Shooting The Gap
A Marketer’s Take on Navigating China’s Economic Opportunity
Shooting The Gap
A Marketer's Take on Navigating China's Economic Opportunity
As we drive around Beijing during rush hour, Esmond Quek, the principal of Ed Bernays Brand Consultancy, points out the behavior of drivers exploiting every available inch of space to gain an advantage in the city’s notoriously gridlocked highways.
“See,” he says, motioning to a car that miraculously merges into a tiny gap in traffic. “There’s a great example of shooting the gap, finding the way in. It’s how the Chinese think about the marketplace, too.”
Quek is borrowing the term “shooting the gap” from American football. It describes a play where a defensive lineman uses the space between two offensive linemen to get into the backfield by any means possible.
Esmond Quek
Principal, Ed Bernays Brand Consultancy, Beijing
Esmond Quek
Principal, Ed Bernays Brand Consultancy, Beijing
“Chinese entrepreneurs have no qualms about shooting the gap,” says Quek. “If there is an opportunity, we'll do it. Somebody looked at Google and said, ‘That's an interesting idea. I'm going to do it, and I'm going to make it relevant to the Chinese. And when the government shuts down Google, I'm going to go up to the government and say, ‘“What is it you want? I'm willing to play by your rules.”’
“Therefore, the success. There is nothing wrong with it. It's just a different philosophy. One is standing by what they think is right, and one standing by what is necessary for the market.”
And what a market it is. According to the China Internet Network Information Center as of December 2014, the Internet user base in China is 649 million, with nearly half of the population online. In April 2015, Apple made news when it announced that iPhone sales in China surpassed those in the United States for the first time ever. The middle class in China is continuing to grow, and China’s consumers present a challenge and a puzzle for corporations.
The Impact of China’s History on Consumers’ Mindsets
Quek, who is ethnically Chinese but was raised in Singapore and spent his college years in the United States at the Kelley School of Business at Indiana University, started working in China 19 years ago.
“I came to China because I wanted to know my roots. I grew to understand the Chinese market, and I fell in love with it. In China at that time, the eighties and early nineties, so much was happening here. Coming from a little island called Singapore, where every day is predictable, it was a huge career challenge for me. Working for foreign brands in China, I learned a lot about the market, about marketing, the different techniques, and of course, the Chinese consumer.”
Quek explains, “It is very important for any marketer to understand what the Chinese consumers have gone through in their lives to be able to market to them effectively. China went into the Cultural Revolution in the mid-1950s and did not come out of it until the late seventies.
“So, for example, let's take somebody who was born in the sixties who is now probably about 55 and who has come up out of the Cultural Revolution when he was 19. This person would have lived in the villages, would have been sent into labor camps or organized commune work, and then suddenly 1979 comes around, and it's an open economy. The world is yours, go for it. You can imagine it. There is no manual, no guidance to wind down. No manual on how to behave.”
On the other end of the spectrum are China’s young consumers, the products of the country’s one-child policy.
“They grew up being doted on, having every little need met,” Quek says. “The one-child policy also means that those born after the eighties or nineties could possibly not have any other relatives their age—not just siblings—no other relatives. So in marketing, there's a very strong sense of individualism but also wanting to be part of a bigger group.”
One Brand Does Not Fit All Multinational companies that commit to understanding—and adjusting to—the Chinese consumer and working with the government are more likely to find success in China.
“By and large, foreign brands that made it to the global stage can be successful in China,” says Quek. “If it's needed by the world, there's no reason why it's not needed by China with few exceptions, like premium brand cheese, which is so foreign to the Chinese taste.”
“Brands also need to recognize the difference between the Chinese consumers and the European or American consumers. For example, take glasses. The Chinese nose, the Chinese bridge, is different — lower. So that means a revamp of the product with Chinese consumers in mind. For glasses, we have a different face shape. Glasses that would fit well on an American or European would not fit well on a Chinese person.
“For brands to be successful, they need to accommodate for the differences. Some foreign brands have ventured into the market and have had success, and some have failed,” says Quek. Even McDonald’s has to localize their menu to stay relevant.
One brand that has succeeded is the automotive company Volkswagen Group.
“The reason why they have such a strong hold on China is because they were the first to be here and they were the first to commit to the market,” he says. “And commitment—not just saying ‘I'm committed’—to actually doing something, making product adjustments especially for the market.
“Volkswagen Group was also one of the first companies to produce a joint-venture car in China with a Chinese partner. Based on a single insight in the 1980s that almost 90 percent of consumers are chauffeur driven, VW customized and extended the wheel base of the first production car called the Santana to make it six inches longer in the backseat.” Since then, the extended wheel base has been a standard-bearer.
The numbers are overwhelming and they are rising.
“One of the things that the world is in awe about China is the speed with which the country has risen out of poverty. China has a total of 1.3 billion consumers. Depending on the different measures, if one considers disposable income as a gauge, and accepts that 30 percent of the population is in the middle income class equivalent to their counterparts in America, we are talking about close to 400 million middle class consumers. This surpasses the total population of the U.S.” Quek says. “And if you look at wealth reports, no other country in the world is minting out more young millionaires and billionaires than China. These numbers will skew future marketing efforts and shift existing market paradigm. Where would you need to be if you are a global business?” asks Quek.
The Euphoria of China’s Economic Boom However, as the economy expands in China, the competition is becoming more intense, especially as more Chinese brands start to enter the market in China and abroad.
“The Chinese brands are coming out of this euphoria of China’s economic boom and they think that they can take on the world,” says Quek. “And they are going to do that. The businessman in me says that competition is good. It will eventually benefit the end users. It is everything the textbook tells you. The competition will create more innovation. It will create more efficiency. It will create more benefits for consumers.
“Last year was a tipping point for the Chinese economy. Last year, for the first time, total foreign direct investment in China was less than the total foreign investment by China. More Chinese money is going overseas than foreign money is coming into China. That means more Chinese companies are going overseas. A lot is spent in developing economies, such as Africa. But it's a sizable amount in Europe and America as well.
“Last year was a tipping point for the Chinese economy. Last year, for the first time, total foreign direct investment in China was less than the total foreign investment by China. More Chinese money is going overseas than foreign money is coming into China. That means more Chinese companies are going overseas. A lot is spent in developing economies, such as Africa. But it's a sizable amount in Europe and America as well.
“Another thing that fascinates me is the total number of patents applied for in China and in the world by Chinese companies. It has increased by 32.1 percent. It is overwhelming. In my space and in my conversations with so many people, I am learning that there are lots of new innovations coming out of China. When these products become visible to consumers, I think that's when the world will stop and have a different look at China.”
For consumers worldwide, this will mean re-evaluating the view that China is only the factory, where things are made, and understanding that it is also a place where things are invented. From “Made in China” to “Made by China.”
“It's like Japan in the past,” says Quek. “They used to be a manufacturer of cheap stuff, and then eventually brands like Sony were introduced, and now Japan is an innovator in many things.”
“Business students should look at history and at numbers. History has China as one of the oldest civilizations. This country has gone through all the ups and downs and has survived. There is no indication it's going to go away.
“China is going to overtake America as the world's biggest economy—some say it will happen in 2020, others say 2030. Either way, it's coming. Unless you are an ostrich with a head in the sand, what are you going to do about it? Come to China and see for yourself.”