Co-Branding with Local Brands is the Key to Winning Free-Spending China Gen-Z Consumers

Post by 
Matthew Ryan
August 26, 2020

“The younger they are, the stronger their sense of pride is”

Generation Z in China love to spend. There are 328 million consumers who fit into the Gen Z bracket in China(born 1995-2002) and they now account for 40% of online consumption in the country. According to a 2018 white paper from Kantar, the monthly purchasing power of China’s Gen Z stands at $507 (RMB 3,501), with most getting additional money from their parents in the way of allowances.Growth in China retail is being driven by these younger consumers and the challenge for all brands in China is to successfully capture the spending of this fickle and evolving segment.

One particular behavior that is prevalent among this segment is a noticeable skyrocketing patriotism and a preference for buying domestic products and brands, or ‘guo huo‘. The drama of the ongoing trade war with the US and general sense of pride towards China’s meteoric rise matched with an increasingly improved quality of its products, has generated a gravitational pull for Gen-Z consumers to domestic brands. Unlike older generations, these younger shoppers did not grow up with a “West is Best” mindset. The growing trend of those born after 1995 becoming more nationalistic is summed up by Xue Ying, senior marketing manager of Dr Yu in an interview for South China Morning Post: “The younger they are, the stronger their sense of pride is”.

From CBNData: “Percentage Increase in Consumption of Guo Chao Apparel by Generation”

This surge in patriotic consumption, named the ‘guo chao’ or nationalistic wave, is especially common in the apparel category. As per the above chart from CBNData, interestingly the most buoyant ‘guo chao’ apparel consumption comes from both those born before 1975 and those born after 1990.

One main reason for this upswing, is that local brands have got smarter, leaner, more innovative and are much more in-tune with the the whims and habits of the China market. Take for example the ascendancy of local sportswear brand Li Ning, whose revenue rose to 13.8 billion RMB(2 billion USD) in 2018, up 33% from the previous year. The company, once decidedly ‘uncool’, launched a transformation plan in 2012 to improve the quality and design of their products, culminating in cat-walk shows and endorsement deals with stars like hot pot fanatic and “Rap of China” winner, GAI.

Growing Scrutiny and Pressure for Overseas Brands

Its no secret that non-Chinese brands are having a tougher time of late. Just this month, an advertisement by luxury brand Balenciaga was accused by the national press of being ‘an insult to tastes of Chinese people’, because of a perceived tackiness of the collection and advertising. Over the last few years, brands such as Dolce & Gabana and Lululemon have been derailed with major PR disasters in which they were deemed to have insulted Chinese people and disregarded local cultural sensitivities.

Even outside the challenges of circumventing an expanding list of cultural taboos, business has become tough in general for international apparel brands. ASOS and GAP were forced to exit the market after disappointing results and failing to connect with local consumers and a string of other retailers are doing worse than expected. On the other hand a number of local heroes have popped up, endorsed by internet celebrities and gained major traction, such as Eve Zhang’s Jupe Vendue.

Local apparel brand Jupe Vendue from celebrity Eve Zhang has enjoyed growing success while established international brands have hit hard times.

In order to follow the feng shui of a rapidly changing market, many overseas brands have tried to surf the guo chao and create patriotic product lines. For example, Adidas released a collection at the end of 2019, inspired by the aesthetics of the Tang Dynasty, which many consider the pinnacle of Chinese civilization. The brand wanted to show how it was possible to mix new style and individuality with traditional culture. The brand brought in a number of local celebrities such as Taiwan-born Eddie Peng and NBA star James Harden.

The Power of Collaboration

International brands trying to brazenly adopt the guo chao trend there is an element of risk. They may be accused of in-authenticity or taking advantage of growing cultural confidence for monetary gains. Chinese designers and brands are aware of the intricacies taste and know how to illicit respect from local consumers. Subtle nods and shades of irony are only safe and passable if one is part of the culture, but an outsider can easily cross unspoken lines (see again the recent Balenciaga  brouhaha).

From CBNData: Positive Search Results for International Co-Branded Products by Generation

For international brands looking to win Gen-Z hearts and wallets, they need to consider instead working in collaboration with local brands. Co-branding is when two brands come together in synergy to create a new product line is a growing trend in Chinese apparel. This is especially true with younger consumers, CBNdata’s study found that post-95 consumers had by far the highest percentage of positive search results for co-branded guo chao products of all participants.

Co-branding collaboration of this sort allow the brand to maintain its essential brand identity while at the same time sharing the cachet and positive brand associations of the local brand. Another key element of why these collaborations are so popular with young consumers is that they are often limited editions so have an amount of exclusivity and ‘must buy feeling’.

International Co-Branding Success Case

Puma & Randomevent

German sportswear company PUMA came together with Chinese streetwear brand Randomevent and released a 4-part collaboration in early 2020. The collection, combined urban style and street fashion with and emphasis on bright colors.

This co-effort shocked and delighted sneaker-heads, both in China and worldwide, while getting an excellent reception from streetwear journalists and influencers.

Key Takeaways

  1. Chinese Generation Z consumers are more nationalistic and brimming with cultural confidence in comparison with older generations, and this is reflected in the attitudes towards brands and their own sense of identity. Overseas brands are definitely not considered as being superior for consumers in this age-bracket.
  2. Gen Z consumers account for 40% of Chinese consumption and brands looking to tap into this market need to be understanding and respectful of this patriotic sentiment.
  3. However, just trying to ride the guo chao wave that has been successful for local brands comes with an element of danger. International brands need to focus on coming across as authentic while being mindful of not crossing local cultural taboos.
  4. Co-branded product lines are a win-win for both local and international brands. The international brand is able to garner greater appeal with nationalistic consumers and the local brand is able to achieve a cachet of internationalism.
  5. Studies show that Gen-Z consumers are particularly fervent for these type of collaborations, especially if they have an element of exclusivity.

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