China's top local brands

Campaign Asia-Pacific's Asia's Top 1000 Brands research for 2018 research points to Huawei, Haier and Alibaba as the most popular local brands in China. We asked five in-markets experts for their opinions on why these brands resonate, and what challenges they may face.

What do you think is behind these brands’ appeal to local natives? What are they doing that other local brands are not doing?

Kevin Gentle, strategy and innovation director at Air Paris:

In my view, Alibaba’s brand strength relies on four pillars.

The first is empowerment: Alibaba is broadly perceived as a brand that empowers consumers. It is seen as an ally of regular 老百姓 commoners who seek to reconcile the conflict between desires for lifestyle improvement and economic pressures. Alibaba is widely seen as the kind of brand that breaks up traditional industries, disrupts profiteers, brings down monopolies and gives economic power back to the people. During a recent workshop with a large fast-fashion brand, I led a discussion about which industry Alibaba should disrupt next and was surprised by the eagerness with which participants were waiting for Alibaba to enter the real estate industry. Real estate for them was the perfect example of an inefficient industry where normal consumers were being preyed upon. They trusted Alibaba to come in to give power back to regular people through transparency and disintermediation. Alibaba is probably the brand perceived as most progressive and allied to the people.

The second factor is infrastructure. When discussing Alibaba with consumers and clients, I often hear people talk about the overall role of Alibaba in China’s economy. Alibaba is talked about almost as a parallel government building infrastructure, running proto-public policies and upgrading the entire country’s economic system for the benefit of the society as a whole. Beyond the 'selfish' benefits of price, variety and convenience, many Chinese consumers are thankful to Alibaba for undertaking the sort of large-scale infrastructure projects that bring the country forward. A good example is the work done in rural communities with Taobao countryside service centres and logistics chains.

Alibaba's 'dream' is the third factor. An article recently circulated on WeChat called “Why Tencent has no dream” in which authors lambasted Tencent for being nothing more than an investment company with no overarching vision. Alibaba, on the other hand, is very much seen as a company with a dream and vision that transcends quarterly financial reports. People see Alibaba as the kind of company that can solve big issues for China in a similar way that Elon Musk does in America. And we do indeed see Alibaba talking a lot about vision, dreams and grand plans in its communication. 

Finally, Alibaba's founder figure is key to its success in China. Jack Ma is the only Chinese entrepreneur with a real pop culture impact. The aura of goodwill that surrounds the Alibaba brand is impossible to separate from his own image. He has an outsized role as the first, and so far almost the only, symbol of a reconciliation between business success and social/cultural awareness. He is aristocracy in the noble sense of the term: a person who builds schools, hospitals, concert halls and has a high degree of social consciousness.

Alibaba founder Jack Ma sings during the Music Festival of the Computing Conference 2017 in Hangzhou

One highly representative initiative would be the recent launch of a version of Taobao for senior citizens. This represents Alibaba’s commitment to empowering all customer groups, its dream of an internet for everybody and its vision that allows us to reconcile social impact (by making shopping easier and more transparent for senior citizens) and business sense (by capturing the tremendous spending power of the Chinese elderly).

Haier

The success of Haier, by contrast, stems from three different points. The first is proximity: Haier’s brand image and communication come off as extremely 接地气 (being grounded): it is seen as a people’s brand that is close to ordinary people’s concerns. Unlike Alibaba, Haier doesn’t necessarily have big dreams but it can be relied on as a faithful, trustworthy companion.

Haier also benefits a lot from the current wave of nostalgia and regression to childhood that we see in post '90s Chinese consumers. The Haier Brothers' characters are obviously a strong asset, now belonging to the general body of Chinese pop culture.

Finally, Haier has always excelled at driving frequent, incremental product innovation. It is excellent at developing small features that answer critical customer pain points often overlooked by other brands. In its e-commerce presence, for example, its content shows how its washing machines can remove the smell of hot pot and other steamy dishes from clothes. It is this connection to the specific, day-to-day concern of consumers that makes the brand trusted and relevant despite the lack of any radical technology breakthrough.

Huawei

Huawei’s success in my view relies on three further points. Firstly, design innovation: Huawei has invested significant resources in building an upscale design language that is seen across all touch points (stores, e-commerce, ads, products, UI of the OS) with a consistency that is very rare for Chinese brands of that scale.

Huawei has also been quite smart in its collaborations, be it in product development, with Leica and Porsche for example, or in branding, with relatively sparse use of celebrities compared to other brands and a focus on top-end names like Messi or 张艺兴 (Yixing Zhang). Its association with these figures has put it in a high bracket in terms of brand prestige.

A man demonstrates using a Huawei Mate 10 Pro smartphone to drive a Porsche Panamera car

Furthermore, Huawei has done a very good job managing its architecture. It manages to combine top-end products like the Mate line or the Porsche collab phones (retailing at 1万) with mass-market products like the Nova under the same roof without diluting the equity or positioning of either. It has created strong sub-brands for each product line with a distinct image and design language that allows it to credibly extend itself. Even at the top end, it manages to cover different ground with the P line (lifestyle focused, more geared towards females with an emphasis on photos and videos) and the Mate line (productivity focused, more geared towards male tech enthusiasts with an emphasis on technology and business applications). 

Nikki Lin, managing director of Greater China, Interbrand: 

Alibaba is a brand that has shown increasing relevance across Chinese consumers’ digital lives. The Alipay system, combined with their newly developed Cainiao logistics system, allows them to better serve their core e-commerce business. They are also expanding their relevance outside of China with the One Belt One Road initiative by developing logistics centres across western China towards the European market.

Doris Ho, managing director of Greater China, Landor:

These brands all display distinctive Chinese characteristics in how they view and interact with the world around them. They don’t always start with a breakthrough idea but rather with a desire to address a pain point of the Chinese customer. In bringing that solution to fruition, they are more open and collaborative with others: their success comes from their daringness to pair and bundle ideas, partners and concepts that may not naturally come together in the more conventional world.

Huawei, Haier and Alibaba are all brands that have gone beyond the China market to compete with bigger international brand names. While their initial market entry may have been from a cost advantage, they have recently made credible leaps in product quality and styling that puts them on a par with global players. Alibaba, in particular, in taking advantage of the freedom that a market like China offers, has really revolutionised how technology can change traditional fields such as logistics, financial services and shopping.

Do you see these local brands’ future as under threat from encroaching global or non-local competitors?

Gentle: 

From both a brand and an operations perspective, Alibaba and Haier seem unassailable by foreign brands. Their success relies on factors that are virtually impossible to replicate, such as their understanding of local customer needs, their distribution network etc. 

Huawei, on the other hand, is not structured in a way that lets it do anything differently from a brand like Samsung. While I do not see any credible foreign competitor on the horizon, one can’t discount the possibility. A big question would be to what extent Huawei’s success relies on a 'nationalist dividend' and people’s pride in choosing a local brand over foreign equivalents.

Ho: 

Isabella Chan, strategy director, Interbrand China: 

I predict that local brands will become stronger, given their in-depth knowledge about the Chinese market and culture, the close proximity that allows them to quickly adapt to changes and, more importantly, their continuous efforts in innovation. These give Chinese brands an advantage in not just gaining an empathy towards Chinese consumers’ needs and desires, but also predicting or even creating new needs and wants, and ultimately changing lifestyles completely (Tencent’s WeChat, for example, and Alibaba’s Taobao and Alipay)

Since the reform and opening up, China’s manufacturing industry has continued to develop rapidly. However, even if China's industry is already on the same scale as advanced countries, there are still significant gaps in brand innovation, efficiency and quality. For many years, the impression that 'Made in China equals low-end and cheap' has lingered in the minds of many foreign and domestic consumers. 

 

In light of this, the Chinese government has spared no effort to change the image of 'Made in China' and promote industrial upgrading. The 'Made in China 2025' action plan and the 'Guideline on Deepening the Integration between Manufacturing and the Internet' in 2016 demonstrate the country's determination to reform the manufacturing industry at a strategic level.

 

Today, 'intelligence' instead of 'creation' is widely valued, and this is reflected in the fact that companies are not only willing to create products, but systems and architecture. The China High-Speed Rail is the best example of China's intellectual creation: the railway uses its own intellectual property rights technology, making it a complete product system. 

 

A CRH (China Railway High-speed) runs on the Guangzhou-Shenzhen-Hong Kong Express Rail Link

 

Brand building is still a key issue that cannot be bypassed in the era of 'Intelligence in China'. It is the most effective way to maintain a competitive edge in the ever-changing consumer market. In the 'Made in China' period, the country’s disposable income was limited. Consumers could only blindly pursue foreign brands. In the era of 'intellectualism', a middle class with considerable spending power has rapidly emerged. The pursuit of commodities is not only greater and more mature but also more fragmented. Moreover, the cake becomes bigger, but each company can cut a finer slice. In this era of competitiveness, brands that don't feel authentic and relevant, or whose products don't appeal emotionally to consumers, will suffer a fatal blow. 

 

In many categories of consumer products, Chinese brands are doing enough to compete against foreign brands in the local market. Examples include the 'big three' in home appliances (Midea, Gree, Haier), and Huawei and Xiaomi in the mobile phone category. Technology applications that accompany China’s intellectual boom, such as big data and artificial intelligence firms, also give Chinese brands insight into foreign companies. The development and maturity of the Chinese market, as well as the government's piloting at the strategic level, have created a favourable climate for the company's current and future brand building.

 

In the end, I think the Chinese companies that have stood for years will continue to be a strong body in the future. Having said that, there will always be competition. So these homegrown brands need to keep innovating and improving their customer experience in order to stay relevant.