Think global or local? Confused?

MNCs often find it hard to manage their China business. Local teams insist that it’s different and needs a unique approach. Regional and global teams are worried about departing from a brand framework and business strategy that’s proven successful everywhere else in the world. How can you frame this interaction positively and help the business move forward?

We work with a mix of MNC and local clients. The local clients are typically what we’d call “mature startups” – they’ve proven the viability of a business model, have a decent amount of funding and are in the process of scaling up.

With the MNC businesses, we’re usually dealing with something that’s been around for at least a few years, done very well at one point and then declined precipitously thereafter. We often find that the local marketing / business team in China has a very different view of the market and the challenges than their counterparts from global or regional management. Given that the business has not progressed in recent years, the China team is required to do a lot more in terms of aligning their global colleagues before getting approval for any of their strategies or support for new product development / special treatment for China.

It’s hard to generalize and say why the global-local communications divide is so much more extreme for China than for other markets but here are a couple of factors:

  1. The marketing ecosystem in China has fundamentally different dynamics than the rest of the world – not just different players but different roles, different routes to market and different power structures to anywhere else
  2. Consumers in China are fundamentally different to those elsewhere and those differences are starting to increase as time goes by. The specifics of that may change from category to category but as a broad theme, people here have a different relationship with (global) brands and the purchase decision-making process is different than elsewhere

Let’s try and illustrate those two points with a few things we’ve observed or analyzed over recent years.

Ecommerce and digital environment:

ECommerce in China is far more dominant than anywhere else in the world (40%+ of retail sales) and unlike anywhere else, dominated by 3rd party platforms (over 80%). This means branded sites and control over your own brand / data in this space are far lower in China. It also means you can’t really optimize and attribute the funnel since you don’t have access to funnel data

Ease of launching a new product without a brand

Every year there is a rash of new products that launch on TMall and rapidly achieve a sales volume of RMB 500 million. Many of these then disappear in subsequent years. IF you talked to the people running these businesses they would all tell you that they don’t need any investment in branding – consumers already love their brand.

That’s not entirely true. The way ecommerce works in China it is very easy for consumers to search and discover new, unknown brands. Often, the platform or even government regulations for selling in certain categories remove all or most of the risk in buying an unknown brand and there are large numbers of consumer reviews to look at when making a purchase decision. If a new brand is able to get some initial traction, it can very quickly grow a big business, but without a real brand and with only functional benefits, it is only a question of time before someone else comes along and manages to be slightly cheaper / faster / better for long enough to take their place. However, that endless churn also creates tremendous pressure on global brands to establish a long term advantage that can outlast the relentless pressure of copycats. One other thing to note is that a lot of these new brands are funded by VCs and there is an endless flow of capital for anyone with a convincing story on how they will build a 500 million RMB business online.

Growing “patriotism” amongst Chinese consumers

While this is obviously a very broad generalization, younger Chinese consumers are showing a strong preference for local brands over global ones. This is not driven only by patriotism but also by the sheer abundance of local choices and a sense that in many categories, there are local nuances to consumer needs that “Western” brands cannot understand. A lot of that ties back into the messages of confidence in their destiny as a world leading economy and self-reliance as a nation that, as the COVID story unfolded, has set China apart from the rest of the world.

Following trends from Japan / Korea rather than the West

Particularly in beauty / cosmetics/ fashion related categories, Chinese consumers are now more likely to be influenced by trends from Japan and Korea than from anywhere else. We’ve seen this in the color contact lens category, for instance, where Korean and Japanese brands created a trend for treating contact lenses as fashion accessories rather than serious vison-correction/eye-care products. That was further enabled by the perception that lenses in China are a government regulated category and therefore even an unknown brand is risk-free (not entirely true). Add to this the tendency for following KOLs/网红 and suddenly you have an inrush of new consumers into this category with none of the behaviors that traditional eye-care consumers exhibit.

What that means for MNCs

While those are generic trends, in the context of each product category it is important to understand and interpret them, then explain them to everyone involved in a global brand and its fortunes in China. Doing so can help avoid painful experiences, failed experiments and situations where the local team and global team are unable to agree on a strategy.

In recent times we’ve worked on two such clients. In the case of one, we resolved a 3 year strategy deadlock by diagnosing and explaining market dynamics in a way that explained all of the facts, data and paradoxes that everyone had observed. That client is now moving ahead with an aligned strategy for China that is different from everywhere else. In the case of another, we recommended and are now helping to implement a Direct-To-Consumer approach for a company that’s always sold B2B2C in the past. In both cases, we were able to help explain the situation in terms which made sense to both global and local marketing teams, drive alignment around a strategy and the resources / input required from each and eventually move them forward.

Searchlight has an experienced team of marketers and strategists with both China and international experience, which gives us a perspective on the market that often serves as a bridge between local and international teams within a global company. Reach out to us at if you think we can help you with interpreting your China business challenges.

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