Why white wine, clothes dryers and car seats all flopped in China
The failure of white wine, car seats and clothes dryers to make an impression in China underlines the importance of understanding the market
China has long been seen as the final frontier of new customers for Western companies, a place where the commercial wells are deep – 1.35 billion people deep, to be precise.
Tapping this incredibly huge market has been an obsession for foreign companies since long before China’s reforms from the late ’70s to the early ’80s. Today, this hasn't changed at all. As China continues to evolve into a consumer-oriented economy with an ever-growing number of middle-class and upper-class consumers hungry for trendy new products, the drive by foreign companies to get their wares into this market is intense.
Profiting from this massive consumer base has always been a tricky endeavour for Western companies. It has long been a mistake to assume that the Chinese will need or want a product just because it is popular in the West, and items that are standard purchases in the US and Europe often do not sell in China. This has led to many foreign companies receiving very rude awakenings in a market that turns out to be far more traditional and arcane than they believed.
While many large foreign companies have successfully established themselves in China and reaped huge profits, many others have failed epically. According to estimates at the Australia-China Business Week 2013, about 48 per cent of foreign businesses fail in China within two years of entering the market, and the reason is usually the lack of a basic understanding of how China works and what Chinese consumers really want.
"A lot of times there is an understanding that yes, there is this emerging middle class in China, but then there can be an assumption that it must mean it's like the American or French middle class or something like that, whereas it is very different," says James Roy, associate principal at China Market Research Group.
