From data to culture: How international brands are trying to crack the code on the fickle Chinese consumer

BEIJING — China's economic slowdown isn't discouraging U.S. and European brands from revamping their strategies to scope Chinese shoppers.

Instead, the allure of the world's second-largest user marketplace is forcing companies to accommodate successful the look of increasing contention from section brands.

In the lawsuit of Kraft Heinz, getting much radical successful China to bargain ketchup this twelvemonth besides meant hiring a section bureau to assistance make catchy campaigns — decorating subway presumption columns to mimic ketchup bottles and promoting the condiment arsenic a caller twist connected a fashionable dish: stir-fried eggs and tomatoes.

It's a hard marketplace to tackle, adjacent for Shanghai-based selling steadfast Good Idea Growth Network (GGN). The bureau has witnessed astatine slightest 5 antithetic waves of user trends successful its 14-year history, laminitis Stephy Liu, said successful Mandarin, translated by CNBC. "The gameplay keeps connected changing."

But GGN has succeeded adjacent aft rejecting an acquisition connection from British advertizing elephantine WPP, Liu said, noting that astir fractional of her clients are overseas brands.

While Kraft Heinz isn't done with its China ketchup run yet, the institution reported second-quarter nett income successful emerging markets climbed by 4.2% from a twelvemonth ago, helping offset declines successful North America.

WPP explored a imaginable acquisition of GGN but did not extremity up going acold successful the process, according to a idiosyncratic acquainted with the discussions.

Kraft Heinz did not instantly respond to requests for comment.

From Starbucks' struggles to Lululemon's successes successful China, it's go wide that the close premix of localization is essential.

"Among planetary brands successful China, the winners are often dedicating much than 40% of gross to marketing, particularly contented and platform-first marketing, portion besides iterating products locally based connected marketplace data," said Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, which helps overseas brands merchantability successful China.

This year, Cooke said that Under Armour has created products nether 100 yuan ($14) successful bid to pull a wide of buyers online, portion utilizing livestreams with dedicated users to past physique fittingness communities and merchantability much premium products offline.

ByteDance-owned Douyin has go an e-commerce unit successful the past fewer years since celebrities and companies started utilizing the app for livestreaming sales during the pandemic. And by the numbers, there's small question that jumping into the Xiaohongshu and Douyin satellite is worthwhile for businesses.

Adapting to that caller societal commerce ecosystem has go the biggest situation for brands successful the past 2 years, GGN's Liu said. "Foreign brands volition think, 'Isn't this conscionable TikTok?'"

She warned that occurrence requires a analyzable strategy that tin impact changing everything from however a squad is structured to the kinds of products sold. But the payoff is significant.

"In fractional a year, it tin assistance you merchantability much than you sold connected [Alibaba's] Tmall successful 2 years," Liu said.

In summation to societal media, a captious origin successful galore companies' strategies is entree to hordes of information connected what consumers successful China are buying.

Chinese e-commerce platforms, including Alibaba's Tmall, stock acold much information connected what's fashionable than Amazon.com does, WPIC's Cooke said. In China, "people mostly cognize what their competitors are selling and what they're selling for."

With that granular data, Chinese constitution marque Perfect Diary was capable to win by identifying a marketplace symptom constituent and creating a lipstick targeted astatine that little terms segment, Cooke said. He noted that's pressured overseas brands to make China-specific products arsenic well, a large displacement implicit the past 5 years.

E-commerce platforms successful China besides often amusement unsmooth figures connected however galore orders were placed per product, portion third-party companies specified arsenic Syntun connection important amounts of merchandise rankings and different online income information for free.

In the lawsuit of Apple's iPhone 17 motorboat connected Sept. 19, it was Chinese e-commerce institution JD.com that released income information for mainland China. The electronics-focused level announced that the archetypal infinitesimal of iPhone 17 bid preorders surpassed the first-day preorder measurement of past year's iPhone 16 series.

Apple's communicative besides underscores however it's imaginable to reignite section interest contempt losing marketplace stock to home competition. Some customers successful Beijing told CNBC that they liked the iPhone's caller cosmic orangish color, and that much locals intended to bargain their archetypal iPhone this twelvemonth since they'd heard astir caller charismatic features specified arsenic larger interior storage.

China's factories were speedy to leap connected the trend, releasing iPhone cases with a akin orangish hue adjacent earlier the 17 exemplary was out.

"Winning brands are those that person established section R&D centers and on-the-ground merchandise teams," said Ashley Dudarenok, laminitis of ChoZan, a China selling consultancy. "This allows them to spot trends early, make products tailored to section needs, and motorboat them successful months, not years. This is simply a important departure from the past, wherever planetary products were often simply rolled retired successful the Chinese market."

Even with the close information and societal media platforms, taste integration is becoming progressively important, particularly arsenic Chinese brands find success successful tapping the country's ain past of artisanal craftsmanship.

"Brands are moving beyond superficial nods to Chinese culture," Dudarenok said. She pointed retired that Loewe partnered with jade carving masters, portion Burberry teamed up with bamboo-weaving artists.

And contempt declining income successful China's luxury market, LVMH this summertime opened an eye-catching ship-shaped store successful Shanghai — instantly generating overmuch section buzz.

In opposition to LVMH's luggage-shaped store successful Manhattan, the Shanghai determination taps into the Chinese city's past arsenic a larboard of introduction for planetary travelers to Asia astir a period ago.

The caller store besides captures the European brand's roots successful hand-crafted question trunks — which contrasts with Chinese brands' inability to connection the aforesaid affectional appeal, Joe Ngai, president of greater China astatine McKinsey, pointed retired successful a LinkedIn post.

"As Chinese customers turn successful their assurance and tendency for section elements," helium said, "creating much crossovers betwixt West and East is 1 of the unsocial opportunities for multinationals successful China."

— CNBC's Eunice Yoon contributed to this report.