China headhunter Sun Tzu updates:

I. Strong Momentum of New Chinese Consumer Brands Going Global

New Chinese consumer brands have shown remarkable growth as they expand overseas. Despite facing cultural differences and intense competition, these brands have leveraged flexible market strategies and precise positioning to gradually establish their international influence. They have not only enhanced the image of “Made in China” but also provided global consumers with more choices.

II. Entrepreneurs’ Insights on Overseas Expansion

(1) Observations in European and American Markets and Product Strategy Adjustments

Niu Yafeng: Visit to IFA Berlin Attending the IFA Berlin in September 2024 revealed that European and American users have high musical literacy, with 80% of attendees over 40 years old and strong musical instrument skills. Distributors showed high acceptance of smart music products, requiring products to meet higher standards in definition and design to align with the rich musical environment and deliver an enhanced experience. Berlin’s relaxed lifestyle, emphasis on quality of life, widespread cycling (70% of people), early restaurant closures (around 9 p.m.), and the tendency for most shops to close on weekends also highlighted the importance of products that contribute to a leisurely lifestyle.

Lu Shengbo: Impressions from Exhibiting in the US and Germany Exhibiting in the US and Germany in the first half of the year demonstrated that pet owners in these regions value the health and safety of product materials and eco-friendly, recyclable options. Some even have a “fixation” against plastic and metal products. Overseas consumers maintain a balanced work-life lifestyle, and e-commerce is less developed than in China, with extensive offline retail channels. This presents an opportunity to expand offline channels abroad. The US, for example, has a well-established network for pet products, where consumers prefer shopping in physical stores.

Liu Tao: Reflections from European Market Research A research trip to Europe in October 2023, starting in Germany, revealed a chilly climate where people still ran outdoors in the morning. Europe’s well-ordered society contrasts with traditional store displays and payment methods, and acceptance of product innovation lags behind that in China and the US. This poses challenges for the entry of smart products into the European market and user education. Additionally, Europe’s product return rates are higher than in the US, and consumers have higher demands for after-sales support and product reliability.

(2) The Surprising Overseas Market – Serbia

Niu Yafeng shared his experience of stopping in Serbia while transferring from Germany. The traditional architecture and a range of new consumer brands, along with vibrant nightlife distinct from Germany, highlighted the importance of visiting potential markets to experience local life firsthand.

(3) Logic Behind Choosing the First Market for Expansion

Lu Shengbo: Youha Tech’s Decision When selecting overseas markets, factors such as the potential of the pet market and cultural compatibility were considered. The US was chosen as the first destination due to its significant market size and maturity, with over 70% of households owning pets and more than half having three or more. Although competition is fierce, there are opportunities for innovation and differentiation, as product update cycles are long, and the market is still in the “channel brand” stage.

Liu Tao: Sujing’s Considerations In the fitness niche, market selection focused on user interest, purchasing power, and market inclusiveness. The US, with the highest fitness penetration rate globally and nearly half of its population engaged in fitness activities, was identified as the best market for Sujing’s high-ticket, innovative products.

III. Overseas Users’ Perceptions of Chinese Brands

(1) Increasing Acceptance

Niu Yafeng noted that earlier products and models catered to Western aesthetics, but it has since become evident that users often expect innovative smart hardware brands to originate from China. This is largely due to the fact that over half of the smart hardware sold on Amazon is made in China, which is known for high-quality and cost-effective products. “Made in China” is evolving into “Intelligent Manufacturing in China.”

(2) Persistent Stereotypes and Competitive Challenges

While acceptance of Chinese products is improving, Lu Shengbo observed that negative perceptions still exist in the current international discourse. In overseas markets, Chinese companies face not only competition from local businesses but also from peers back home. Healthy competition focusing on brand and quality, rather than low prices, is essential for standing out. Liu Tao emphasized that Chinese products are already part of many overseas consumers’ daily lives, and maintaining quality and service can enhance brand acceptance, particularly by expanding offline channels to build trust.

IV. Providing Emotional Value to Overseas Users

(1) Niu Yafeng: Extracting Emotional Value in Music Products

Music transcends borders, and products should too. Understanding and tapping into local needs, such as users’ desire for a sense of achievement and relaxation when practicing alone or the need for fun during group sessions, can create emotional value that makes the product indispensable.

(2) Lu Shengbo: Creating Emotional Value in Pet Products

Pet owners are social and expressive. Emotional value can be built by focusing on user reputation and offline penetration. Communicate with users through various platforms, involve some users in product development, and spread brand content with key opinion leaders (KOLs) and key opinion consumers (KOCs). Organize offline events and workshops to familiarize overseas consumers with the brand.

(3) Liu Tao: Realizing Emotional Value in Fitness Equipment

Fitness equipment requires a strong service element, building a close connection from the moment users receive the product. Incorporate user co-creation, such as turning successful weight-loss stories into courses to support other users. While hardware serves as a tool, software is essential for motivating users to maintain their fitness. Consider sleep, diet, mood, and exercise metrics to create a comprehensive ecosystem and potentially integrate AI coaching in the future.

V. Core Capabilities for Different Stages of Global Expansion

(1) Lu Shengbo: Three Core Capabilities for Localization

Market Research Capability: Conduct thorough research to validate product feasibility. For instance, designing high-strength interactive toys for large dog owners in the US based on data has yielded positive feedback.

Product Adaptability: Adapt products to meet the varied demands of different countries and channels, learning from foreign brands’ localization strategies, such as KFC’s localized products in China.

Brand Communication Capability: Beyond good products, convey the brand’s story and core values effectively, ensuring cross-cultural communication respects local religious and cultural customs.

(2) Niu Yafeng: Localization Focus in Product and Marketing

In product terms, consider the differences in musical culture between Asia and Europe/North America, such as folk versus rock guitars. In marketing, note that while China’s livestream e-commerce is advanced, overseas platforms like TikTok have mixed shopping habits, and users often buy from Amazon or independent brand sites.

(3) Liu Tao: Dynamic Shifts in Core Capabilities Across Expansion Stages

First Stage: Develop differentiated products and utilize comprehensive tools like independent sites and Amazon to establish an initial online presence.

Second Stage: Move from online “air force” tactics to “on-the-ground” offline penetration, collaborating with local service providers.

Third Stage: Address compliance and intellectual property (IP) challenges as scale grows.

VI. Challenges and Solutions in the Global Expansion Journey

(1) Intellectual Property Challenges

Liu Tao: Faced and peacefully resolved a patent lawsuit thanks to non-infringement evidence. Awareness of IP issues is crucial to minimize risks.

Lu Shengbo: Spent 5-6 months resolving an unjust Amazon trademark removal due to communication difficulties with overseas entities. Switching to US-based compliance partners improved issue resolution despite higher costs.

(2) Supply Chain Challenges and Solutions

Niu Yafeng: Noted seasonal fluctuations in electronic product orders, such as drumstick orders surging in October 2023. Forecasting peak supply chain loads and maintaining flexibility is essential. Collaborate with long-term partners and understand material characteristics to prepare long-lead and low-cost items in advance.

Reflections on US-China Competition Shen Ying: Highlighted Vietnam’s growing role in US-China supply chain dynamics, especially in Northern Vietnam’s electronic clusters. Liu Tao suggested that while shifting production to Southeast Asia is an option, companies must consider local policies. Chengdu and other China-Europe rail hubs also present opportunities with favorable policies. Lu Shengbo noted that while pet products face low sanction risks, keeping production lines and supply chains domestic remains preferable. Niu Yafeng shared that music products are not currently sanctioned, allowing the Shenzhen-based Dyle brand to manage comprehensive costs from production to after-sales, with consideration given to overseas repair logistics.