Exporting to China: How to conduct market research

In the first of a new series of articles about exporting to China, FOCUS speaks to Andrew Cameron from The Silk Initiative about the importance of conducting effective market research before diving into the China market

The size, growth and maturity of the China market must mean there is space for everyone to win, right? Maybe. According to Andrew Cameron, director at Asia-based brand consultancy The Silk Initiative, there are seven common questions that come up time and again when he speaks to brands about expanding into the China market.

Which products are in high demand?

Knowing what Chinese consumers are clamouring for really requires boots on the ground. But, that doesn’t mean you’re out of luck if you can’t hop on a plane. Popular sites like Xiaohongshu (aka Little Red Book) and Douyin (Chinese TikTok) make it easy to see what consumers are paying attention to and talking about. Likewise, there are a number of services tracking sales on e-commerce platforms like T-Mall and JD.com that make it easier to understand trends within your specific category.

Projects should start with an initial market landscape analysis that includes a look at what’s trending in a specific category and industry. Beyond the approaches above, an agency like TSI can also help to interview experts within the industry, which provides a top-line view of popular products in any given category, helps paint a clearer picture of the industry as a whole, and provides indications of the direction it is moving in.

How do I conduct robust competitive analysis?

Competitive analysis is a two-step process. First, you have to understand who your competitors are. Then, you must understand what they’re doing well (and not so well) and what that means for your brand.

Identifying competitors may seem as simple as searching for your product category online. With a hyper-segmented market like China, however, it’s important to also look at tangential categories, different domestic regional players, and even multinational case studies that may not have done so well.

This is why it is almost always best to speak to real consumers in China to understand the lay of the land. A useful exercise is placing your products with consumers and having them document their experience over the course of a week. This allows for understanding of product occasions as well as insights into the broader competitive set.

When it comes to understanding how your competitors perform, desk research is also a good starting point. According to Cameron, TSI tends to look through a brand’s product ranges, price points, and communications or positioning. Again though, speaking to consumers is always the best approach. This helps you gain a good understanding of how competitors perform and how they’re viewed in the mind of your target audience.

How much should I charge?

Once you’ve identified your competitors, it’s important to then understand the best price point for your product. The first step is to understand the price your competitors are charging. Fortunately, this can often easily be done online. The harder part is in layering on your brand strategy and intended positioning in the market.

For new brands importing to China, a big element of their pricing strategy will be tied up in logistics costs. This means they often have to charge a premium relative to their competitors. Again, speaking to consumers can help you understand how much consumers expect to pay for your product relative to the competition. Just be sure you can always justify any price premium.

Be aware that consumers will do their homework. If your price point in your home country is dramatically different than in China, or if it differs across e-commerce platforms, consumers will notice.

Where do I launch my product first?

The sheer size of China means that there are distinct regional differences that you must take into account. Understanding where to launch first comes down to two main factors – the most important of which is ensuring reliable distribution. For obvious reasons, this is often the biggest decision for new brands.

However this is also why a lot of brands tend to default to Tier 1 cities such as Shanghai, Guangzhou, or Beijing. This might seem like an easy first step, but brands should consider looking beyond just these cities and into other locations where competition might not be as fierce.

The second factor is understanding what consumers across China want. Each region, and even each city, in China can have its own dialect, climate, competitors and local flavour preferences.

For instance, TSI once worked with a client developing an oat-based snack bar. TSI saw that consumers in hot and humid Guangzhou in the south preferred a lighter, flakier version. Their northern counterparts in Beijing, with famously frigid winters, preferred a heavier, stodgier product. Examples like this show why understanding the market is critical.

What government bodies or associations are there to help?

With travel to China very limited, having a partner in market is more important than ever. Luckily, there are plenty of bodies and associations that can help, including CBBC and UK-government trade bodies like the Department for International Trade.

These organisations can help put you in touch with the right people, provide invaluable advice, and often hold knowledge-sharing sessions that can help you on your journey.

Should I localise my product?

In a word, yes.

Some level of localisation is almost always a good idea. This is especially true in food and beverage, where sentiment has shifted away from outright trust of and preference for foreign brands. Over the last decade, local brands have done an incredible job at closing this gap. At the same time, they’re more attuned to what local consumers want and can bring new products to market much more efficiently.

China is also now flooded with brands from around the world. The UK has a great reputation when it comes to producing high-quality food and beverage, but so too do Australia, New Zealand, Germany, and many more. Localisation can help differentiate.

Whether you are launching new products, flavours or packaging, some level of localisation is one of the ways foreign brands can stand out. Even a well-crafted Chinese brand name can help with word-of-mouth marketing and recommendations, as well as online searches. Consider localisation as one of your first steps, not an afterthought.

What’s the most common mistake companies make?

China today is not the China of ten years ago. Getting things right requires time, money, and patience. Success is also no longer guaranteed. Domestic competition, with huge amounts of capital and a “fail forward” mentality, consistently outpace foreign brands. Many of the issues we see brands facing here simply boils down to the local team not having the right amount of support from home offices to succeed. Having robust two-way communication is paramount, and should be prioritised above all else.

While all of this might seem daunting, opportunities for success still abound. The key is to know what you’re getting yourself into. Market research, including the right landscaping, competitive analysis and consumer understanding, remains the best first step towards reaching your goals. Being thorough in setting the right foundations, rather than believing you’ll be an overnight success, is how brands exporting from the UK must approach the China of today.

This article is part of a series on exporting to China. See all the articles in the series below.

Part 1: How to conduct market research
Part 2: Protecting your trade mark
Part 3: How to choose the correct route to enter the China market
Part 4: The dos and don’ts of choosing a distributor
Part 5: How to find and hire staff in China

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research and analysis services can provide you with the information you need to succeed in China.

This article was provided by Asia-based brand consultancy The Silk Initiative