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November 1, 2010
Marketers: Visit China Before China Visits You

I recently came across a random tweet from @kkendd that read, “Visit China before China visits you.” I have no idea what the author meant, but I laughed just the same. Partly because I just visited China and partly because, from a marketing perspective, there is more truth in that tweet than @kkendd may realize.

Over the past few decades, cheap labor has made China the world’s factory, and the rising Chinese middle class has become an attractive target for foreign brands. Aside from making stuff cheap or flogging status brands to the starry-eyed nouveau riche, China seemingly has an image that is one of a rather backwards place struggling to get by. In brand discussions, I rarely see them identified as a potential source of competition. I wonder if that is about to change.

While it is true that China hasn’t been much of a global player for the last century or so, China absolutely dominated world economies for most of recorded history. In fact, China has been the world’s largest economy for 18 of the past 20 centuries. They lost their dominance in 1850 when they refused to join the industrial revolution. China’s decline continued right up to the death of Chairman Mao in 1976. But from that day forward, China began its ascent like a spring that had been wound tight for 100 years.

For a concrete example of China’s new competitiveness, compare Beijing Airport’s Terminal Three to London Heathrow’s Terminal Five. Both structures opened in 2008 within weeks of each other. Terminal 5 in London is 353,020 square meters, took 19 years to build at a cost of 4 billion British pounds. Terminal 3 in Beijing is 986,00 square meters, took four years to build at a cost of 2 billion British pounds. That’s three times bigger, five times faster, and half the cost. I don’t think this is a fluke. I think it is an apt metaphor for what is to come.

As you know, China already surpassed Japan as the world's second largest economy behind the United States. In 2003, Goldman Sachs was ridiculed for suggesting the Chinese G.D.P. might match that of the U.S. by 2041. Remember the airport? They’re doing the same with their economy. In February, PriceWaterhouse-Coopers predicted it will happen by 2020. No one is ridiculing them. This is not our parents' China. This is something else entirely.

That became apparent to me a couple of years ago. I was invited to speak about branding to Communist Party leaders in Guangxi province, China. The invitation itself would have seemed absurd not so long ago, yet my hosts were genuinely curious and very engaged in the subject. In my talk, I applauded them for their economic reforms but noted that much of their hard work was being used to build equity in foreign brands. For example, a Chinese manufacturer is paid 35 cents for making a doll that Mattel then brands Barbie and sells for $20. I expressed my feeling that for me, as a marketer, China’s true arrival on the world stage will not be based on their ability to manufacture and export goods labeled “made in China” but rather on their ability to develop and export Chinese brands.

The Chinese leadership, by and large, is aware of their knowledge-deficit when it comes to branding. That is why the strategy has been to buy Western brands as opposed to building them (think Volvo, IBM’s PC business, and attempts to buy Maytag or Hummer). But the Chinese understand the financial stakes behind strong brands and are determined students. If they can bring the same forces to bear on building brands as they do on building airports, Western marketers may want to start taking notice. Now.

Not long ago, I was talking to a Chinese business man who reads my Chinese blog
. With the new influx of foreigners and their brands in China, I asked him if he was concerned about the Westernization of his country.

“I think you may have it backwards.” he said “After all, you’re the one with the Chinese pagoda on your blog.”

Touché! I think there are wider implications to his statement. Forget about our influence on China. If China can get its branding act together, a much more likely scenario is the Easternizaton of the West.

It may not be that far off. Consider new brands like Google, Facebook, YouTube, and Amazon. None of these brands are household names in China like they are in the West. A few months ago headlines across the U.S. and Europe bore the ominous news that Google may pull out of China. When I asked my Chinese friends about this, all I got was an apathetic “Who cares.”

China has its own versions of each online megabrand like Weibo for Twitter, Youku for Youtube, Kaixin for Facebook, Taobao for Ebay/Amazon, QQ for MSN, and Baidu for Google. Now, consider that China has more Internet users than America has people. Perhaps we should be equally interested in the prospect of Baidu taking market share from Google in the U.S.

There is evidence of this offline as well with Chinese brands beginning to stumble their way onto the U.S. branding scene. A prime example of this is Li Ning, the Chinese athletic wear company. The first time I visited a Li Ning store was several years ago in Shijiazhuang, Hebe province. There was so much Nike-inspired imagery (including the Li Ning logo), I thought it was just a local Nike knockoff store. Today, Li Ning has more than 4,000 stores and revenues of $1.25 billion. Guess where it has just opened its flagship store and U.S. headquarters? Portland, Oregon, Nike’s backyard.

Thank you @kkendd for the heads-up. If you are a marketer, you may want to consider joining me on my next visit to China before China visits your market.

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Sean Duffy is a founder of Duffy Agency, the digital marketing agency for aspiring international brands. Sean has over 25 years of experience working with strategic marketing in Boston, San Francisco, Stockholm, and Copenhagen. In addition to his involvement with Duffy Agency, Sean is a frequent speaker on strategic international marketing and online brand management. He serves also as Lecturer and Practitioner in Residence at the Lund University School of Economics & Management and as Mentor in their Masters Program in Entrepreneurship. Sean is an active member of  TAAN Worldwide where he has served two terms as the European Governor. He is also a speaker, bloggerTwittererand is on LinkedInWith offices in Malmö and Boston, Sean splits his time between Sweden and the States.

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