Western companies need to rethink when entering the Chinese market

One in five internet users worldwide already lives in China, and the media regularly report on new records and impressive figures that make local companies sit up and take notice and increasingly woo the Chinese target group: On last year's Singles Day alone, November 11, 2018, online orders worth $30.8 billion were placed in China - 90 percent of them via smartphone. By comparison, the online order value in Switzerland for the whole of 2018 was 9.5 billion Swiss francs. In terms of value, three times more goods were ordered in China in one day than in Switzerland in an entire year.

However, the Chinese target group also increasingly offers great potential for Western companies beyond their national borders. Europe is attracting more and more Chinese tourists, and recent reports of a 12,000-strong group of travelers visiting Switzerland on an incentive trip are making people sit up and take notice.

However, companies must face new challenges when establishing themselves on the Chinese market or among Chinese travelers. No matter how successful a brand already is in Western countries, it should never be blindly guided by existing models of success in the Chinese market. This is shown by well-known advertising faux pas of Western brands such as Dolce & Gabbana or Burberry.

Google, Amazon, Facebook and Apple, also known as the Big Four, set the pace of digitization. That's our understanding. Looking a little further east, a different world opens up. In the digital ecosystem of China, Baidu, Alibaba and Tencent - also known as the Big Three - dominate the digital market.

The platforms, originally a search engine, e-commerce store and social network, are expanding their business areas at a rapid pace and now cover almost everything from digital payments to cloud computing. So anyone who wants to do business successfully in China or with Chinese travelers needs a lot of know-how, and above all access to this huge ecosystem.

WeChat is a good example of how deeply rooted digital usage is in China. WeChat, also known as the "Swiss Army Knife" of mobile apps, is part of Tencent's ecosystem and offers a plethora of tools that can be used for just about any activity - making payments and purchases, sending text messages, gaming, booking flights, or even making medical appointments.

The app has over one billion monthly active users. 60 percent of them open it at least ten times a day, and the average user spends more than three hours on the platform. The app is thus an integral part of everyday life in China, and is responsible for satisfying needs and desires - always in exchange for personal data. A mecca for advertisers and platform operators.

While such an open approach to data seems almost inconceivable in this country, Chinese users are uncritical of the data collection frenzy of the big players. "In China, technology is seen as a useful friend, not an enemy," was the assessment of Kaiser Kuo - host of the Sinica podcast - at the Webrepublic China Roundtable in November 2018. In China, technical progress is associated with economic progress - and everyone wants to be part of it.

The Western lifestyle is increasingly triggering aspirations among young Chinese, and local brands are gaining strong popularity. There is great potential for Western luxury companies in particular. According to studies, Chinese spending on luxury goods is expected to double to 150 billion euros by 2025.

This is especially true for Chinese millennials. Unlike the previous generation, they are better educated, have no financial worries or restrictions, and have grown up digitally. They are more receptive to video and display advertising, as well as influencers. Content marketing and working with key opinion leaders can effectively reach Chinese customers. But ultimately, product quality, customer experience, and brand equity are the foundation for trust and long-term healthy customer relationships.

And this is precisely where companies need to rethink their approach. After all, Chinese users - in addition to demographic characteristics - differ greatly from Western users, especially in their buying behavior and mentality, and different rules of the game apply for building trust. Virtually all digital transactions are conducted via smartphone, and users have increasingly integrated online and offline behavior. Gaining the trust of buyers who are impatient and discerning, shaped by corruption and deception, is paramount. Before the purchase, an extensive background research is made, after the purchase, a very high quality of the product, speed of customer service and delivery times or interactive after-sales services such as an integrated live chat in WeChat are expected. The expectations for service quality are therefore extraordinarily high.

Advertisers also need to understand the Chinese language and culture and apply it to their products and campaigns. The Chinese language is much more emotional, playful and entertaining. Logos, claims and advertising campaigns must be adapted to the target audience. For example, through visual appearances, usually very colorful, in which the focus is on people. A good example of this would be the P&G brand, which adapted very quickly and successfully to Chinese conditions.

For companies that do not (yet) want to enter the Chinese market with a local presence, there are also exciting and effective methods to get in touch with Chinese customers. Cross-border e-commerce works particularly well for health, fashion or food industries. Also, given the forecast that 220 million Chinese will already be traveling overseas in 2025, with over 50 percent of their budget spent on consumption, the tourism or luxury goods industries should pay great attention to travelers.

The key is to be present on the platforms that are also used in China. This also applies to payment systems, which are already increasingly being made WeChat-compatible in Europe. Advertisers who use relevant customer data of Chinese travelers via search engines, social and e-commerce platforms can effectively address their target group and bring them to local stores. For example, WeChat offers targeting capabilities to target Chinese travelers in Europe based on their current location and their interests.

There are many ways to connect with Chinese users and sell products to the Chinese market. And even without a physical presence in China, Chinese users can be targeted either while traveling overseas or via cross-border e-commerce. The choice of relevant platforms, the tone and dynamics of the ads, the interaction possibilities of the users with the brand as well as the service quality are decisive success factors for successful campaigns in China. Otherwise, the advertising money invested can very quickly disappear into the nirvana of the Chinese platform jungle, leaving both buyers and sellers in the lurch.