Is China Overdosing on Brands?

Brandchannel readers have seen China mentioned numerous times of late. The reason: China's robust economy hasn't slowed. Even in the face of a global recession, retail sales grew more than 15% in 2009, according to official Chinese statistics. Consumers in what is now the world's second biggest economy are hungry for quality goods, and that makes the Asian giant a hotbed of brand activity.

Just in the last month, we've reported on Levi's new brand in China (dENiZEN), Merck's joint venture to market vaccines in China, Pabst beer's upmarket offering in China, GM's new Chinese car brand (Baojun), the launch of a new Hermes brand (Shang Xia), and Burberry's Chinese growth strategy.

With all of this activity, you have to wonder whether Chinese consumers are becoming, well, a little jaded. Indeed, the UK's Telegraph reports that, despite the frenetic retail activity, "the underlying hard data shows that margins are being increasingly squeezed by rising costs and intensified competition."

Of even greater concern, perhaps, is the fact that "shoppers are simply no longer wowed by any new launch."

In fact, Matthew Crabbe, a consultant specializing in Chinese consumer trends, laments to the Telegraph that U.K. retailers in particular have made strategic blunders. He cites as examples:

- a poorly executed first store by Marks & Spencer ("getting its prices, sizing, product and store decor wrong")
- Tesco's late entry into the Chinese market, when Carrefour and Wal-Mart had already established a foothold
- Topshop, the British women's fashion retailer who has yet to enter a market already dominated by H&M, Mango and Zara.

China may tantalize brand marketers with its hundreds of millions of potential buyers, but it is a place where a brand can fall flat on its face.

To be successful in China, a brand must not fail to recognize the unique qualities of the Chinese market — and it must find ways to differentiate itself from the competition in order to impress brand-weary, increasingly sophisticated consumers.