It’s a huge, untapped market for many brands, but expanding into China requires a different business, cultural and creative mindset. We asked YASO founder Adam Knight what founders and marketers need to know
“China typically tends to be a bit of an afterthought,” says Adam Knight, founder of YASO – a social commerce consultancy that supports brands as they expand into the country. Knight has spent ten years helping companies understand the Chinese market, having launched more than 120 brands, from a range of sectors, into China. And he knows all about the pitfalls they face.
“It tends to be something that businesses come to quite far in their brand journey, and it’s a market that gets treated as a bit of a far-flung place or a line on your spreadsheet that doesn’t necessarily command its own teams or strategy,” he says. “The problem with that is that China is quite a unique beast.”
According to Knight, doing business in the country is complex and nuanced, on many levels. It’s a different set of regulations and compliance, a different set of channels, a different attitude to creative work and a completely different consumer space in terms of demographics and purchasing habits. As he points out: “It isn’t enough to copy and paste what you’re doing at a global level and assume that’s going to work.”
IT’S A RAPIDLY CHANGING MARKET
Certain categories such as beauty and skincare and mother and baby are growing quickly in the country, according to him, however domestic brands are also massively on the rise – with companies that previously traded largely on price now focusing more on quality, innovation and connection with the end consumer. And stepping into this highly competitive market requires a big slice of humble pie.
“Businesses that come in with a belief that they know it all and they can shape the market, and that consumers are absolutely going to want exactly what they’re selling without having to adapt that – that kind of arrogance is a recipe for disaster,” he explains.
“The space has changed drastically in the last few years, and if you’re a business that assumes you can teach the Chinese something – without localised R&D, and without localised brand and consumer strategies – you’re just going to spend a lot of money and not get anywhere.”
GEOGRAPHY IS KEY
Knight says many businesses consider China as a homogeneous space, but that brands need to be aware of this kind of cultural reductionism. “It’s a huge country, to state the obvious, and not just from a population perspective – 1.4 billion people – but also a geographic perspective,” he explains. “You have, in the north, the arid, sandy, very dry environment, and down south you have very humid, tropical and warm weather. And in between there’s everything else – the Himalayas down in the southwest, the Gobi desert in the northwest, and these massive urban metropolises. If you’re a beauty or skincare brand, that has very strong implications for the kinds of products you can sell and the kinds of solutions you’re trying to offer to consumers.”
And while many brands might be focused on young consumers with disposable income in China’s bustling cities like Shanghai and Beijing, there’s a much more complicated story here. According to Knight there’s a growing middle class located outside the biggest cities, and he thinks these are likely to be the next frontier for retail.
BUTTON DOWN YOUR IP
But before companies even start their move into China, Knight says there’s a good amount of the “boring stuff” to do. Getting trademarks is an obvious first consideration, but it’s particularly critical in this instance as China has a “first-to-file regime” – which means trademark squatters can shove in ahead if they identify a promising Western brand. “They might charge you £100k when you do come to market, to get your trademark back, so you want to get that stuff locked down six months in advance,” he says.
There’s other major infrastructural considerations including getting your stock transferred to bonded warehouses, registering with Chinese customs, and setting up for mobile payments. According to Knight, only 2 to 3% of the Chinese population have a Visa or Mastercard, which means platforms like Alipay, WeChat Pay and other localised channels for payments are needed. Businesses should also set themselves up on the relevant digital storefronts, and familiarise themselves with popular social commerce platforms such as Little Red Book, Doyin and WeChat.
And brands will likely need to invest significant sums to gain a foothold and resonate with Chinese consumers. Knight says the cost of social commerce platforms has come down, which means getting started on the biggest ones can come in at as little as £20k. The rest of the spend, according to him, is around brand-building – which is absolutely critical.
“When we speak to brands, we talk about a minimum investment of something like £250k for the first year,” he explains, adding that YASO often works like a brand incubator for its partners, funding this cost of entry in exchange for revenue share.
“You need to find those localised stories in the message, and that’s an art in and of itself.”
Adam Knight, founder of YASO
CLARIFY YOUR CREATIVE APPROACH
The branding question also requires a lot of cultural and commercial understanding; it’s not enough to replicate whatever a business is doing in another market. “Content and campaigns that work still tend to be relatively transactional, promotion-driven and influencer-driven,” he elaborates. “There are brands that are pushing the envelope in terms of greater investment in storytelling and equity building and all that, but it’s still relatively early days in that sense.”
It’s also worth knowing that Chinese consumers respond to different kinds of messaging around sustainability, social responsibility and environmental issues. “Where we might think of it in terms of climate change and macro topics, in China it’s much more in your face – messaging around climate change doesn't tend to go down as well as stuff about pollution, for example, and that’s because of lived experience,” he says.
That’s not to say companies can’t address bigger issues. For example, Japanese skincare brand SKII delivered a successful campaign challenging stereotypes around ‘leftover women’, and Aesop also ran a campaign focused on feminist literature and messaging across their China stores. “In these contexts, it’s about how you surface Chinese topics,” adds Knight. “Several brands have come unstuck where they apply global messaging to a Chinese context, and it comes off as quite patronising. It’s framed as trying to impose a Western lens and ideology. You need to find those localised stories in the message, and that’s an art in and of itself.”
GET PEOPLE ON THE GROUND
The other mistake brands make is having global teams located thousands of miles away, and without the relevant experience and understanding of branding and business in China. One way of making sure that creative work does resonate is to work with local teams, talent and agencies – and making sure priorities are aligned on both sides.
“Many brands over the years have been in partnerships where incentives weren’t aligned – for example one side working to a short term sales strategy where the Chinese distributor is going in with a discounted and promotional-driven strategy to shift stock, and that, in the long term, doesn’t serve brand very well. If there hasn’t been any investment in brand equity and building, they burn fast and decline after that. Finding the right partner is absolutely key.”
