appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Wade Shepard


China has long been seen as the final frontier of new customers for Western companies, a place where the commercial wells are deep – 1.35 billion people deep, to be precise.
Tapping this incredibly huge market has been an obsession for foreign companies since long before China’s reforms from the late ’70s to the early ’80s. Today, this hasn't changed at all. As China continues to evolve into a consumer-oriented economy with an ever-growing number of middle-class and upper-class consumers hungry for trendy new products, the drive by foreign companies to get their wares into this market is intense.
Profiting from this massive consumer base has always been a tricky endeavour for Western companies. It has long been a mistake to assume that the Chinese will need or want a product just because it is popular in the West, and items that are standard purchases in the US and Europe often do not sell in China. This has led to many foreign companies receiving very rude awakenings in a market that turns out to be far more traditional and arcane than they believed.
While many large foreign companies have successfully established themselves in China and reaped huge profits, many others have failed epically. According to estimates at the Australia-China Business Week 2013, about 48 per cent of foreign businesses fail in China within two years of entering the market, and the reason is usually the lack of a basic understanding of how China works and what Chinese consumers really want.
"A lot of times there is an understanding that yes, there is this emerging middle class in China, but then there can be an assumption that it must mean it's like the American or French middle class or something like that, whereas it is very different," says James Roy, associate principal at China Market Research Group.
Blake Stone-Banks, director of marketing consulting at trommsdorff + drüner, says a company cannot simply bring over the same models and processes it employs abroad and expect them to translate perfectly to China.
“If a company comes in with an open mind, willingness to work with local partners and long-term investment in cultivating the right local team, that company can succeed in this market," he says.
A classic example of an industry being snubbed by Chinese consumers for cultural reasons is what happened with white wine.
In 2013, Chinese consumers emptied 1.87 billion bottles of red wine, a 136 per cent increase in five years. By all accounts, the red wine market in China is booming. The colour red is seen as auspicious and associated with luck, wealth and power. Red wine is also regarded as a healthier alcoholic beverage that is good for the heart and the skin, which conforms well to the popular traditional Chinese medicine practice of attributing certain health attributes with certain foods and drinks.
In this way, red wine has made a place for itself in modern China; it's been branded as a drink that businessmen share when sealing a deal, and it's also become a standard gift to bring to celebrations and a classy beverage to distribute at banquets.
Naturally, white wine producers felt that the same could happen for their product. But it didn't. White wine, although available, is often shunned by Chinese consumers, and the doors of the market were virtually slammed shut before many purveyors could even get a foot in.
The reasons for this aversion to white wine are embedded in Chinese culture and traditional concepts of health. A huge portion of the Chinese consumer base has adverse reactions to drinking cold liquids, which they feel is pernicious for the stomach, and white wine is meant to be served chilled. White wine isn't seen as having the same health properties as red, while in Chinese folk tradition white is the colour of death. This has meant that white wine has been a very hard sell in China, where 85 per cent of all grape wine purchased is of the red variety.
Red wine's wide appeal in the Chinese market was a direct effect of marketing campaigns. Ioana Benga, export manager of Jidvei Winery, says it was promoted as a healthy product with antioxidants and lower alcohol than Chinese spirits, while famous French wines such as Chateau Lafitte and Mouton-Rothschild were seen as status symbols and red wine in general as an elegant drink suitable for both men and women. “You would think that all these apply also to the whites, but for the Chinese it was basically: we know the red does this, but what if the white doesn't?”
Another Western product that bombed in China was the clothes dryer. In the US, washing machines and dryers tend to go together: if you have one, you often have the other. In China, washing machines have become a standard part of a modern home but the dryer has never piqued much interest. For the average Chinese consumer, pumping money into purchasing and running a big metal box that does the same exact thing the sun and air do for free is the very definition of frivolous.
With the Chinese generally living in small apartments and the culturally embedded knowledge that ultraviolet rays from the sun also kill bacteria, the dryer isn't something many people in China have any use for.  
With the rampant rise of car ownership in China, it could be assumed that a knee-jerk demand for child car seats would be a given, but it wasn't. While the car seat is a standard piece of safety equipment for children in the West, in China car seats are generally unused and unwanted. Even though China has half the number of cars as the US but loses twice as many children per year in auto accidents, only 5 per cent of parents use car seats.
This mainly has to do with a lack of awareness that is deeply rooted in the culture. According to two surveys, 65-80 per cent of Chinese parents claim that they clutch their children in their arms when riding in a car rather than putting them in car seats. It is a common misconception that this way is actually safer, which is an attitude that percolates to government policymakers who have failed to make child car seats a requirement.
Whether or not a foreign product or company will be successful in China has been a conundrum since foreigners began trading there centuries ago. It's often an unpredictable riddle that companies decode only after they have invested millions of dollars and years of time in the country. Some never get it at all and summarise their miscalculations by admitting that they just didn't understand the market.
"What it means is that they brought a lot of their own assumptions from their home market over and assumed that Chinese people would adapt to them," Roy says.
"People are interested in other products and they are interested in Western brands, but they like what they like. So many different companies are competing for their attention that the ones who really understand their lives and their values are going to be able to give them an offering that's closer to their tastes.”
While many new products, services and ways of doing things will be accepted into Chinese society, the culture itself is a big factor in whether a new addition to the market will make it or not. While the Chinese are always hungry for new foreign products, they will often only swallow those that fit nicely into their cultural moulds. It may seem like a paradox, but innovation in China is often rooted in a framework of tradition, and understanding this tradition makes the difference between foreign enterprises reeling in huge profits or going bust in China.
“The innovations that are transforming China will only take root if they make sense in the context of China's culture and the tastes and needs of customers here," Stone-Banks says. “A deep appreciation of China's culture is imperative for any company that wishes to succeed in business."


China drops $145 million on a superconducting computer

Wanda looks to sell most of its overseas properties

Morgan Stanley to seize control of China business after foreign rule U-turn

China Literature raises second-largest investor capital in Hong Kong IPO history, aiming to be China's Marvel Studios

Invest China

QIANHAI INTERNATIONAL LIAISON SERVICES LIMITED

Why white wine, clothes dryers and car seats all flopped in China

The failure of white wine, car seats and clothes dryers to make an impression in China underlines the importance of understanding the market


China has long been seen as the final frontier of new customers for Western companies, a place where the commercial wells are deep – 1.35 billion people deep, to be precise.


Why white wine, clothes dryers and car seats all flopped in China

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The failure of white wine, car seats and clothes dryers to make an impression in China underlines the importance of understanding the market

The failure of white wine, car seats and clothes dryers to make an impression in China underlines the importance of understanding the market