October 6, 2022

Why small brands have an edge in China

The drive towards being unique is on contrary to the ‘individualism’ in western cultures. Brands that can be ‘sherpas’ for the consumer will be powerful
October 6, 2022

Why small brands have an edge in China

The drive towards being unique is on contrary to the ‘individualism’ in western cultures. Brands that can be ‘sherpas’ for the consumer will be powerful

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Chinese consumer demand changes rapidly. Up to 70% of the new products can survive no more than 18 months. In some urban areas, the annual rate of store turnover has reached 48%. Consequently, this drives faster product launching speed, which increases risk of creating strategic products with insufficient market potential and lower return on investment. 

The good news to some foreign SMEs is that consumers are generally becoming more selective about their spending and allocating more of their income to lifestyle services and experiences; as well as increasingly trading up from mass products to premium products. 

But how do SMEs position a brand in such a complex landscape?

The multi-dimensional consumer 

Chinese consumers today are much more shaped by personal passions and digital technology than in the past. 

The post-90s consumer to 1) define himself through uniqueness, and 2) then getting societal acknowledgement. Today as many as half of Chinese born after 1990 may aspire to be a KOL (key opinion leader), who represent a growing influence in the Chinese society. Generally, if you are able to be a tool or a guide through this new world, you will be appreciated – there still has to be societal acknowledgement – particularly amongst the peers of their own social circles of shared common interests and topics. As many as 90% of Chinese consumers trade information about their favourite interests with others who share those interests.

Even the new generation of 30- and 40-year olds are redefining success, which still encounters professional success but is enriched with a balance between the different components of their lives – whether professional success, modern mother or father, traveller or a citizen or the world on the cutting edge.

Brands that can be ‘Sherpas’ for the two-dimensional consumer will be very powerful

The drive towards being unique is on contrary to the ‘individualism’ in western cultures that encourages you to define yourself independent of society. It is on contrary to the Japanese sense as well where you would want to fit in – Chinese have always wanted to be acknowledged as different and special.

In all cases, people crave societal acknowledgement. This idea of sub-tribal identity and having shared passion is (also) something that motivates a lot of today’s social dynamics. People want to get together with people with shared interests.

Brands that are lifting people through identify articulation are key: Brands that can be ‘Sherpas’ will be very powerful.

From ‘place first’ to ‘people first’ 

The exponential digital transformation gives consumers unprecedented control and freedom over their choices. Consumers can choose to buy the same product or satisfy their needs through multiple channels and chose the most convenient and appropriate way. This is the fundamental reason for the transformation of the new retail era from ‘place first’ to ‘people first,’ and represents a major opportunity as well as challenge to the entire retail industry.

Transformation of small businesses

The good news is that standardized products can no longer meet the personalized needs of consumers. Big brands’ market share is dropping. Diversification of categories and products upgrading are becoming new trends in the market. Creative new products are increasingly favoured by the market. Today, small retail channels account for nearly 60% of sales.

The challenge is that although the online B2B platform has effectively penetrated into the traditional channels with a current penetration just above 20%, the service quality lacks behind vis-à-vis offline channels. Consequently, a change the digital platform towards a means of communicating with and serving consumers is emerging, with the eastern region evolving at a higher pace than the western, most conservative, region. 

In parallel, more than 3 out of 4 online shoppers are likely to visit a physical store before making a purchase. A trend that is helping maintain interest in physical stores is ‘retailtainment’.  2/3 of Chinese consumers say that shopping is the best way to spend time with family. Unsurprisingly, shopping malls have benefited most from this trend the most at the expense of big-box retail outlets such as department stores and hypermarkets because of malls’ combination of shopping, dining, and entertainment experiences.


Brands that understand the multi-dimensional Chinese consumer and can manage to lift people through identity articulation have an advantage.

The buyer’s journey is getting more complex with multiple touch-points. Each touch-point should satisfy the consumer’s freedom to choose the most convenient and appropriate way.

SMEs must embrace the buyer journey and spin-off from physical retailtainment to online shopping and thus invest in communicating with and serving consumers online.

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