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Internet-driven brands emerge, but established brands dominate

Expansion to developed markets makes brand building more critical

Entrepreneurial, internet-driven Chinese brands are finding acceptance overseas, and consumer electronics brands dominate the ranks of Chinese exporters. However, consumers worldwide are still less likely to choose a Chinese brand in most categories. As Chinese companies continue to expand beyond nearby Asian countries, export success will require extensive market insight and brand building.
 
These summary findings emerged from the BrandZ™ Top 30 Chinese Global Brand Builders 2017, a groundbreaking examination of consumer attitudes toward Chinese brands as they shift from product makers to global marketers. Produced by BrandZ™ and Kantar Millward Brown in collaboration with Google, the report identifies and ranks Chinese brands based on the strength of their brands overseas. It also reveals challenges and opportunities, and provides vital insights and recommendations for global brand building.
 
By leveraging WPP’s BrandZ™ analytics with Google’s Consumer Surveys capabilities, we calculated the Brand Power of Chinese brands outside of China. We ranked the brands based on their Brand Power, the BrandZ™ metric of brand equity, the consumer predisposition to choose a particular brand. And we studied product categories and country markets most critical to future growth.
 
Rather than focus exclusively on the industrial and infrastructure categories that produced China’s remarkable GDP growth over the past 35 years of economic reform, we selected nine product categories, including many associated with China’s ongoing rebalancing to a consumer-driven economy. The findings are relevant to both established categories, such as consumer electronics, and Internet-driven categories, such as e-commerce.
 
And because Chinese brands already have extensive experience exporting to nearby developing markets in Asia, we examined consumer attitudes about Chinese brand in seven developed markets, including three continental European countries, the UK, the US, Australia, and Japan. We compared how consumers view Chinese brands with how they view non-Chinese brands – both global brands and local country brands.
 
Across all categories and countries, the BrandZ™ Top 30 Chinese Global Brand Builders 2017 ranking breaks down like this:

By Number of Brands
The ranking divides equally in brands: 15 come from established categories, and 15 come from Internet-driven categories  

By Brand Power
The ranking is less balanced in Brand Power. Brands from established categories make up 57 percent of the ranking’s Brand Power  

By Product Category
Seven of the Top 10 brands come from established categories. In fact, one established category – consumer electronics – produces 40 percent of the ranking Brand Power.  

In addition, three of the Top 5 are consumer electronics brands. Lenovo, ranks Number 1, followed by Huawei. Xiaomi ranks Number 5. Although we classify the consumer electronics as an established category, these brands are emblematic of China’s new economy, as are the brands ranked third and fourth: Alibaba, the e-commerce giant, and mobile gaming brand Elex.
 
These results reflect the transition of China’s economy from a production-driven past to a consumer-driven future. Brands in the established categories dominate the top of the ranking. In general, these brands drove economic growth and built Brand Power over time. The Internet-driven brands are more present toward the bottom of the ranking. These newer brands indicate the potential for economic growth and rising Brand Power.
 
Core observations
We corroborated and enriched our analysis of research results with insights from WPP companies and Google brand experts and executives from several of the BrandZ™ Top 30 Chinese Global Brand Builders 2017. This exercise yielded seven core observations about how consumers outside of China perceive Chinese brands. We amplified these observations with brand implications.
 
Export success begins with the product. A quality product that meets customer needs in a relevant way, and at the right price, inspires word of mouth and is step one in building a strong brand. In fast-growing markets, especially those in Southeast Asia where Chinese products are present and consumers are familiar with Chinese brands, a strong product and word of mouth sometimes can propel expansion.
 
But brand becomes vital in slower-growth developed markets, where companies encounter greater competition and demographic diversity. Some developed markets are better understood as collections of submarkets with certain niches more accessible to Chinese brands. Brand can expedite market entry, and accelerate consideration, by raising awareness and trust and alerting consumers about product innovation and diversification. Here are several summary observations:
 
Awareness and Consideration
  • Chinese brands need to build awareness and consideration. In the countries and categories studied, consumers are much less aware of Chinese brands – or likely to purchase them – compared with local market or international brands.
 
  • Awareness and consideration varies by country and category. Consumers in Spain and Australia are relatively more receptive to Chinese brands, especially compared with consumers in the US, the UK, and Japan. In established categories, Chinese brands enjoy awareness, but also face a lot of competition. Internet-driven brands are growing quickly in awareness and consideration.
 
Differentiation
  • Brands in established categories need to differentiate. Consumers say that brands in established categories have understood and met their needs in relevant ways, but the brands have not sufficiently differentiated. In contrast, the newer Internet-driven brands have had less time to meet consumer needs, but consumers are likely to view these brands as distinctive because of their technology and innovation.
 
Changing market dynamics
Chinese brands are increasing their export efforts at a time when several market dynamics are aligned in their favor. First, Chinese brands have changed. For several reasons, including pressure from increasingly sophisticated Chinese consumers, and production experience gained as Original Equipment Manufacturers (OEMs), Chinese brands have improved in quality during the past decade. They now are more capable of meeting international expectations. Second, consumers have changed. Equipped with greater product choice and knowledge, consumers worldwide are more capable of assessing brand quality and willing to select less well-known brands, when justified.
 
Chinese brands demonstrate their quality with their digital sophistication and ability to create ecosystems that integrate e-commerce with mobile payment apps and a wide variety of other services. Chinese innovation and quality is also evident in other technology sectors. DJI, ranked 13 in the BrandZ™ Top 30 Chinese Global Brand Builders, is a global leader in drone development, for example. But these achievements are not sufficiently well known outside of China. Consumers in the seven markets studied were less aware of Chinese brands than non-Chinese brands, across all categories.
 
Similarly, brands like Huawei or Xiaomi produce smart devices that rival Apple and Samsung in function and design. Yet when we compared the Number 1 Chinese mobile phone brand with the Number 1 global or local mobile phone brand in each of five markets, consumers viewed the Chinese brand as less trustworthy, desirable, and creative. This disconnection between reality and perception particularly challenges Huawei, which intends to reach a space where no Chinese brand has gone before – premium.
 
It seems as if the quality of Chinese brands is improving faster than the image of Chinese brands. The gap exists at a time when western consumers have greater access to products from China, in part because of the e-commerce brands that market Chinese products abroad. Those ranked in the BrandZ™ China Export Top 30 include Alibaba, which reaches overseas consumers with its AliExpress site, as well as GearBox and Light in the Box.
 
Ranking reveals potential
Chinese brands have a good story to tell, but they need to tell it better and more often. Perception is changing, in part because of a generational influence. Younger consumers have experienced Chinese products differently than their parents or grandparents. For young people, China makes cool stuff. Our research discovered that in one category, mobile gaming, consumers prefer Chinese brands over the local or global brands. They like the graphic style of Chinese games and the strategic thinking required to play.
 
The mobile gaming category illustrates the enormous potential spread throughout the BrandZ™ Top 30 Chinese Global Brand Builders ranking. With one exception, Elex, the mobile gaming brands fall in the second half of the ranking, and four of them – Tap4Fun, IGG, Youzu, and Ourpalm, are clustered together in ranks 19 to 22. Compared with the Top 10, which represents 57 percent of Brand Power, the Bottom 10 produces only 16 percent.
 
Two consumer electronic brands, smart phone producers Oppo and Vivo, appear at ranks 26 and 27, respectively. Like the mobile gaming brands, they illustrate how China’s export economy is tilting to technology and innovation, and how, with greater access to venture capital, Internet-driven brands have rapidly entered overseas markets to compete with more established Chinese and global brands. Many younger brands are in growth categories and are expanding organically now, having survived a competitive shake out in China.
 
These entrepreneurial brands can be more nimble than some of the larger BrandZ™ China Export Top 30 brands, in more mature categories, which have built their international presence through acquisition. These include Lenovo, with its purchases of the IBM personal computer and server divisions, and Motorola Mobility; Haier, which expanded US market share with the recent purchased GE’s home appliance division; and TCL the home appliance brand that achieved initial prominence with acquisitions, including the telecommunications brand, Alcatel.
 
Regardless of their category or export strategy China’s export leaders are raising awareness of Chinese brands overseas and improving the perception of Brand China. As these companies build their brands abroad, they also enjoy a bonus return on investment at home. According to BrandZ™ research about the Chinese Dream, around two-thirds of Chinese believe that building strong brands worldwide is essential to achieving a better life. Exporting success confers status on a brand and potentially raises trust. Chinese consumers view acceptance by an international audience as an endorsement, a guarantee of quality.