brand, resulting in Alibaba’s 59 percent increase in brand value.

If Alibaba surpassing Tencent is a mark of the success of the e-commerce giant’s “New Retail” initiative, JD.com’s tenth-place finish further underlines the significance of online retail in China today. Although it didn’t make the list, cross-border e-commerce platform Netease Kaola, which helps consumers purchase international brands, was cited by the authors as one of an emerging crop of services clamoring for market share in that field. In addition to the e-commerce and New Retail powerhouses, innovative companies in the artificial intelligence and social media fields also showed impressive results.

As in previous years, there are valuable takeaways from the list-climbing fortunes of high-end brands of baijiu, a type of Chinese grain liquor. The BrandZ Top 100 authors noted that many baijiu companies have invested in brand upgrades to engage affluent younger consumers — modern packaging, festival tie-ins, and new flavor variants (Moutai, for example, launched a new chocolate liqueur.) The BrandZ Top 100 results show impressive outcomes for baijiu producers, with five of them ranking among the 20 brands with the largest year-on-year growth: Wu Liang Ye, Moutai, Yanghe, National Cellar 173, and Gujing Gongjiu. Moutai also rose to fifth overall on Top 100 from seventh place in 2018, with 58 percent year-on-year growth.

Other brands in luxury consumer categories didn’t fare as well, with skincare/healthcare brand Yunnan Baiyao suffering a 20 percent dip in value year-on-year despite diversifying its offerings to attract more millennial consumers. Shanghai’s time-honored (“lao zi hao”) jewelry brand Lao Feng Xiang barely clung to its Top 100 status dropped to 98th place after a 15 percent drop in brand value over 2018, while another jewelry brand dropped off the list entirely. The report blamed these trends on a dip in discretionary spending as a result of the US-China trade war and slowing domestic economic growth.

This year is the first time the BrandZ Top 100 has included “unicorn” companies (startups that have a valuation of over $1 billion based on their most recent public valuations, but are not publicly traded, including smartphone maker Xiaomi and Uber-like ride-sharing app DiDi), allowing the publishers to present a fuller picture of the key players in contemporary Chinese commerce. Seventeen brands made their debut on the list, with four industry categories represented for the first time: consumer finance, entertainment, lifestyle platforms, and transport.

Marketers should pay particular attention to how they can collaborate with powerful brands in the entertainment and lifestyle platform categories. The lifestyle platform category, which includes brands like Meituan, Ele.me, and Dianping, is both new to the BrandZ Top 100 and Kantar’s China report, where authors describe the category as “a uniquely Chinese phenomenon—the radical integration of online platforms and offline capabilities (O2O) to provide products and services with extreme consumer convenience … Only in China do hundreds of millions of people, especially in major urban centers, conduct their daily lives, generally without cash, using only one or two apps to order and pay for almost any product or service they need.”

The entertainment category enjoyed a 186 percent increase in combined brand value — by the largest growth of a single category by a large distance. Video streaming services iQiyi and Youku enjoyed the largest individual year-on-year growth of brand value at 158 percent and 136 percent, respectively. Of the 24 industry categories represented in the top 100, 13 saw an overall increase in value. Technology was the most-represented category, with 11 brands in the top 100 representing 26 percent of the top 100’s total dollar value.

The combined growth in the Top 100’s brand value was the largest annual increase in value since the BrandZ Top 100 was established in 2011. Against the backdrop of an economic slowdown and trade tensions, most notably with the United States, the record 30 percent surge may seem surprising. However, the authors said brands have enjoyed opportunities for unprecedented growth and expansion because of the emergence of consumer spending power in China’s lower-tier markets. Another factor boosting brand value is enthusiasm for Chinese consumer brands that are establishing reputations and clout outside China.

“The threshold to enter the BrandZ China Top 100 has more than doubled from $311 million in 2018 to $681 million in 2019, demonstrating the continued pace of growth for Chinese brands increasingly recognized as leading the way in innovation,” David Roth of WPP said in a statement. “Against a backdrop of heightened competition and disruption, building stronger brands is what it takes to stay in the game.”

BrandZ offers five key takeaways for brands aiming to strengthen their brands in the year ahead. The authors urge brands to “build difference,” stressing the importance of distinguishing themselves from the pack as the Chinese market becomes increasingly crowded and competitive.

One aspect of that is to “refine the brand experience,” meaning brands need to look for opportunities to personalize their products and services to deliver more memorable experiences. With so much growth happening in lower-tier cities, “going deep” means investing in understanding the specific conditions in different regions and cities, as brands can no longer afford to rely just on experiences gained in the major metropolises.

The authors also suggest that brands need to “be intelligent” by integrating both human and artificial intelligence to provide maximum convenience to consumers who value ease of experience above all else. And finally, they advise to “build a powerful brand” by focusing on how the consumer interacts with your brand at the point of sale. Whether a brand’s business is online or brick and mortar, powerful brands will stand out and attract consumers to complete their purchase.

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