Chinese consumers' growing preference for local brands

The Covid-19 experience is spurring some changes in behavior among Chinese consumers. Among these is a growing preference for domestic brands over foreign ones. A recent survey of 5,000 consumers in 15 Chinese cities showed that 85 per cent of respondents would buy a local brand over a foreign brand.  This has risen from 60 per cent in 2016 and 15 per cent in 2011.

 
 

 

As Chinese people become better educated and more affluent, their confidence in their own country’s products has grown compared to one or two decades ago, when foreign brands were synonymous with quality and status while domestic products were perceived less favorably. Chinese companies have also been quicker to adapt to changing tastes and requirements, like using online sales channels such as live broadcasting.

Before this year, the shift towards domestic brands was already well underway and the global pandemic has only accelerated this trend. In previous years, reasons included ambiguity of brand origins (e.g. consumers mistook foreign brands like Danone and Yakult as local), value for money, improving product quality, and better after-sales service. These factors have only become more important recently, especially the focus on quality and after-sales service. Against the backdrop of trade wars and travel restrictions the balance probably tips further towards local brands.

By comparison, foreign brands in China are often hindered by more bureaucratic chains of decision-making and preference for traditional forms of marketing, not to mention steeper cost structures. As a result, those multinationals that fail to adapt to rapid changes in Chinese consumers’ tastes stand to lose more market share while local companies will likely reap further benefits.