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Made Better in China (first posted July 2012)

Our July 2012 research into what Future China looked like for higher education and employers threw up many trends. One that stood out was one we are becoming more and more accustomed too. The stereotype of China as just the ‘workshop of the world’ has now to contend with the fact that China is now also about quality and in some case making things better. If you want to partner with China make sure your thinking is equally up to date.

In China we have seen a significant emergence of local and national business and brand. It has been argued that previously China did not have neither the savvy nor patience to build brands. That China was happier to focus on the cheaper market and value. It had been a very different story in South Korea and Japan where we have become accustomed to the rise of global names such as Samsung and Sony. Of course, one of the major factors in why China has not built its own major brands has been that is hasn’t had the same kind of brand-led audience so familiar in Seoul and Tokyo. Well that’s all changing now. As the local consumers demand it, we’re finally seeing the emergence of Chinese brands across a breadth of products, services and sectors. And these brands aren’t so cheap now, as they move up the value chain, whether in healthcare, clean technology, luxury products and FMCG.

A good example is Li Ning, the sports apparel maker. Li Ning recently overtook Adidas in sales in China, despite the German sports giant pumping millions into its Beijing Olympics marketing promotion in 2008. Furthermore, Li Ning has not achieved this by focusing on price alone; it’s now competing at the same points in the value chain. The company has hired the same American designers that have been so successful in their work with global brands. In fact, Li Ning even have a base near to Nike’s Oregon HQ, no doubt tapping into the local talent there. They have followed a well established path in major sports star endorsement, including some of the biggest names in the US, but they have also moved off on their own trajectory delivering in a way that is more appealing to their Chinese customers. Li Ning has recognised the importance of building a strong brand based on a unique identity and personality by paying more attention to the communication with local customers. Whilst familiar global players have been hit by economic downturn, Li Ning has not had to contend with hesitancy or a glut of inventory, continuing to innovate and push forward.

Li Ning is also an example of what we’re now calling ‘Made Better in China’. This desire to outdo other global brands has been inspired by many of the trends in Chinese consumerism. You can dig into the trends and we’d recommend looking at MEC’s Top 10 along with the trendwatching.com report and some great Swedish Project China insight.

Some of the highlight trends include Urban and Consumption Boom. In 2010, China had 18m households with an annual income of over $16,000. By 2020 this will be 167m households. That’s nearly 400m people. The estimated number of millionaires in China in 2011 was 450,000. This is expected to have nearly doubled to 800,000 by 2013 (data from McKinsey 2012). We’re also seeing luxury consumption escalate. Whilst the West has scrambled to sell its best products in China (think Burberry, Scotch Malt Whisky and the fact that BMW Chinese sales have just outstripped its US market), it has helped raise a level of expectation of product and service in the country.

Add to this the rise of China’s new generation of brand-savvy customers and the immense progress in technology, the internet and social media (over 500m internet users) then an online driven market is developing, feeding off and adding to the new consumer culture. All of this is contributing to the idea of ‘Made Better in China.’

2012 releases of The Future Index are available at http://www.thefutureindex.com or drop one of us a line jim.tudor@thefutureink.com, nick.brian@thefutureink.com.
We’ll soon be tweeting @thefutureindex

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