WHY DO GLOBAL INTERNET BRANDS FAIL IN CHINA?

For most international internet brands, China is an oil mine for business since a population of 1 billion users is on the internet as per a report for 2017. This figure is expected to increase to 1.14 billion by 2022. Aside from that, China’s economy has been on the rise for the last few years and has been stable ever since.

Of course, this prompted a lot of international brands to enter the Chinese market. While the Chinese market is extremely huge and ripe for taking, it isn’t easy to penetrate. In fact, a lot of big brands that tried to enter got stomped out. Some of the big companies that failed in China include Nike, Uber, Groupon, and even Google.

Now, most people wouldn’t have thought that an internet giant like Google would become one of the business failures in China. Google, being the biggest search engine in the world, is expected to take over the Chinese market easily! However, Google found out that their services weren’t compatible with the Chinese market. The thing about Google and other international brands for that matter is that they didn’t go into China prepared. Here are a few reasons why Google failed in China:

Google didn’t have an ICP certificate which the Chinese government required.

Google couldn’t block sensitive content which rendered it not suitable under the Chinese government.

Majority of the Chinese people couldn’t really pronounce Google and couldn’t retain the brand name in their heads.

Why do global internet brands fail in China?

Aside from Google, why can’t other foreign startups in China seem to push through? There are six main reasons why they can’t grab the Chinese market:

Not Understanding the Language

The reason why local companies trump the foreign companies is that local companies know how to talk to the Chinese since they’re all Chinese too. In the Chinese language, two Chinese characters have their own separate meanings. If you put these two characters together, a whole new meaning may pop out.

Nike found out the hard way when they tried to use two Chinese characters separately when promoting their Chinese New Year brand. One character meant wealth and the other meant prosperity. Together, the word meant getting fat. This was a big fail on the part of Nike that made the locals poke fun at the brand.

Not Understanding the Culture

Chinese are very particular about their culture. If there is something that goes against their culture, they will immediately take offense and dislike it. Such is what happened to big internet brand Groupon. Although Groupon partnered with Chinese giant Tencent, they didn’t grab the Chinese market because of cultural insensitivity. They used rather inappropriate humor for some of their marketing campaign which turned off the locals.

Not Doing Market Research

Foreign companies, especially from the West, often think that the strategies that they use in their hometown can be applicable abroad as well. While they are right in some cases, China is completely different. Let’s take the big home appliance brand Home Depot for example.

In America or other Western countries, DIY repairs and maintenance are a norm, especially since most people live in big houses that are often bare and need DIY fixing. In China, however, most people live in newly furnished small apartment buildings, so they don’t need a DIY shop. Also, most people don’t do DIY in China as they usually call for labor to do the jobs for them.

Not Finding a Local Partner

We already established that entering the Chinese market is going to be really hard because the Chinese market has a completely different demographic. For this, foreign companies need to team up with a local one to succeed. If they don’t, they’ll get stomped by the competition.

Let’s take Uber China for example. Uber China decided to penetrate the Chinese market without a local partner. When they went in, they had to face an equally big ride-sharing company, Didi Chuxing. As Didi Chuxing knew the Chinese market better, they were able to stomp out Uber. Eventually, they were bought out by Didi Chuxing. If they partnered with Didi Chuxing or another local ride-sharing company in the first place, Uber China could have still penetrated the market.

Not Using Chinese Social Media

In other countries, Facebook, Twitter, Instagram, etc. are social media platforms that are all effective in promoting brands. In China, however, the locals have their own brand of social media platforms like Wechat, Weibo, and others. Most foreign startups don’t make use of the Chinese social media apps to promote their businesses. As most locals are on these apps, foreign businesses fail to take the opportunity to dig into an already existing gold mine.

Conclusion

While the Chinese market is a huge one with lots of business potential, it’s definitely not an easy one to penetrate. If foreign companies want to tap into the Chinese market, they have to study it very carefully first. If possible, they must get a local partner so that they’ll know how to navigate the environment successfully.