Local Versus Global: How to Preserve Brand DNA and Still be Successful in China

    The lack of a compelling global brand DNA and relevant positioning is a fundamental hurdle for many Western brands to succeed in China.
    The lack of a compelling global brand DNA and relevant positioning is a fundamental hurdle for many Western brands to succeed in China. Photo: Shutterstock
      Published   in Hard Luxury

    When the French retail group Carrefour recently announced it was selling an 80 percent stake in its Chinese operations, a lot of Western companies watched closely. Carrefour, which once dominated retail across China, no longer felt it could compete against more nimble local competitors after experiencing a significant decline in revenue.

    Most Western companies struggle in China, and Carrefour is no exception. To Western companies, the Chinese market holds an allure due to its size, growth potential, increasing sophistication, and digital leadership. As a result, there has been a consistent influx of Western brands into China. In fact, China has become so trendsetting, that winning there is now seen as the precondition to winning around the world, particularly in the luxury segment.

    Blinded by the prospect of growth in the Chinese market, most companies underestimate the market’s dynamics, the necessary investment and digital infrastructure needs, and the fast-evolving preferences of Chinese consumers. Early advantages, like the kind Carrefour once had, can be wiped away quickly when trends aren’t anticipated early enough, and countermeasures are implemented too slowly. Carrefour was initially successful in China, but eventually, when consumers increasingly embraced digital purchases and demanded fast and convenient delivery to their offices or homes, Carrefour wasn’t able to compete with the local businesses that reacted better to changing customer preferences.

    Is global brand DNA an obstacle to local success?#

    A lot of global companies struggle when deciding how much freedom to allow their local organizations in China, and brands commonly ask if the brand DNA and positioning each need to be adjusted for the Chinese market.

    But, across industries, the issue many brands face is not about having to develop a Chinese brand DNA — it’s a much more fundamental issue. Many brands lack a compelling and truly differentiating global brand story. Then they are surprised when Chinese consumers don’t buy into it. Brand positioning is still often confused with a vague description of the business they’re in. It’s not unusual to hear companies state that “we are the most admired watch company based on our exceptional craftsmanship and heritage” or “we are the most trusted organic grocery brand.” The list goes on and on.

    When brands describe themselves in that way, they become extremely vulnerable because these positioning statements are too generic and lack any distinction. Also, they omit the consumers from the conversation. Consumers couldn’t care less about a self-centered description of a brand — this is usually the brand’s biggest mistake. Many brands don’t provide any rationale for consumers to buy. Relying purely on a tech- or design-centered discussion is not enough, especially in China where consumers choose the brand first and the product second. This makes brand equity even more important in China.

    Brands should always be defined from a value proposition towards consumers: What rational benefit do we provide? How is it different than any other brand? And finally, what emotion do we strive to inspire? The most powerful brands always provide relevant rational and emotional benefits, with each being highly distinctive amongst their competition.

    The lack of a compelling global brand DNA and relevant positioning is a fundamental hurdle for success in China. Before Chinese consumers buy a product, they need to first understand the brand benefits. And for them to understand the brand, companies need to define their brands from a consumer perspective — and with much more precision than most do today. Without that exercise, a Chinese launch will surely fail.

    Insufficient insights give slow and imprecise measures#

    The second dilemma for most Western brands in China is a lack of real-time consumer insights and the unwillingness to invest in the proper infrastructure and tools needed to understand trending consumer issues, topics, and desires as they happen. Recently, a well-known European luxury brand with sharply declining sales in China was convinced that their losses were due to a lack of quality perception. However, they didn’t have real-time consumer data to validate this assumption or figure out what exactly caused the negative perception. They were also unable to identify whether the issue was trending and if so, why. These questions could have been answered by applying advanced consumer consent measurements drawn from sophisticated data querying technologies like AI and machine learning, ultimately making sense of consumer conversations about the brand on digital platforms.

    Local Chinese management wasn’t able to convince top global management that this investment was necessary, and as a result, countermeasures came too late, too slow, and were too imprecise. This wastes time and money, and the competition can take advantage of the void while the brand starts to decline faster. Not wanting to invest a nominal amount into the right digital infrastructure early on so the brand can understand insights will cost much more in lost profits later, and it may ultimately cost the brand its market position.

    To survive or not to survive — complacency is not an option#

    If the global brand positioning is precise, compelling, differentiating, and local management teams have access to real-time insights when they need them, then brands can operate successfully in China. What’s important is to not be complacent or lose time by simply guessing or hoping. Fast, data-driven decisions are key in order to compete with ambitious, bold, and disruptive local Chinese competitors who are much closer to Chinese consumers than Western companies.

    Carrefour could still be in growth mode in China if it had anticipated shifting consumer preferences earlier. It could have kept its global positioning while quickly and accurately adapting the execution of some of their services to meet local needs. But there is no mercy for being reluctant or not close enough to consumers. Consider this a wake-up call for every manager with China aspirations.

    Daniel Langer is CEO of the luxury, lifestyle, and consumer brand strategy firm Équité. He consults some of the leading luxury brands in the world, is the author of several luxury management books, serves as a regular keynote speaker, and holds management seminars in Europe, the USA, and Asia. Follow @drlanger

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