Penetrating China. Two words that elicit both excitement and horror in the mind of many a CEO.
Home to almost 19% of the world’s entire population, it’s not hard to see why international businesses find Mainland China so appealing: even just 2% of the market share here would still return heady profits compared to other developing countries. Yet the experience of many entering China seems to echo the Greek myth of Atys, eternally condemned to be just out of reach of food and water. Business publications now act partly as online graveyards, strewn with the corpses of all those to whom the seemingly low hanging fruit of China, while agonisingly close, was always just beyond their grasp.
Ebay is perhaps history’s most famous example, the narrative of its defeat truly gong-worthy. One can only imagine the incredulity with which they must have perceived Taobao’s (then) cutesy, cuddly aesthetic, let alone the horror they felt when, despite entering with 85% of the market share and $100 million in of Wall Street Investment, Ebay was annihilated by a punky dreamer by the name of Jack Ma. More recently, all have heeded the cautionary tale of Marks & Spencer who, while loved by the Chinese when on holiday, were so staggeringly unpopular on home turf that all Chinese stores closed in 2016.
There are some, however, who seem to do the impossible, none more so than coffee titan Starbucks, which just unveiled plans to open 2,700 stores in China within the next five years (that’s one every 15 hours for those of you who like to think of statistics within the realm of your daily routine). The success of Starbucks seems to be perpetual, and is even more astounding when you realise the enormity of what the brand has managed to do: convert a nation of tea drinkers.
What is it that lies in the abyss between these two wildly different outcomes? When consulting with brands entering the China market, the most promising are those whose China teams demonstrate their own autonomy. But the majority of international companies refuse to devolve power to the team they install on the ground here anyway – and this can prove a fatal mistake.
This attitude seems to be built upon an ongoing perception by Western companies that Chinese professionalism can be somewhat lacking and that procedure, content and strategy has to be strictly prescribed by international headquarters in order to ensure productivity. But this is a misunderstanding, and above all, a strategy that simply does not work. China is a dynamic, fast-moving consumer landscape where agility is king and localisation is god. By refusing autonomy, international companies deny their China teams the flexibility they need to adapt to the market and reach their target audience segments.
Starbucks’ focus on branding and merchandise (iPad cover anyone?) in China is colossal, while its WeChat loyalty programme and its social gifting function is elegant in its simplicity, ensuring constant engagement with a larger audience. While obviously the same brand, a shiny Starbucks here with its different menu and lack of comfy chairs doesn’t feel like a Starbucks in the UK or the US, but what Starbucks seems to have realised is that that’s okay.
Instead of aggressively protecting its brand pedigree, Starbucks honed in on its target audience, allowing the brand a certain malleability in order to fit around them rather than prescribe brand values. And it’s this flexibility and commitment to localisation that has returned handsome rewards for the coffee chain. As spending power increases, China becomes ever-riper for the picking, but international companies that underestimate discerning consumers and cultural nuance will find that they quickly get left behind.
Written by: Eleanor Porter, Senior Account Manager, Sinclair