China

Shoppers already love Chinese brands — they just don't know it yet

Made-in-China products used to be seen as inferior. Now they're among the world's most popular — but won't acknowledge their origin.

Shoppers already love Chinese brands — they just don't know it yet

LOS ANGELES, CALIFORNIA - MAY 02: In this image released on May 02, 2021, Tinashe attends SHEIN Together Fest 2021 in Los Angeles, California.

Photo by Emma McIntyre/Getty Images for SHEIN Together Fest 2021

Chinese companies used to be known for making cheap and low-quality stuff for other firms' international brands. No longer. The "Made in China" of cheap, brandless, low-quality stuff is ending. "Branded in China," complete with cheeky English names and savvy, localized social media branding strategies, is just beginning. Chinese companies are flocking into overseas markets, but with a twist: Many of their devoted customers don't know they're from China.

In China's ecommerce sector, the practice is known as building "independent sites (独立站)" overseas. It's a clear pivot away from the earlier practice of selling via third-party ecommerce platforms like Amazon and AliExpress. In 2020, China's crossborder ecommerce exports totaled $174 billion, up 40.1% from 2019, according to a recently published industry report by Equal Ocean, a tech-focused Chinese think tank. This compares with the 4.5% growth rate in domestic ecommerce.

HOTO, a Chinese tech company making run-of-the-mill home tools with sleek designs, epitomizes this shift. It plans to open its own online store for U.S. and European consumers in June and has hired an American marketing firm to produce localized promotional content. Promotional images on Instagram have a minimalistic vibe, very different from its nondescript branding on Amazon.

Building an independent site is now "the general trend among Chinese brands 'sailing overseas (出海),'" HOTO marketing manager Leah Xu told Protocol. Tech insiders like Xu frequently refer to crossborder ecommerce as if it were a ship leaving for a foreign port.

Chinese companies have also realized they can collect valuable consumer data and keep it for themselves if they connect to consumers directly via SaaS providers like Shopify. "Whether [or not] you have your presence on Amazon, you need your own space to present your products," Xu said. "Chinese merchants today want to break free from the restrictions imposed on them by the ecommerce platforms so that they can play with innovative marketing and sales tactics."

Some Chinese companies have already made this pivot successfully. SHEIN, a fast-fashion ecommerce platform headquartered in the eastern Chinese metropolis of Nanjing, has grown into a global garment brand particularly coveted by Gen Z shoppers. Shenzhen-based Anker has risen to a global leader in computer and mobile peripherals. And DJI is globally known as a pioneer of innovative drone and camera technology. All three brands ranked among the top 20 Chinese global brands in a BrandZ report co-published by Google and Kentar earlier this month, well ahead of larger tech companies like ZTE, Didi Chuxing and JD.com.

"It's a combination of [Chinese companies] wanting to build their brands [and] the massive improvements in tech capabilities in China," said Chris Pereira, president of Canadian Ecosystem Institute, a communications and market research firm helping plug Chinese brands in North American markets.

Thanks to the past few decades of international trade, Chinese companies are now backed by robust supply chains and manufacturing capabilities. Innovative ecommerce models developed in the past 10 years have allowed manufacturers to efficiently distribute high-quality consumer products around the world. And Chinese businesses' new approach to developing their own boutique stores is in line with a systematic shift away from an overreliance on third-party ecommerce platforms in the global markets, Pereira said.

Why now?

Chinese manufacturers are increasingly aware that building their own brands allows them to protect their margins. "Historically, international brands have been outsourcing manufacturing to China, and the final product has a higher profit margin," said Simon Shao, co-founder of DigitalStar.ca, a company that develops operational software and systems for crossborder ecommerce businesses. So original equipment manufacturers, or OEMs, are "bound to have a desire to develop their own brands."

Innovations in China's tech scene have also bolstered crossborder companies. A mobile-first tech ecosystem enables brands to directly connect to consumers via mobile app. And the melding of social media with commerce (think livestreaming shopping) and a strong capability to analyze consumer data allow Chinese brands to engage with their customers better, wherever they may be.

What works in China may also be successful abroad. Domestically, HOTO is building a community of home DIY enthusiasts on Xiaohongshu, a social commerce app particularly popular among fashion-forward young Chinese people. Xu says HOTO could replicate the same community-building strategy to boost sales in the U.S.

'Global brands,' not 'Chinese brands'

As successful as the Chinese brands are at localizing their products, designs and services, many are downplaying, if not obscuring, their origin. They tend to bill themselves as "global brands," not "Chinese brands."

HOTO doesn't plan to emphasize its country of origin, concerned about stereotypes associated with Chinese products. "China has been known as the world's factory," Xu said. "Consumers in North America and Europe may harbor suspicions." She says emerging markets are more open to China brands. "In markets like Southeast Asia and Africa, Chinese brands actually are well-accepted," Xu said.

Pereira said he sometimes suggests his clients brand themselves as "Made in Shenzhen," "Made in Hangzhou" or "Made in Shanghai" because China's cosmopolitan cities have a better image than the country does. But in the long run, brands will be better off embracing their identity.

"When you're branding yourself, you want to focus on your strengths, and you want to own your own background," he said. "A Chinese brand wouldn't be where they are today if they were not from China."

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