Luxury's latest gambit: riding the guochao wave

Guochao (national hip) is the buzzword making a splash across the Chinese consumer landscape. A movement that celebrates trendy homegrown Chinese brands, domestic brands are increasingly embraced by the Chinese market, as climbing nationalism among China’s young consumers and a noticeable uptick in high quality products fuels Guochao’s fast-rising ascent. 

The success of being the world’s second largest economy has effectively ignited Chinese consumers' pride in their national identity and cultural heritage. Millennials, especially those born in the ‘90s, and Gen Z have grown up in an ever more prosperous China to become the main consumer force. They are thriving and are more open to innovative products, displaying a stronger desire to experiment and a fondness for niche purchases. According to a study by Nielsen, 68% of Chinese consumers preferred home-grown brands, especially those from first and second-tier cities. 67% chose domestic brands because of their passion for Chinese culture and symbols. 

While foreign brands have historically represented quality and social status (which is still prevalent to an extent), local brands are growing three times faster than other brands in China. With tangible sales results piling up, international luxury brands are looking to insert themselves into this space and capitalize on the enthusiasm for Guochao to attract the attention of China’s highly coveted consumers.

Here are some major takeaways for luxury brands to consider as they explore the possibilities guochao can present.

Local Chinese brands are keen to establish partnerships and collaborations with international brands and industry experts.

Consumers tend to prefer brands that can resonate and showcase their cultural and/or social identity, belief and pride, further echoing sentiments that Chinese consumers’ impressions towards local brands have shifted positively. Co-branding could be a win-win situation to increase the value a brand holds, as well as both partners’ equity and identities. As a starting point, foreign brands need to look into partnering with Chinese brands, designers, KOLs or even KOCs to leverage the power of incorporating local, traditional Chinese culture and symbols into their products. Local expertise will help these brands sidestep taboos and come up with new ways to stand out in the Chinese marketplace and capitalize on the guochao trend. One good example is Fenty Beauty’s collaboration with Hey Tea.

There is a receptive audience for contemporary interpretations of traditional Chinese culture.

China’s influential young consumers have been raised in an environment that actively promotes Chinese culture. TV programs such as “Chinese Poetry Competition”, “National Treasures” and “Everlasting Classics” feature famous stars and build a stronger sense of social belonging for young viewers while sharing traditional Chinese culture. Even more so, the State Council approved the establishment of the “China Brand Day” on May 10 every year in order to promote the “Made in China” brand and help Chinese companies build up their brand image locally and internationally. With this being the case, consumers are attuned to messages that play on cultural traditions.

Harnessing guochao can effectively revitalise seemingly old-fashioned brands.

After first starting in the fashion industry, guochao is making its presence felt in beauty and cosmetics, electronic products as well as entertainment. Guochao gives brands the ability to transform and revitalise their image while opening up their reach to whole new audience segments. Regardless of whether the brand is local or international, thanks to guochao, consumers are more open-minded to products that combine traditional Chinese culture and new trends. For example, the Palace Museum which has risen to the forefront of product collaborations with partners from different industries — from stationery featuring the culture of the Forbidden City to a Chinese lipstick series inspired by objects found inside the museum. 

Maximising your digital tools is a must in order to reap results.

Leveraging digital and data-driven campaigns to interact with consumers is the new normal for brand marketers — this is no different with guochao, which necessitates that brands undergo a digital transformation. In China, social media platforms like Douyin and Kuaishou have become the engines for product launches and retail. In March 2020, the total number of Taobao livestreams increased 190% and the number of orders made during livestreams also increased 160%. The hosts are not only limited to influencers but also expanding to celebrities and entrepreneurs as well.

Companies need to bridge the gap between the online and offline experience by understanding their customer data and information, then carrying out well-thought out social CRM and content strategy that provides a comprehensive digital experience.  For example, the Chinese beauty brand Perfect Diary developed a range of eyeshadow palettes inspired by famous geographical regions in China and incorporated social marketing strategies on Xiaohongshu, Douyin etc. Instead of setting up retail stores, it focused on innovative ways of communication to create a more interactive experience through social media channels to successfully penetrate the market. 

When it comes to luxury, huge market opportunity awaits. China emerged as one of the only markets to see an increase in luxury spending in 2020. With much stronger purchasing power and growing national pride, domestic brands in China are expected to grow in the long term. All of these developments show that the time is ripe for international brands to reach Chinese consumers. In trying times like this, it is more important than ever for brands to stay agile and continue to innovate by tapping into these trends to make their brands more relevant to the ever-evolving shoppers in China.

This article is contributed by Charlene Ree, Founder & CEO of EternityX Marketing Technology Limited.