A report released last week by Sinomonitor International reveals that Chinese brands are losing ground to their foreign rivals in the domestic consumer market.
The report ranked the top competitive brands in 27 consumer product sectors for the year 2004.
The sectors include information technology, daily necessities, food and beverages, financial services, and textiles and garments.
Lenovo computers, Sony digital cameras, Nokia mobile phones, Gree air conditioners, Olay shower gel, Rejoice shampoo, Huiyuan juice, Peony bank cards, KFC fast-food restaurants and Nike sports shoes are ranked as the most competitive brands in their categories.
The report is based on information gathered by the China Marketing and Media Study, which has been following over 70,000 Chinese consumers between the ages of 15 and 64 in 30 major cities during the past eight years.
The competitiveness index of the surveyed brands is calculated based on the share of their consumers, the ratio of loyal consumers among all purchasers and market share growth indices.
"Comparing the ranking lists for 2004 and 2003, we can see great changes in China's consumer markets," said Liu Rong, vice general manager of Sinomonitor.
In Sinomonitor's first such ranking produced in 2003, Chinese brands caught the spotlight. Among the 27 product sectors ranked, 16 local brands were found to be the most competitive.
The report for 2004 saw several domestic brands on the outs, especially those in the daily necessity categories, such as Liushen shower gel and Dabao skin care products. P&G's popular Olay brand ranked top in both sectors.
Liu said the survey revealed two prominent features: foreign products enjoy much greater brand loyalty than their domestic rivals; and consumption patterns are moving upscale.
Lenovo laptop computers ranked the most competitive, but customer loyalty is only 79.1 percent, compared with 91.4 percent for Sony, 90.0 percent for Dell and 89.4 percent for IBM.
In the sports shoes sector, Anta ranked top in terms of market share, but brand loyalty is just 59 percent. Its foreign rivals, Adidas and Nike, can boast 72.7 percent and 71.0 percent brand loyalty.
Changing consumption trends indicate that people are more willing to pay more money for high-quality products, Liu said.
The skin care sector is a case in point. Lancôme and Revlon reported sales growth rates of more than 90 percent last year.
Savvy sales campaigns are contributing to successes like those.
On November 18, 2004, CCTV auctioned its prime time ad slots for a record sum of 5.3 billion yuan (US$634 million). P&G spent more than 385 million yuan (US$46.5 million) on the auction and was the biggest bidder that day. Twelve other companies spent a combined 753.3 million yuan (US$91 million) for major ad slots.
Li Guangdou, general manager of Beijing Huasheng Shidai Advertisement Co., said, "The country's economic growth in the next 20 years will depend on domestic brand building."
Li pointed out that China lacks its own big brands. The country currently has 2 million registered trademarks: just one brand for every six registered companies. Moreover, foreign-funded companies own fully a quarter of those 2 million.
"Foreign companies have done better in brand-building in China, as well as in their localization strategies," said Zhang Zhongliang, director of the China Economic Monitoring Center affiliated to the National Bureau of Statistics.
Many Chinese firms now are eager to expand into overseas markets despite a weak performance at home. "Chinese companies should rethink their overseas expansion strategy," said Zhang.
Successes in the domestic market are mainly based on the sheer size of the market and relatively low labor costs, according to Zhang.
"Only when they have strong foothold in the domestic market can they succeed internationally," Zhang said.
(China Daily January 14, 2005)