The economic growth of China is still at a rapid pace and for foreign companies venturing into the country, their success lies in the patronage of Chinese consumers. Because of the differences in culture, norms, beliefs and language, it is difficult to gauge how the Chinese consumers will take to foreign brands. Moreover, there are Chinese products that are similar to foreign products, thus the marketing staff has the enviable task of carefully studying the market in order to survive.
In 2017 China contributed 18% to the world’s GDP, overtaking the United States in the process of becoming a global economic power. After 30 years since it opened its doors, China suddenly has become a major influence in many markets overseas. Due to this, the interest of enterprises and business from the Western countries was awakened.
Although China is open to foreign investments in the country, the market penetration presents a huge challenge to the English-speaking countries because of the business policies, language and culture of China. These factors must be overcome by foreign businesses to ensure that they develop effective partnership and efficient business communication with their Chinese partners.
Business challenges
Penetrating a new market is always a challenge. Asia is now the focus of interest of many international companies because the region is one of the fastest growing economies in the world. Asian consumers are open to foreign brands and international companies are seeing the huge market potential in Asia. However, the conditions in Asia could be a mystery to many international companies, with China being one of the most challenging.
1. Language barrier
The language barrier is one of the many hurdles for multinational companies to reach Chinese consumers. It is very vital for businesses interested in operating in China to have key executives and business managers learn the language. This in itself is another challenge because the Chinese language is difficult to learn and doing business using the language is essential. Even if Mandarin Chinese is the official language of the country, international companies will still deal with people speaking several regional dialects. It affects proper communication and understanding even among the locals from various areas of the country.
The language issue among executives can be solved with the expert help from skilled interpreters especially during business negotiations. Professional translators can accurately translate business documentation and transcripts of important meetings.
2. Chinese regulations for foreign companies
Entering China is not that straightforward. On one hand they say that the country is creating a non-discriminatory environment for international companies. On the other hand, there are government actions that prevent foreign companies from accessing the large community of Chinese consumers. Without local knowledge and support, it is very difficult to adapt to the regulations and laws of the market in China.
Another thing that prevents the productive integration of Western companies into the Chinese market is the fact that China also aims to position its own enterprises as global leaders in their own niches.
3. Fickle stock markets
The stock markets in Shanghai and Shenzhen are only a small part of the economy of China. The value of these stock markets is primarily determined by government policies. Foreign companies have to understand that the government decides which companies that are trying to enter the market will be listed in the stock markets. The stock market in China is also volatile as any other stock market but its volatility does not have a direct effect on the economy of the nation. It’s critical for foreign companies to prepare a different strategy to respond to the changes in the stock market if they are already operating in China.
4. Divided markets
The retail market in China is very fragmented, which makes the situation more difficult for companies from the Western world. The presence of various small shops in the heavily populated but smaller cities in the country presents an unfavorable environment to new and foreign businesses trying to seek patronage from Chinese consumers.
An effective localization strategy is very important for international companies to succeed in penetrating the Chinese markets. International companies have to thoroughly understand the inner workings of the Chinese markets if they are planning to enter China because the business environment in the country is very complex.
Understanding the characteristics of Chinese consumers
For companies for the United States and other countries, it is vital to understand the Chinese consumers because this is where their success will depend. It is imperative that they learn the characteristics and the changing needs of the Chinese consumers in order for them to gain their trust and patronage.
Many foreign companies that have succeeded in entering China fare differently. Some were successful while other established companies in North America failed miserably.
1. Brand-conscious but price-sensitive
Chinese consumers are known to be brand conscious but they are also after products that offer the best price. For the Chinese consumers, price is the determining factor when they are making a purchase. This is due to the price wars that are a normal occurrence in the country. While the price wars hurt many companies, they still have to participate in it in order to make a sale.
Chinese consumers are very fond of luxury brands. The phenomenon of being brand conscious and price sensitive can be easily understood if you know about the Chinese culture where social status and face are very vital. Chinese consumers will gladly pay premium for a brand that can give them a higher economic or social status. However, if the brand cannot provide them that higher social standing, they are very sensitive to the product’s price.
They like products with a good reputation, big names and high popularity. For them, price equates to quality thus the socially conscious consumers like to drive fancy cars and wear luxury branded cloths. They trust brands from the West, as they are known for their quality, especially clothing and food.
Therefore, many companies who have learned this secret often offer prices of luxury items such as wines and gold watches that are two times more than their price outside China. For products that the Chinese consumers use in private and not for status, there are companies that produce reasonably priced items exclusive to the Chinese market. However, the quality of the products is lower compared to the same brands sold in other countries.
2. Trust is important
EBay failed in China because they brought the policy they use in the West to this Eastern country. EBay asks buyers to pay for their purchases first and consumers wait for the products to be delivered. If the trust level, such as in the United States, is high, this system will work very well. But trust is lacking in China and they want to see the products before paying for them.
Local online shopping site Taobao established another system. The company introduced AliPay, a third party payment system. Chinese consumers pay the money to AliPay. The consumers buy the products. Only when consumers have confirmed that they have received the products will AliPay send the payment to Taobao.
3. Food safety issue
Chinese consumers are very wary of the local milk brands because of the milk contamination issues that happened 10 years ago. Chinese consumers have a higher demand for milk brands coming from other countries and are willing to pay double for them.
4. Informed consumers
Chinese consumers are more informed now. The Internet, foreign trips, social media and technological advancement have helped them become more sophisticated. They have become more aware of the array of products and other consumables outside their country. Many are traveling overseas just to purchase branded products. They also found out that these branded goods are available at a much lower price than those sold in their country. Their sophistication shows in their preference for luxury items that have discrete logos.
They now know their rights as a consumer and they understand how to protect those rights. They are able to lodge complaints if the products are defective.
5. Online shoppers
Chinese consumers are some of the most prolific online shoppers today. This is a very huge market for foreign companies. Taobao is enjoying huge success due to this. In China, consumers would go to the physical stores to choose and try a product but will still opt to purchase online so that the products are delivered to their homes.
This means that foreign companies must ensure that their products are available online. This also means that they should have excellent customer service that can respond to questions quickly. Chinese consumers usually ask several questions before making a purchase thus it is important for sellers to have human customer support representatives all the time.
Middle-class purchasers are compulsive buyers. They immediately show interest in online products that offer a discount or those that come with some small gifts. But generally, Chinese consumers are negotiators and price is still very important to them, thus they like to compare prices online and will go for a shop that sells products at a lower price or go for products with special offers and discounts.
Chinese consumers have changed and because of the one-child policy in China, parents are always looking for quality products for their child. They want their child to have a comfortable life.
Localize your business
It is important to note as well that the biggest consumers in China are in the 19 to 29 age bracket. They are the most willing to spend a fortune on luxury items. They are more aware of the world outside their home country so they have also become meticulous and less trusting of foreign companies. This means that to penetrate the Chinese market, companies have to employ excellent translators to help them localize their business. It is important for Western companies to build a strong personal relationship with Chinese consumers, as they are willing to spend, as long as they can relate to the products and their message.
Adapting to the local needs is one of the methods to succeed in business, especially in China. This could be through effective localization strategies or establishing proper communication channels through interpreting and translation. Whatever you need, Day Translations, Inc. can help. We offer several forms of interpreting as well as professional in-country translation services. Chinese is complex language and the presence of various dialects can make proper communication difficult. Call Day Translations any time at 1-800-969-6853 or send us an email at Contact us. We have Mandarin Chinese translators and interpreters who are available any time because we are open 24/7.