Wal-Mart, the biggest retailer in the world which opened in China in 1996, has struggled./Photo: Ariana Lindquist/Bloomberg
The Financial Post reports that brands like Home Depot, Best Buy, and Wal-Mart have all suffered losses since entering the Chinese market, while McDonald’s, Starbucks, and even Roots Canada have thrived. What makes a winner and what makes a loser in China?
“Asian people particularly like brand names that carry a positive symbolic image,” said Shih-Fen Chen, an international business professor at the Richard Ivey School of Business.
McDonald’s and Starbucks are hardly high-quality restaurants, but they serve up something much more important than great tasting meals.
“They are cultural products. People in China do not like the taste of McDonald’s food, but their kids get to brag that they went to McDonald’s and got some toys there.
“A student in Canada can give up one meal on campus and buy three Starbucks [specialty] coffees. In China, you would have to give up six meals to buy a cup of Starbucks. People do not spend that much for coffee just because they want to drink it, but because holding the cup of Starbucks coffee makes them feel so good psychologically,” Chen said.
For similar reasons, the offbeat brand Roots Canada has found success. Michael Budman, the brand’s president and co-founder, explained, “The Asian community embraced Roots: they love Canada, they love fashion and they love brands.
“We appeal to many groups, but in specific in China, the vision of Canada – the health, the wellness, the environmental consciousness – in all of these things, we are seen as an extremely progressive country.”
One way that Chen sees for non-lifestyle retailers to succeed is for the brands to open in smaller Asian markets and slowly build awareness on the continent.
To debut in China is possible, but it takes much more effort and greater resources.
“You need to have a home market with generous enough resources to support your expansion into China, where you are probably going to lose money for ten years,” he said.
Credit: Red Luxury