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'Made in China' gains ground

News, 26 May 2016

SHANGHAI: Chinese brands were once synonymous with cheap, poor quality products, but improvements to quality and branding have changed consumer sentiment, and international brands are paying the price.

Wade Shepard, a business writer based in Xiamen, explored the reasons behind the rise of domestic Chinese brands in an article for Forbes, the business magazine.

He cited recent research from McKinsey, the management consultancy, which recently found that 62% of Chinese consumers now prefer domestic brands over foreign ones if the quality and price are the same.

Wade also interviewed Mark Tanner, the Managing Director of China Skinny, a Shanghai-based consumer research firm, who said Chinese attitudes have changed significantly in just five years.

"If we look back to 2011, 31% of Chinese consumers wanted to support Chinese companies by buying Chinese goods. Just a year later, if was 43%," Tanner said. "It is representative of how fast Chinese consumers are maturing."

Tanner went on to list four main factors to explain the rapid change in consumer sentiment witnessed in such a short space of time.

Clearly, the marked improvement in the quality of Chinese brands has been key to their domestic and international growth, but Tanner also noted that Chinese consumers are now more confident in the social status than domestic brands convey.

According to Tanner, Chinese consumers no longer "need a foreign brand to show they're cool" and this may go some way to explain why Apple sales have fallen 26% so far this year.

But interestingly, patriotism also plays its part and it seems Chinese opinion is being shaped by important opinion leaders, such as First Lady Peng Liyuan.

The wife of Chinese leader Xi Jinping is reported to be very public about wearing only Chinese fashion brands and her influence has had a noticeable effect.

Tanner noted that the World Luxury Association found in October 2012 that 86% of Chinese consumers would not buy domestic luxury products because of their reputation for poor quality, but the "Peng Liyuan effect" turned this around in just 18 months to the extent that the proportion still feeling that way dropped to 9%.

Celebrity endorsement and effective, locally targeted, marketing campaigns – most especially around the rise of domestic cinema – accounts for the fourth factor in Tanner's analysis.

Chinese films accounted for almost two-thirds (62%) of China's box office in 2015 and Tanner said this has shaped national pride and a preference for all things Chinese.

Data sourced from Forbes; additional content by Warc staff