Over the fence: How China brands succeed and fail to woo Hongkongers

Hong Kong’s ongoing political unrest and the China-US trade war have caused marketers in the region to become more cautious. Yet, while the growth of Asian markets has indeed slowed, many companies are still looking to expand outside of their home markets, and Chinese brands are no exception. As Simon Yuen reports, they remain keen to go global.

The young and restless

The relationship between brands from China and companies operating in Hong Kong has seesawed over decades. Once upon a time, local consumers would only purchase made-in-China products to demonstrate their patriotism. These days, Chinese brands offer goods and services that are stylish, trendy, and competitive.

Presently, however, a haze of anti-China sentiment hovers in the air as protests against potential suppression by the central government continue to take place. This fog of resentment is especially potent among members of the younger generation.

Consumer boycotts have ramped up, with brands deemed as showing a pro-government stance being shunned by swathes of the community; restaurants under the Maxim’s Group and Yoshinoya Hong Kong being prominent examples.

And in a more aggressive development, branches of certain businesses such as Bank of China, China Mobile Hong Kong, and Chung Hwa Book Co, have had their physical outlets damaged by more radical protesters.

What this comes down to is that a large proportion of Hongkongers in the age groups with the highest purchasing power could start to have a hostile outlook towards Chinese brands instilled within them for the long term. And that would have serious ramifications for the bottom lines of Chinese companies.

Though some Chinese brands may seem not welcomed by local consumers, some believe the impact on their overall business may not be too severe.

“The damage of the retail shops does not imply damage to the core business,” says Henry Fock, head of the department of marketing at Hong Kong Baptist University.

He says Chinese banks make most of their profits from business loans and mortgages, rather than the retail banking business, meaning that though the negative publicity isn’t great, these parts will likely be unaffected.

Their strengths and positions in the market are also keys to their success.

“(The reason why) top Chinese brands have become leading brands in their respective industries is because they possess sophisticated technology, such as DJI and Huawei, or innovative marketing and logistic techniques, including Alibaba and TikTok,” he adds.

As many a PR professional will sympathise with, it’s difficult for brands to change customer minds and behaviours if negative perceptions refuse to be tempered. But brands can continue to grow with or without adjusting their marketing strategies to cope with the negative sentiments among young Hong Kong consumers.

Some are fortunate to be the best-established players. SF Express, Taobao, AlipayHK, and DJI, have little comparable non-Chinese alternatives in the local market. And what’s more, they have the benefit of youth.

“Hong Kong people, particularly those under 30, tend to abandon the conventional media and are attracted by new social media which tends to challenge the authorities in society, including ruling parties of government, organisation management, and traditional cultures,” Fock says.

Henry Fock, head of the department of marketing at Hong Kong Baptist University

“That is probably why most of the Chinese brands of the new generation, such as DJI, Alipay, Taobao, and SF Express, are suffering less than the traditional brands in the recent unrest.”

Before the civil discordance powder keg was set off this summer, plenty of Chinese brands were gaining great popularity in the local market. For example, Shenzhen-based Chinese tea shop chain Heytea had been well received by young consumers across China and Hong Kong.

The brand has mainly relied on word-of-mouth recommendations on social media and mentions from influencers. Following a sudden rush of visitors travelling to the Mainland just to enjoy a cup of tea, the chain decided to come to the Hong Kong market in December 2018.

One year on and Heytea now runs eight stores in the city.

Hot pot restaurant chains Little Sheep, and Haidilao, are two other clear examples of brands who have hopped across the border to score success in Hong Kong.

“Hongkongers love going out and eating. I think it is easy to accept a foreign (F&B) brand because cuisine has been something that travels very well,” says Jay Milliken, senior partner of Prophet.

“When we talk about software and hardware, building a restaurant is a low-cost way to enter a market, and the software, such as concepts of food and menus, can be localised.”

The realisation of localisation

On the retail front, despite some recent controversies, Huawei and Xiaomi have been popular not only in Hong Kong, but worldwide. And low-cost retailer Miniso, a provider of household and consumer goods, is an example from another category that has swept Hong Kong. What they have in common is that consumers are drawn to these brands by the balance the products offer between affordability and high quality.

However, not every brand can succeed on that balance alone. For many others, gaining a cultural foothold is going to be required. Milliken believes that brands which failed to establish their business in a foreign market were mainly unsuccessful due to the lack of localisation strategies.

He says: “Brands would have to consider this trade-off – is (almost) eight million people here worth it to localise the strategies quite significantly, or just to translate?”

He elaborates on Apple as an example. The company spends little effort on localisation in markets outside of the US, doing little more than translating the tag line on its ads.

“Adopting a universal idea is a typical failure of entering the Chinese market. Apple’s businesses in China rapidly declined even before the challenge of the China-US trade war.”

Milliken describes Apple’s ecosystem as a “beautiful prison” – a chic, yet convenient place in which users are willing to stay. However, what works in the US is not necessarily applicable to China, a place with its own unique ecosystem.

“Apple has learned that they can’t just take the same ad and translate it, or just drop the same store idea into anywhere. Everything can’t be the same; there are differences in markets, different competitors, different ecosystems, and different cultures. They require you to be more thoughtful on how to market it.”

Striking a balance between localisation and brand consistency is crucial. An in-depth understanding of customers is the key to deciding the focus of brand building and how to translate a global purpose into localised efforts.

“There needs to be modifications. It doesn’t mean that you need a 180-degree change in strategy, but there are new ways like how you talk about yourself, who you target, how you deliver, that have to happen in this market. If you are not willing to make those adjustments, it is more likely that you are going to fail,” Milliken explains.

Undoubtedly, relevance with consumers is fundamental to building a strong brand. By constantly engaging, surprising, and connecting with customers, consumers are more willing to support and stay loyal to a brand. Localising a business is the key to unlocking relevance.

“The way brands communicate with consumers in Hong Kong has a unique nature to it,” Milliken says.

“In Hong Kong, the use of Cantonese is very friendly and approachable; you often see brands use wordplay that makes it feel very familiar with Hong Kong people. Giveaways are also a common method in Hong Kong as a promotional tactic.

“So you need to understand these little new answers of how Hong Kong is different from other markets. Being different is necessarily good, but it is more important to be relevant. You have to localise your business. There are really few companies that have a single business model or a single brand that works globally.”

Culture and environment can radically change people’s needs, behaviours, and attitudes. The cultural differences and environmental differences where consumers live translate to which brands they transact with.

“It depends on who you go after, and how similar are their needs. These are very important elements of how businesses succeed in whatever markets they want. The more universal the needs are, the more likely that the operating model can be the same (in different markets).”

The “friend” in need

To get an idea of how to successfully get a brand over the border, let’s talk about Alipay and TikTok and how they built custom brands to do so.

Starting with Alipay, as Alibaba’s third-party mobile and online payment platform, it is no doubt an indispensable mobile app to people’s daily lives in China, and has been for some time. However, when it entered the Hong Kong market, it did so as an independent company with a new brand – “AlipayHK” – under a joint venture of CK Hutchison Holdings, and Ant Financial Services Group.

With its localised in-app features and appealing promotional offers, in a short time, AlipayHK has fast become one of the most popular mobile payment apps in Hong Kong. It is ranked among the top three most positively talked about brands among Millennials in the city, according to YouGov BrandIndex, and took the top title of Most Relevant Brand in Prophet’s Brand Relevance Index 2019.

But AlipayHK hasn’t stopped its localisation efforts there. The brand sees consumers as still mixing up “Alipay” and “AlipayHK”.

AlipayHK has taken it upon itself to educate the public about the difference between these two brands through several marketing initiatives. Earlier this year, it launched the AlipayHK NEXT unmanned Store campaign to showcase its innovation and technology, alongside joint promotions with local malls and brands to raise brand relevance.

Now, let’s turn to look at the similar case of the app Douyin and its more recognisable brand for overseas markets, TikTok.

These short video platforms are gaining momentum globally as they fulfil the consumer need for instant gratification. Both apps are backed by internet technology company ByteDance, but their brand positioning and in-app features are different.

Douyin targets users in China and is additionally used as an eCommerce channel, while TikTok targets overseas markets with a slimline focused eye on pure entertainment with far fewer bonus functions.

In light of this, Douyin can thrive happily in the environment it was birthed in, while TikTok has the potential to expand its popularity abroad and become increasingly distinct, according to Hong Kong-based digital consulting NDN Group.

“TikTok is gaining momentum in the West. The number of downloads has surpassed Facebook and Instagram. It is common to see new social media apps debut in America or Europe, with popularity catching on in other parts of the world later. Douyin and TikTok are changing this standard,” says Andy Ann, chairman of NDN Group.

Hong Kong marketers are seizing this opportunity to create more marketing content for TikTok in a bid to tap into this platform to engage its active users. Because of this, NDN Group has partnered with GELOS to introduce Douyin TikTok marketing to Hong Kong.

“Many brands that have used Douyin and TikTok have experienced extraordinary growth. The fact that Douyin and TikTok can remove the middleman is very powerful. We believe Douyin and TikTok will perform better than western alternatives because the internet market in China is much more advanced and profitable,” says Louise Au, group chief operating officer of NDN Group.

The content-oriented app has captured users’ attention with its captivating video content, but to broaden the Hong Kong user base, creating authentic local content that connects emotionally with young users will be essential.

“For TikTok to raise awareness in Hong Kong, it should start with local music. Music tracks from Hong Kong shall be incorporated into the playlist of the TikTok music banks. Therefore, users can use it with ease to produce user-generated content with the soundtracks they are familiar with,” says Jack Lee, Douyin/ TikTok expert at GELOS.

The challenge moving forward

“Hong Kong is benefited from its location and unique relationship with China. Pre-handover or post-handover, Hong Kong is seen as a jumping-off point for businesses to enter China. There are lots of benefits, but also negativities around this special relationship. It is always a tricky cultural, social, and political environment for Chinese brands in Hong Kong,” Milliken says.

China brands not only face intense local competition in Hong Kong, but also the negative ingrained perceptions of low-quality made-in-China products. Chinese brands need to find ways to overcome these challenges regardless of whether they are coming to Hong Kong or going to other markets.

To overcome the challenge presented by consumer doubts as to the quality of Chinese wares, smartphone maker Huawei armoured itself with the reputation of another brand.

By forming a partnership with Leica – a camera maker that is legendary for its exceptional production standards – Huawei was able to highly publicise the inclusion of Leica camera components in its phones. This drastically elevated consumer perceptions by cancelling out the low-quality stereotype.

The association doesn’t need to be quite as close as producing physical products together to alleviate the bad vibes. But when a Chinese brand is shown to be working in partnership or alongside a recognised external company in any capacity, it can also increase confidence. Consumers will trust the judgment of the known brand, lending the China brand some of its shine.

However, some feel that worrying about the quality perception has become a superstition rather than a reality. Something to be dropped moving forward. “I personally don’t believe in the so-called ‘ancestral sin’ of Chinese brands. When Chinese products and services provide the best solutions to people’s daily lives, no matter in Hong Kong, overseas or anywhere, people will love those Chinese brands,” Fock says.

This article was produced for the November issue of Marketing Magazine Hong Kong. For more features and other magazine-exclusive content from this and upcoming issues, you can subscribe to receive your free monthly print copy here or you can read the digital version in its entirety here.

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