China’s economic conditions look bleak in comparison to the country’s glory years of growth, but consumers there are still willing to spend—especially on the brands they believe in most.
In its latest BrandZ Top 100 Most Valuable Chinese Brands, communications services group WPP and Millward Brown said total value among the leading Chinese brands increased 13 percent to $535.6 billion in the last year.
“For 35 years the tide of extraordinary economic growth lifted many brands, but now the ‘free ride’ is over in today’s rebalancing China,” David Roth, CEO for EMEA and Asia at WPP, said. “Brand strength is the key determinant for success.”
Tencent, China’s investment holding company, led the list, growing its brand value 24 percent to $82.1 billion. Tencent operates TenPay, a PayPal-like online payment system, WeChat, China’s leading social mobile app for text messaging and other updates, and it also holds a 15 percent stake in JD.com, a Beijing-based e-commerce company. Tencent secured its position at the top by partnering with JD.com to offer big data-backed marketing solutions, and TenPay has become China’s No. 2 payment platform.
China Mobile, a telecommunications company, ranked second, and Alibaba—the only retail category to make the top 10—ranked third despite losing 20 percent of its brand value, bringing it to a total of $47.6 billion.
“For the first time ever, market-driven brands—those that are owned by entrepreneurial companies—contribute more than half (51 percent) of the value of the China Top 100; evidence of China’s continuing transition to a market economy,” the report noted. “These brands have taken full advantage of their freedom to innovate and generate value from technology.”
Chinese brands are now as competitive as multinationals, according to the report. They do well at building brand awareness and connecting with consumers, but they lack differentiation. “The increasing power of ‘home-grown’ brands may help to stem the current outflow of capital from China that is concerning economists,” the report noted.
“The brands in the Top 100 are not immune to economic and market influences, but the strongest have survived and even thrived,” Roth said. “To grow in value in the coming years Chinese brands must invest more in being unique and innovative, and continue to make meaningful connections with consumers.”
Three key trends emerged in the BrandZ report for this year:
- Brands that are innovative and unique grow eight times faster than their rivals. Ranking the Top 100 by innovation, the top third most innovative brands grew 29 percent between 2014-2016 compared with 3 percent for the least innovative. The top third most unique brands grew 29 percent, compared with 3 percent for the least unique.
- Brand strength drives share appreciation, despite market fluctuations. In January 2016 the stock market performance of the MSCI China index was down 10.7% on its 2010 level, while the share prices of the brands in the BrandZ Top 100 had gone up 43.1% over the same period.
- Fast-growth categories reflect consumer optimism. Personal care and jewelry retail (up 61 percent apiece) were the fastest-growing categories in terms of brand value, followed by real estate, insurance, airlines and travel agencies. This is evidence that consumers are still spending on non-essentials, luxuries and big-ticket items.
“China is the most dynamic market in the world in terms of mobile use and companies that intend to build their brands there should not underestimate the speed of the digitalization and mobilization wave,” Doreen Wang, global head of BrandZ at Millward Brown, said.
And the speed of technology’s influence is greater in China than anywhere else. Ninety percent of Internet users access the web from a mobile device and, naturally, the highest performing brands have a strong mobile presence.
Slowdown aside, Wang said, consumers are still optimistic and they are still holding on to “the Chinese Dream” of a better life.
“The most successful brands will become the consumer’s partner in this pursuit, using digital and mobile to connect and communicate at the right time, in the most appropriate media, with a relevant and creatively compelling message,” Wang said.