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Go East, Young Brand: What China Can Teach Us About the Future of Brands and Commerce

China is shedding its long-standing image as just a place to make stuff cheaply and flexing its muscles as ground zero for digital innovation in commerce, powered by disruptive companies like Alibaba and JD.com—two of the fastest-growing companies in the BrandZ Top 100 Most Valuable Global Brands 2018 report produced by market research firm Kantar Millward Brown.

Though the BrandZ list is littered with U.S. companies and the typical tech names you might expect—Amazon, Apple and Facebook, to name a few—Chinese firms have made notable, historical strides over the past decade-plus. Up from just a single brand 12 years ago, 14 Chinese companies earned a spot in the Top 100 in 2018, and brands from the Asian nation grew 49 percent year over year—and 1,445 percent across the past 12 years.

As such, “brand builders looking to the West to understand the future of consumer behavior and customer experience are looking in the wrong direction,” the report noted.

From Alibaba and founder Jack Ma’s “New Retail” to JD.com’s owned logistics network and relentless focus on the customer experience—even delivering luxury products via white-gloved couriers—Chinese consumers are accustomed to receiving the best of the best in when it comes to commerce. They’re even more digitally addicted than their Western counterparts—using smartphones and mobile apps to manage nearly every facet of their lives, including seamless, in-app payments via social platforms like WeChat.

Though the mid-‘90s outsourcing shift that sent jobs and manufacturing from the U.S. to China is largely responsible for the explosive middle-class growth and spending in the world’s most populous nation, now the tides are turning. “With an insatiable appetite for growth and constant innovation, China is set to expand its influence in the high-growth markets,” the report said, noting that a new wave of “digital colonization” could be underway. “The irony that the Industrial Revolution, and related outsourcing of low-cost manufacturing by the West to China, led to this shift in power is not lost on us.”

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As brands wake up to the value of China’s influential consumer class, some are starting to evolve their thinking and product strategies. “Chinese consumers have become more demanding and discerning, prompting marketers to test products in China first—because if you win with the Chinese consumer, you are likely to win everywhere else,” the report said. “It shouldn’t be surprising that many global brands are moving their design centers to China, as Made in China becomes Designed in China.”

Retail’s not an “apocalypse” but a “bellwether”

Overall, brands on the Top 100 list grew $748 billion, a record 21 percent increase. Much of that growth came from businesses in the retail ecosystem. “Retail increased 35 percent in value, making it the fastest-rising category for the second consecutive year, as e-commerce brands spiked in value and the category adjusted to disruption,” the report noted, describing the category as a “bellwether.”

Topping the list at No. 1, Google—with its successful smart speakers and retailer partnerships—found its more than $300 billion brand value up 23 percent from the prior year. Ever the perennial threat, Amazon earned the No. 3 spot with more than $207 billion in brand value—a year-over-year jump of 49 percent. Despite recent scandals and an executive shake-up, Nike remains the world’s most valuable apparel brand, landing the No. 29 spot with roughly $38.5 billion in brand value, 13 percent higher than the previous period.

Rival Adidas broke onto the list for the first time, eking out its spot at No. 100 with approximately $12.5 billion in brand value. Its 50 percent year-over-year jump puts it at the No. 12 spot among the list’s fastest-growing brands, a distinguished cohort that includes JD.com (up 94 percent) and Alibaba (92 percent higher year on year) at No. 1 and No. 2, respectively. Luxury darling Gucci’s success with millennial consumers is reflected in not only its ranking among top brands out of continental Europe but also as the No. 6 fastest-growing brand, with more than $22 billion, a 66 percent improvement from the prior year. Amazon’s 49 percent progress from 2017 earned it the No. 13 spot among high-growth brands.

Brands on blockchain

Depending on how you look at it, blockchain is coming or already here—and the much-discussed immutable ledger technology has significant implications for brand marketers, according to the report. In short, blockchain is sort of a glorified digital database, except it’s decentralized so that many parties can verify its records, making those records essentially tamper-proof. That’s why it’s widely seen as the most promising way to usher in transparency—across numerous industries—going forward.

Two thirds of large corporations employing 20,000 or more people are expecting to integrate blockchain into their businesses this year, according to Juniper Research’s Blockchain Enterprise Survey, and this development could be instrumental in accelerating blockchain innovation. Brands that commit to using blockchain could solve the perennial problems of consumer trust and data privacy, according to the BrandZ report.

“Brands will be forced to commit, because consumers will have ownership over their own data, meaning they will move to a competitor if their expectations aren’t being met,” the report said. “We will then meet the real ‘empowered consumers’ who will not only expect brands to keep their promises but also expect to be treated as stakeholders.”

What’s more, blockchain will become instrumental in fostering loyalty among consumers when brands rewarding shoppers with proprietary virtual currencies reach a tipping point.

‘Algorithmically enabled consumers’

You can thank Alexa and her smart-speaker peers for destroying what remained of the path to purchase.  Digital voice assistants are on track to replace text and typing as the de facto approach to search and thus digital shopping. While Amazon jumped out to an early lead in the voice-assistant space with Alexa inhabiting a range of devices across price points and an aggressive sale push around the holidays, resent sales data shows that Google has closed the gap.

For the first time since the smart-speaker category emerged, sales of Google Home smart speakers surpassed that of Alexa-powered devices in 2018’s first quarter, driven largely by growth overseas. International retailers prefer the brand-agnostic Google platform and devices over voice-assistant devices from Amazon—itself a retail competitor. But for global dominance, said a Slate article, Amazon’s superlative dominances in the retail space now may be the key factor suppressing its success across borders.

“Instead of thinking ‘digital first,’ brands need to start thinking ‘voice first,” Tara Marsh, global head of content, Wunderman, said in the BrandZ report. Brands must put aside some of their digital best practices to develop a voice-centric strategy as they face the new challenge of consumers who shop by voice, perhaps querying digital assistants for product not by brands name but by category.

That’s why brands must look at tech-empowered shoppers in a different light, according to the BrandZ report.  “Brands no longer sell to consumers. Brands sell now to algorithmically enabled consumers,” the report said. “No longer just a person, but a person with smart device in hand who uses this device to make smarter, faster, more personalized decisions.”

While these new technologies might be great for the consumer experience, brands have an uphill battle. Through disintermediation via digital assistants like Alexa, brands that haven’t clearly differentiated their value and vision could run the risk of becoming an “endangered species,” the report said.