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Chinese brands losing
ground
BEIJING - Chinese
brands are losing the race to foreign rivals in
the domestic consumer market, according to a
report released recently by Sinomonitor
International, a Sino-Japanese independent market
monitoring company. The report ranked the top
three competitive brands in 27 consumer product
sectors for 2004, including information
technology, daily necessities, food and beverages,
financial services, and textiles and garments.
Products featured in the survey range from
microwave ovens to instant noodles, cosmetics to
sportswear and personal computers to bank cards.
Lenovo computers, Sony digital cameras,
Nokia mobile phones, Gree air-conditioners, Olay
shower gel, Rejoice shampoo, Huiyuan juice, Peony
bank cards, KFC fast-food restaurants and Nike
sports shoes are ranked the most competitive
brands in their categories. The report is based on
information gathered by the China Marketing and
Media Study, which has been following over 70,000
Chinese consumers, between the ages of 15 and 64,
in 30 major cities over the past eight years. The
study covers more than 1,000 brands in the Chinese
market and is the biggest market survey so far in
terms of scale, coverage and time span in the
domestic market.
The competitiveness index
of the surveyed brands is calculated on the basis
of share of consumers, the ratio of loyal
consumers among all purchasers, and market share
growth indices, according to Ma Hongzhong,
research manager for the study. "Comparing the
ranking lists for 2004 and 2003, we can see great
changes in China's consumer markets," said Liu
Rong, vice general manager of Sinomonitor.
"International big brands are hastening their
development in the domestic market and regaining
lost ground," she said.
In Sinomonitor's
first such ranking produced a year ago, Chinese
brands stole the limelight. Among the 27 product
sectors ranked, 16 local brands were found to be
the most competitive for 2003. However, in 2004,
several domestic brands, especially in the daily
necessity categories, such as Liushen shower gel
and Dabao skin care, lost out to foreign rivals.
Olay, with an expanded product line, ranked top in
both sectors. "I felt a chill when I saw the
survey results for last year," said Wang Weiqun,
editor-in-chief of Successful Marketing magazine,
co-producer of the report. "Domestic brands are
losing their advantages, and will face great
challenges in future," Wang said.
Liu from
Sinomonitor said the survey has uncovered two main
features of China's consumer market. First,
foreign brands enjoy much greater brand loyalty
than domestic brands. In the laptop computer
sector, domestic brand Lenovo ranked the most
competitive. But only 79.1% of its consumers are
loyal to the brand, compared with 91.4% loyalty to
Sony, 90% to Dell, and 89.4% to IBM. Lenovo
recently purchased IBM's computer division, which
should increase its competitiveness, however.
In the sports shoes sector, Anta ranked
top in terms of market share, while its brand
loyalty is just 59%. Its foreign rivals, Adidas
and Nike, enjoy as high as 72.7% and 71% brand
loyalty. "This is one of the reasons that more
foreign brands won over their local counterparts
in 2004," she said. The other feature is the
structural changes in the country's consumer
market. In today's China, consumers like to pay
more money for high-quality products, Liu said.
And the country's luxury goods market is growing
by the day.
Take the skin-care sector for
example. International brands Lancome and Revlon
enjoyed high growth rates of more than 90% last
year. Foreign companies, more experienced in
marketing, have better knowledge about China's
markets and consumer demands and have easier
access, she said. "Foreign brands' outstanding
performances in the Chinese market last year,
unveiled by the ranking, are similar to their
position in China Central Television's prime time
advertising auction last November," said Guo
Zhenxi, director of the advertisement department
of CCTV.
On November 18, CCTV auctioned
its prime time ad slots for a record 5.25 billion
yuan (US$634 million). International giant Procter
& Gamble, spending more than 385 million yuan,
was the biggest bidder. The year before, P&G
had invested less than 180 million yuan. Another
12 companies won some major ad slots, spending
753.3 million yuan. A major reason for the market
change is the attraction of China's rapid economic
growth and its huge market potential for foreign
companies.
The successful development of
local firms also stimulates the shifting of
foreign companies' focus to China. In the
post-World Trade Organization era in China,
foreign brands will have easier market access
while local brands will face more challenges and
competition as all kinds of protectionist measures
will be abolished. "The next two years will be a
turning point for both domestic and foreign
brands. Companies which have priorities will win
the market," Guo said.
Li Guangdou,
general manager of Beijing Huasheng Shidai
Advertisement Co, suggests the key point for
domestic companies' development is to build brand
loyalty. "The country's economic growth in the
next 20 years will depend on domestic brand
building," he said at the conference launching the
report. Chinese enterprises should focus their
core strategy on brand building in their
development as only brand competitiveness is a
long-term strength, he added.
According to
Li, though China has a large number of
enterprises, it lacks big brands. Statistics
indicate the country currently has 2 million
registered trademarks. That means one of every six
companies registered has only one brand. And among
the total number, 25% are owned by foreign-funded
companies. "Foreign companies have done better in
brand-building in China as well as in their
localization strategies," said Zhang Zhongliang,
director of the China Economic Monitoring Center,
affiliated to the National Bureau of Statistics.
According to Zhang, many Chinese firms are
now eager to expand in the overseas market, though
they did not perform very successfully in the
domestic market. "Chinese companies should rethink
their going-out strategy," he said. The success of
Chinese firms in the local market is mainly based
on China's huge market and relatively low labor
costs, according to Zhang. "Only when they have a
strong foothold in the domestic market, can they
succeed in [the] international market."
Guo Zhenxi of CCTV believes that through
the competition in the years ahead, some domestic
brands will grow into international ones. Based on
the survey result, an evaluation made by marketing
experts, and an Internet survey, the report also
ranked the top 10 brands which influenced the
Chinese market most in 2004. These were: Hainan
Airlines, China Merchants Bank, TCL, Nokia,
Lenovo, Amway, KFC, Procter & Gamble, Hisense,
and Beijing Hyundai.
(Asia
Pulse/XIC) |
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