Is There a Bamboo Ceiling for Chinese Brands?

on October 17 2011 | in Retail Trends | by | with No Comments

bamboo ceiling

Chinese brands in the global marketplace are struggling to shrug off old stigmas, namely being cheap.

Li Ning, the Chinese sporting goods company owned by the Olympic gymnast of the same name, appears to be one of the few Chinese brands poised to achieve brand success in China. It had beaten out Adidas for second place in China’s sportswear market last year.

Could Li Ning climb to the top or has the brand hit the bamboo ceiling?

Recently profits at Li Ning have staggered, and the company’s owner has fallen in the rankings of China’s richest people to 291 from 64 last year.

“Li Ning has done really well to challenge Adidas, but it has done it by copying the model,” says Andy Edwards, head of planning at BBH, the advertising agency, in Shanghai. “Now Li Ning needs to build greater value, stop copying and find its own uniqueness and drive this through everything the brand does, especially the product.”

Shaun Rein, the author of The End of Cheap China, believe many Chinese companies trying to build brands make many common mistakes. Rein sees these flaws in Li Ning’s brand positioning: “They went from saying we are the best Chinese brand, to saying we are going to take on Nike globally, to going back to cheap again, over a three-year period. They didn’t keep consistency in their image.”

Li Ning’s chief executive, Zhang Zhiyong, admits that the company’s brand positioning was not strategic enough and that Li Ning lost loyal customers when it raised prices.“I think we have to learn how to balance the price-driven and the quality-driven,” he said.

Brand loyalty among Chinese consumers is hard enough to come by, according to a recent HSBC report, especially in lower-tier cities.

“As Nike and Adidas are introducing lower-priced products, it comes into question whether the fans of domestic brands will continue to maintain their loyalty.”

To compete effectively against global premium brands, Chinese companies need greater achievements in marketing, design, innovation, and branding. They have to build the brand not only in China, but on the global stage.

Foreign competitors are not the only problem for Chinese brands, so are new Chinese regulations. HSBC forecasts that local brands will lose market share in the coming year as wage increases continue to climb; unless, the brand is valuable enough to overcome the higher price.

[ft]

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