“The 19th century belonged to England, the 20th century belonged to the U.S., and the 21st century belongs to China. Invest accordingly.” With this statement, Warren Buffet emphasized how the United States lost its edge, and how it all benefits China, who has opened up to foreign investments and enterprises. With its 1.3 billion consumers, a rapidly growing middle-class having more disposable income than ever, China offers an excellent growth opportunity for Western brands.
This is why over the last decades, countless companies have tried to access the Chinese market to gain a foothold of the world’s second-largest economy.
However, many have underestimated the barriers to enter this very specific market. What are they?
Finding a Chinese name
First, the most obvious but also one of the most important ones is the language barrier. Not only not speaking Chinese will prevent one from understanding their Chinese partners and consumers, but it will also greatly affect the overall understanding of this unique culture.
For instance, choosing a Chinese name for a brand is extremely important, and it has even become a business itself. In China, names are imbued with deep significance, and an off-key name could have serious financial consequences.
Take the example of the French brand Peugeot. In China, France evokes luxury or romanticism, this is why French luxury brands are striving on the Chinese market, but not French carmakers. French automotive companies indeed don’t hold the same prestige as their Western counterparts, such as Germany.
Peugeot still decided to enter the Chinese market with a joint-venture in 1992. They chose the Chinese name 标致 (Biāozhì), translating as beautiful or “handsome”. However, they did not realize that it was really close to the word Biaozi, meaning prostitute in Chinese. Therefore, one of their ads’ slogan “Canton’s Peugeot offers you the best services” could also mean “Canton’s prostitute offers you the best services”.
This reckless mistake was made because Peugeot’s French team did not realize how important names are in China, and because they did not take the time to listen to their Chinese partner’s counsel.
This, combined with the perceived image of France in China resulted in the bad performance of the company. Still today, PSA Group is having a hard time performing on the Chinese market.
Peugeot is not an isolated case. Many other Western brands chose odd brand names that led to ridicule from Chinese people.
Understanding the culture
If you want to do business in China, forget all you think you know in business. Chinese consumers are unique and copying and pasting a Western strategy on the Chinese market is destined to fail. This is valid for the way you do business, and most importantly, the way you communicate.
Chinese consumers are sophisticated and demand flawless communication from foreign brands when addressing them.
However, these past years, numerous luxury brands riled Chinese with fashion and beauty faux pas. From Balenciaga, Dior, Versace and Balenciaga, they all provoked – and felt – the anger of Chinese internet users.
The latest Dolce & Gabbana crisis is the perfect example to show how important perception is in China. In late 2018, the Italian brand ran a series of adverts showing a model struggling to use chopsticks to eat spaghetti & pizza, offending Chinese netizens that accused the brand of racism. When co-founder Stefano Gabbana reacted in private messages on Instagram calling Chinese a “country of sh**”.
This is went everything went downhill: the brand ambassadors and models announced that they would boycott the label, which resulted in Dolce & Gabbana canceling fashion shows in China and shutting down stores in China.
Recently, Dior also sparked outrage among Chinese internet users, when, during a workshop in a Chinese university, it revealed a map of China that did not include Taiwan. A student intervened and asked why it was not featured on the map, to which the presented responded saying that it was “too small “ to appear on the map, when Hainan, which is much smaller than Taiwan, wad featured.
It only took a few hours for Chinese netizens to demand explanations and a global apology from Dior. Even though the brand later apologized, it did not do so on a global scale, which made Chinese users think that they did not mean it.
Many similar cases occurred with foreign luxury brands in China, which makes us think that foreign brands do not measure the impact of their miscommunications and how it could affect their business.
As a matter of fact, according to Bain & Company, Chinese shoppers are to make up 46% of the world’s luxury goods purchases in 2025.
Why do foreign companies still make these mistakes today?
The common mistake that foreign players make when they come to China is to think that China is comparable to the West. They assume that what worked in the U.S or Europe will work in China too. They think they know what Chinese consumers want and how they think. Well, many cases proved that wrong. China is an incomparable market and should be treated as such.
Foreign brands should therefore study the market and ensure that their product fits the Chinese market. They should also, and that is very important, listen to their Chinese partner. It is common sense, but still today, many companies privilege their headquarters’ counsel than the Chinese team’s one.