U.S. brands think they understand China’s market, but a new report says they don’t

January 17, 2020, 11:11 AM UTC

U.S. brands still don’t know enough about China, and they don’t seem to care.

The vast majority (88%) of American marketing leaders actively involved in marketing products and services to consumers in China were extremely confident in their marketing campaigns, according to a new report from Lewis Research. However, only half of the 351 senior American marketers professionals surveyed had designed local strategies specifically for the Chinese market, and almost one in five admitted to having little to no understanding of China’s marketing practices.  

“One of the main issues that the report uncovered is senior U.S. marketers’ false belief that they fully understand marketing practices in China,” said Matt Robbins, vice president of insight and research at Lewis Research. “The motivators that spur consumer purchasing are entirely different than those of U.S. consumers, and knowing the cultural principles behind those motivations will be key to US marketers having success in China.”

Indeed, for U.S. brands breaking into the Chinese market, it is almost like entering an entirely different world.

Chinese shoppers are even more online than their U.S. counterparts, as China now accounts for over half of the world’s online retail sales. Yet Chinese consumers are communicating and purchasing goods through entirely different platforms and channels. Where there is Amazon, Facebook, and Google in the U.S., there is Alibaba, WeChat, and Baidu in China.

In total, China’s e-commerce industry is now worth almost $2 trillion per year, which makes it the largest e-commerce market in the world—and over three times the size of the next largest market in the U.S., according to study released last June.

This means that to be successful in China requires at least some fluency in Chinese e-commerce platforms (such as Alibaba or JD.com) and Chinese social media platforms like WeChat. However, Lewis’ study reports that up to a third of U.S. marketers in China know little to nothing about China’s e-commerce industry.

More broadly, the operating environment in China for U.S. brands has only gotten more difficult in the last few years.

While a preliminary trade deal has been agreed in recent days, years of economic blows traded between the two major powers have made it a difficult environment for Chinese and U.S. companies alike to work across the ocean.

Moreover, recent anti-government protests in Hong Kong, where demonstrators have engaged in over six months of protests in defiance of Beijing’s influence in the city, have created a uniquely tricky environment for U.S. companies, which need to somehow balance Beijing’s interests with international support for the uprising.

From the N.B.A.’s dust up with the Chinese government over Houston Rockets’ General Manager Daryl Morey’s tweet supporting the Hong Kong protests, to Starbucks getting caught (literally) in the crossfire on the streets of the Special Administrative Region, this issue has been inescapable for major U.S. brands (the list of those affected also includes Apple, Vans, and Tiffany’s).

In the midst of these controversies, China’s consumers have been increasingly turning towards domestic brands in lieu of their foreign counterparts. In October, Fortune documented how Chinese apparel brand Li Ning fortunes were on the rise after amid fallout from the NBA’s controversies in China. This is only one example of a widespread inward push towards supporting domestic over foreign brands.

Syaru Shirly Lin, a world politics professor at the University of Virginia, told Fortune this week, “Businesses walk this impossible tight rope, they are at the front line of this China dilemma.”

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