Ikea, Nike, BMW, Marriott: Chinese consumers find you less relevant now

Local brands constitute the majority of the third edition of the China Brand Relevance Index just released by Prophet.

Two years ago, 32 of the top 50 brands were MNC brands. Today, 30 are from the mainland, including Alipay, Wechat, Huawei, Taobao, and Meituan Dianping, which cracked the top 10 for the first time. 

Prophet measures ‘relevance’ via a survey where consumers rate brands across 16 different attributes. The 2018 edition, conducted by ISSI, included views from more than 13,000 Chinese consumers on 249 brands across 30 industries. Prophet does not include brands in the tobacco and firearms categories or brands engaged solely or primarily in B2B selling. 

For the first time, the rise of local brands is fueled by innovation, not basic price/value reassurance, according to Prophet. Several local competitors beat MNCs in being "pervasively innovative", meaning they "don’t rest on their laurels" in finding new and creative ways to engage with customers in China.

Huawei and Xiaomi represent this shift by outperforming Apple in the smartphone category. The Huawei P20 Pro is the first phone with a triple rear camera. Xiaomi’s Mi Mix, launched back in 2016, showed the world a nearly bezel-free design long before the iPhone X, Prophet notes. 

The weakest MNC brands fell hard from grace. For example, Ikea went from fourth last year to 37th this year, Nike from sixth to 44th, BMW from eighth to 46th, and Marriott from ninth to nowhere (though Marriott-owned W Hotels took 18th place).

"It’s not that these MNC brands are falling behind, but domestic brands are making progress too quickly," clarified Leon Zhang, Prophet’s co-author of the report.

The drop in Nike's ranking was simply because "Adidas is moving faster in establishing relevance and a sense of community across a broad swathe of sports in China," pointed out Tom Doctoroff, the chief cultural officer at Prophet, at a launch event in Shanghai where Nike reps were present. Adidas has been working closely with China’s education ministry, providing training for Chinese sports teachers who will then teach soccer skills in schools. So did Nike in 2016, but apparently, Adidas' efforts have been more well-received.

Chinese consumers are actively seeking products and services that provide substance, innovative experience and belongingness, Doctoroff added. However, innovation is something easy to claim yet difficult to deliver. Home-grown brands have demonstrated a “strong ability to create continuous, tangible innovation”, often outpacing that of their international peers, said Zhang. 

Top dog Alipay (in first position for the third year in a row) goes beyond a payment channel, offering functions for travel, insurance, tax refunds, shopping loans and WiFi/internet packages. Arguable competitor Visa has dropped from third in 2016 to 36th in 2017 and is not even on the 2018 list. Outside of China, Alipay's collaboration with location-based service providers such as Koubei and Yelp enables it to recommend the best places to eat / shop / play for spoiled Chinese outbound tourists.