Insight
Trends and Importance of Global Brands
[Taiwan Economic Research Monthly]
By International Market Opportunities and Consumer Insights
Traditionally, Taiwanese companies' perception of Europe and the United States has been that they have many international brands, that they may not be as receptive to new brands, and that there is more room for them to expand into emerging markets such as China. However, in recent years, the results of many domestic and international surveys and questionnaires have shown that this is not the case. Accordingly, this article will follow this trend to unfold the changes in economic consumption trends in Europe, the United States and China, summarizing the similarities and differences in international consumer demand for brands and products, in the hope that owners interested in expanding into the international market will have a better understanding of the foreign market.
Taiwan's industry has been developing brands for more than 20 years, and branding has long become a familiar topic. According to the latest Census of Industry and Commerce, the number of private label enterprises has exceeded 44,000, an increase of 11.79%, while the number of branded enterprises in the manufacturing and service sectors has grown by 9.33% and 13.18% respectively, indicating that the development of branding has continued to become one of the most important topics for domestic enterprises.
The Brand Program of the Industrial Development Bureau of the Ministry of Economic Affairs has been conducting brand operation surveys since 2013, and has found that the attitude of domestic enterprises toward brand operation is gradually shifting from a price-ratio and cost-oriented business model to a value-based marketing model that appeals to trustworthiness and emotional appeal.
Due to economic development, consumer awareness and the speed of information dissemination, the real needs of today's consumers have changed significantly from traditional perceptions. For example, regional development differences in China are widening the differences in consumer needs between different places, and the brand loyalty of high income earners in China has increased significantly. In contrast, European consumers, whom we have traditionally recognized as having high brand loyalty, are positively inclined to try new brands.
Economic growth in all countries provides the basis for consumer growth.
(i) Consumer demand has increased dramatically as a result of China's continued economic growth
According to the 2018 McKinsey & Company China Consumption Study, the income and consumption of the public reached the highest level since 2008. In terms of income performance, the per capita income of urban consumers in China grew by 7.84% in 2018, while the income of rural residents grew by 55% compared to 2013, indicating that as China grows, it is also gradually contributing to the gradual improvement of the economy in non-urban areas This suggests that as China grows, it is also leading to a gradual improvement in the economies of non-urban areas, and bringing with it consumer potential.
As China's economy continues to grow, a large emerging middle class is forming, with an overall demand for consumer goods and even luxury goods that exceeds that of the original high-income group. This leaves companies operating in the China market facing a situation where, as the wealth gap continues unchanged into the future, there will be a significant growth in both income and consumer demand among different income groups, whereas in the past, companies were only targeting the mainstream affluent high-income groups.In the future, consideration must be given to reaching out to an even larger emerging middle class, and there are many differences between the two in terms of market positioning.
(ii) Increase in consumer behavior as the U.S. economy warms up
The financial tsunami in 2008 caused the U.S. public financial contraction, forced to cut entertainment and living expenses have been through the recession, and then the economy gradually returned to the growth track, according to the U.S. Bureau of Economic Analysis retail sales data, retail sales have continued to maintain a positive growth since 2010, indicating that consumer spending continues to expand. Salary income and savings, in 2018, after deducting taxes, insurance premiums, the U.S. people's income increased by 5% compared to the same period in 2017, and the amount of savings also grew by 6.18% compared to 2017, looking at the performance of the income in recent years, in addition to the impact of problems such as the European debt in 2015.U.S. consumers' incomes continue to improve and will provide a good foundation for market growth.
(C) Emerging European markets showed remarkable growth and continued strong consumption.
The rapid economic growth of the European Union in recent years, the impact of economic improvement is also reflected in the performance of the local retail market, the EU consumer retail in 2018 compared to the same period in 2017 grew by 2.09%, the UK, France and other developed countries have an average of more than 2% of growth, and emerging markets in Central and Eastern Europe generally have a growth of more than 5%, and then observe the household income in Europe in recent years, the 2018 Looking at household income in Europe in recent years, EU household disposable income in 2018 was 1.15% higher than the previous year, and has maintained positive growth since 2013. The performance is the most impressive among the emerging European countries, indicating that Eastern Europe will be a potential region with economic growth and market opportunities in Europe in the future.
Challenges and Opportunities for Taiwan Enterprises to Expand into International Markets
(i) There is a market gap for business opportunities
1. Increase in Consumer Demand and Consumer Power
Increasing consumer demand and capacity in local markets is the first and foremost factor to consider when evaluating whether or not to enter and expand in a foreign country. China, despite the recent trade disputes, is still experiencing moderate growth in overall consumer spending, while Europe, driven by rapid economic growth in the emerging countries of Central and Eastern Europe, is also remaining optimistic in terms of consumer spending. In the United States, the latest Consumer Price Index from 2019 is 95.1, compared to 63.7 in 2009, indicating that consumers are optimistic about consumer spending. The improvement in demand and consumer confidence in key markets will provide strong conditions for companies to develop new products or expand into new markets.
2. Increased acceptance and willingness to try new brands
How to successfully operate their own brands in the international market has always been an issue of concern for many Taiwanese companies. According to the results of a survey conducted by The Brand Project on the European and American cosmetic markets, internationally renowned brands have not increased consumer loyalty, and the public still prefers to switch brands frequently. The US market is also in a similar situation. In recent years, some US consumers have shifted to higher-priced brands in their brand selection behavior, which means that consumers' brand decision-making in recent years has seen an increase in brand switching and a decrease in the propensity to purchase preferred brands.
(ii) Challenges that still need to be broken through
1. Blurring of the image and recognition of Taiwan as a manufacturing location
When expanding into emerging markets such as Southeast Asia, many Taiwanese enterprises face local consumers and use "price/performance ratio" and "Made in Taiwan" as their marketing communication appeals to capture market share through good quality but relatively affordable pricing, and they have indeed achieved good results. However, if the company is planning to operate in the European market, it may be difficult to touch the local consumers with similar marketing demands.
According to the results of the 2016-2018 branding program market survey, the European public is still uncertain about the image of Taiwan's manufacturing and overall industry, and will not increase their willingness to buy Taiwan brand products, so if we enter the European market in the future, we must rethink the main axis of marketing communication planning.
2. Changes in consumer demand in emerging markets
China has always been the priority of Taiwan enterprises to expand the international market, with the economic growth of the region and time evolution, in addition to the original affluent consumers in China, in recent years, the emerging middle class has gradually become the main group of market consumption, this group of emerging affluent middle class, driving the improvement in the quality of the products and the demand for well-known European and American brands force, in 2015 in the apparel, consumer electronics and other items In 2015, there was growth in apparel, consumer electronics, and other products.
This group of earlier affluent high-end customers, the early pursuit of luxury goods motivated by the pursuit of quality of life and social status, hoping to have the same lifestyle as Europe and the United States, driving the development of China's high-end market. In recent years, this consumer mentality has shifted to emphasize the emotional value link between brands and individuals, which will prompt Taiwanese companies to re-examine their market positioning.
New Technology Brings Changes in Consumption Patterns and Habits
(A) Gradual molding of the all-access pattern
How to smoothly connect online and offline channels to provide consumers and potential customers with a complete product purchasing experience is a channel business model pursued by enterprises around the world. In China, for example, due to the popularity of e-commerce such as online payment in the Chinese market, the scale of virtual channel retailing has grown rapidly in recent years. Although the proportion of overall retailing is still dominated by physical channels, Chinese consumers have basically realized the decision-making process of online and offline shopping in a full range of channels. According to McKinsey's consumer channel survey, most consumers will actually browse the products in physical stores before purchasing them online. Take footwear brands as an example, Nike, as well as local Chinese brands such as Li Ning and Anta, have set up branded concept stores in the city's busier shopping districts in recent years.The product display, activity experience and visual design of the store are all created with the aim of enhancing the consumer experience.
One of the reasons for the rapid growth of non-physical channels in the U.S. in recent years is due to the price factor. In recent years, Americans have become more willing to use the Internet to shop at more affordable prices, which has led to the development of the U.S. virtual channel market, which is expected to become one of the key purchasing channels in the U.S. in the future.
(ii) Rise of environmental protection, natural and sustainable development trends
With the gradual rise in public awareness of consumerism and environmental conservation, it can be found that in recent years, both at home and abroad, there are many new brands appealing to the positioning of organic and natural, environmentally friendly, etc. The emergence of these consumer trends will prompt companies to require more comprehensive considerations in future research and development or production.
Understanding and grasping consumer needs and trends is a constant challenge for businesses.
Due to the rapid development of information and technology, enterprises have been able to overcome many objective limitations to produce large-scale and inexpensive products. "Product homogenization" has made it impossible for enterprises to compete with one-dimensional differences, such as price or functionality, and make profits, and "fragmentation of demand" is another trend in the maturing of the market. Consumers nowadays are faced with a huge amount of information and knowledge, and it is expected that individual consumers will have a more comprehensive understanding of products and their own needs in the future, and will be more willing to pay a higher price for products that satisfy their needs. Under such a trend, branding has become an important ability for companies to create differentiation and communicate and interact with their target customers.
Expanding international markets has always been an unavoidable issue for Taiwan enterprises to further grow. It is true that the global market size and consumer power continue to strengthen, which is of great value for Taiwan enterprises to develop, but consumer preferences and demands vary greatly among different regions, and there are also many discrepancies between the established views of Taiwan property owners and the real appearance of the market today, and the expansion of new overseas markets requires a large amount of resources, which implies a difficult-to-assess operational risk for SMEs. Expanding into new markets overseas requires a large investment of resources, which means an operational risk that is difficult to assess for small and medium-sized enterprises (SMEs). Therefore, how to grasp the real consumer needs of the local market and formulate a correct positioning and communication strategy will be the key to the successful development of an enterprise in the international market.
(Source: July 2019 issue of Taiwan Economic Research Monthly (Vol. 42, No. 7))