Chinese Brands Want to Go Global; Here's Why It's Still So Tough

Despite all its current troubles, China is the world's second biggest economy, and there's no shortage of huge Chinese companies. Yet China has only one player on Interbrand's Best Global Brands list -- Huawei, the telecom equipment and smartphone maker, at No. 94. What's knocking Chinese behemoths off Interbrand's list? For one, it requires them to be truly global players, getting at least 30% of revenue outside their home region. And building brands abroad is where China's giants struggle. Huawei has done it in a sector that's seen many companies -- aside from leaders Apple and Samsung -- come and go. It's also enlisted various international firms, from Dentsu-Aegis' Isobar to WPP to Publicis' Bartle, Bogle, Hegarty to Saatchi in Shanghai. In a country of 1.37 billion, some companies haven't seen a need to look beyond China's borders, given the booming new consumer class. But many have international ambitions, and with China's economy cooling off, there might be more incentive to seek out growth in foreign markets. For now, only 22% of consumers outside China can actually name a Chinese brand, according to Millward Brown. Though some Chinese brands sell well internationally -- appliance-makers Haier and Hisense, for example -- they lack name recognition. Others are getting there. Xiaomi, the smartphone and electronics upstart, is expanding fast, but its international business still "pales in comparison" to sales at home, IDC says. Internet giant Alibaba got a jolt of international PR during its initial public offering in New York, but Westerners generally see it as a stock to buy, not a brand relevant to them (yet). To be fair, China's prowess in tech and electronics is chipping away at the "Made in China" stereotype. The smartphone category is especially hot, and Huawei, Xiaomi and Lenovo ranked after Samsung and Apple in worldwide shipments in the second quarter, IDC says. OnePlus, the buzzed-about Shenzhen-based smartphone startup known for high quality and affordability, says its biggest markets are the United States and India. Some Chinese companies buy foreign brands in their quest for clout abroad; Lenovo acquired IBM's personal computer division and Motorola Mobility; automaker Geely bought Volvo; and conglomerate Fosun won a bidding war for Club Med. And eventually more of China's homegrown brands will spread globally, like Japanese and Korean brands before them. Here's a look at what's holding them back: 'Brand China' still has issues Despite China's rapid transformation, it still has issues with food safety, fake goods and quality control. When a warehouse storing toxic chemicals exploded in Tianjin this month, killing at least 150 people, it was also a blow to "Brand China." An event like Tianjin "influences global consumer views about China, even though it has nothing to do with individual Chinese enterprises trying to break into America," said Martin Roll, brand expert at the Martin Roll Company and the author of "Asian Brand Strategy." "If China is serious about grooming local winners to become global winners, there is a huge path ahead." Companies by themselves might not be able to change the image of the country's brands. "Sometimes you need a helping hand from a government agency," Mr. Roll said. It might help if the government took a cue from Korea and developed more public-private cooperation to help brands go abroad, with efforts including tax breaks, business missions and leadership seminars, he said. Their brand identity is shaky Especially in fashion, many Chinese brands masquerade as foreign to seem more upscale. La Chapelle is actually a Chinese clothing retailer; even more perplexing is a sunglasses brand named after Helen Keller. Others use nonsense words that seem foreign, like Marisfrolg or Metersbonwe, which some liken to China's Gap. A 2010 McKinsey & Co. survey found that 90% of Chinese consumers thought Metersbonwe was foreign. For Chinese companies aspiring to export their brand (as is Metersbonwe) that ambiguity gets weird. "You can't fake being foreign if you're going to another country," said Rogier Bikker, China CEO at Tomorrow, a Shanghai creative agency helping brands cross borders. "Their entire brand story makes no sense outside of China." He points out that Chinese tech brands like Xiaomi, Alibaba and Tencent are comfortable with their heritage. Will that rub off on other categories? Their timing's off The Li-Ning sportswear brand, founded by the Olympic gymnast of the same name, set up a U.S. headquarters in Portland, Nike's home town, and poached a Nike endorser, NBA star Dwyane Wade -- and a handful of other NBA greats and other international stars. But the sneakers have never really taken off in the U.S. Aside from name recognition, the brand's old logo, which was meant to resemble the letter "L" and a patriotic red flag, was seen as similar to Nike's Swoosh. And a previous slogan was similar to Adidas'. The company changed those, but other problems persisted. When it launched a brand with Mr. Wade in Texas in 2013, Li-Ning didn't have a retail network or an e-commerce presence in the U.S., according to Reuters. (The sneakers are available again including online.) Meanwhile, the company has struggled at home, reporting three straight years of losses. For Li-Ning, "going abroad was a 'trying to run before you can walk' kind of thing," said Torsten Stocker, Hong Kong-based partner at management consulting firm A.T. Kearney. By going abroad, one of Li-Ning's goals may have been to convince customers back in China to see it as a more aspirational global brand, "and of course that doesn't work unless you do well," he said. China-based car startup Qoros faced a similar situation. It originally planned a push in Europe along with its main market of China; it reportedly is putting Europe on hold. Qoros is struggling in general, having sold just 7,000 cars last year. They neglect market research on foreign consumers, and plain old marketing In China, companies tend to test products abroad by putting them on store shelves to see how they sell, said Doreen Wang, global head of BrandZ at Millward Brown. "They think, I'll put my product in Walmart and online and all of a sudden it will be a hit in the market," she said. "That assumption is wrong. And probably they will have volume because of the low price, but they won't have profit -- the more they sell maybe the more money they'll lose. Without strong branding you can't enjoy premiumization or make a good margin." Ms. Wang, who has divided her career between China and the U.S., says she doesn't notice many ads for Chinese brands in the United States (though she singles out Hainan Airlines as an exception.) "There are so many great Chinese brands with the ambition to go global, and their branding is still at a very preliminary level -- that's very surprising," Ms. Wang said. BrandZ's latest ranking of the 100 Most Valuable Global Brands has 14 Chinese names on the list. China's government has previously recognized the importance of building global brands. But many Chinese companies aren't accustomed to spending the time and money necessary to sell themselves in foreign markets simply because they got their start as manufacturers making parts or equipment for another company's final product. Even over time, it's a tough mental switch to make. It's not easy to cross borders, period In 2013, Chinese internet giant Tencent hired Argentine soccer star Lionel Messi as a pitchman and spent $200 million plugging its all-purpose social app WeChat abroad. (But no advertising agency was involved with the ad, which was made by U.S. production company Stardust.) The app is central to how China uses its smartphones. Though it gained some traction in other markets, it hasn't become the breakout star many hoped, and Tencent has cut back on its international promotion of WeChat since them. What's the lesson? Maybe just this: Even for a great product with a big ad campaign, it's tough to crack competitive sectors in new markets -- for any brand, from China or anywhere.

Chinese Brands Want to Go Global; Here's Why It's Still So Tough

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