Doing Business in China - How Far Do You Go to Localize?

Walking into an Ikea store in China may possibly have those familiar with a typical Ikea store in the west wonder if they've walked into a movie set of sorts.  Nearly every piece of furniture that demonstrates the comfort of sitting or sleeping is occupied, by real customers, taking a real rest, just like they would at home.  The whole family may take a nap together in the bed, blanket covered and all, solidly snoozing off.  No one else finds this strange and the shop assistants patiently wait for people to wake up. 

 

After nearly two decades in China, Ikea had learned that in order to succeed in China, it needed to adapt its business to local culture farther than they ever imagined.  As an example of a success story in China today, Ikea had dramatically increased the localization of its supply chain that helped slash prices by 60% so that they could compete with local "copy cats".  They redesigned their showrooms and changed the sizes to replicate a typical Chinese family's condo dwelling.  They even greatly expanded delivery and assembly services to cater to the Chinese consumers because the latter are not that into "do-it-yourself" projects. 

 

Allowing customers to use their store as a "theme park" or social gathering place is another example of how far Ikea is willing to adapt to make their customers feel comfortable and at home, literally.

 

How far do you need to go to localize your products and product experiences in China?  The answer can be far, very far.   Take another example, during the recent "Mid Autumn Festival" celebrated around China, Allianz China General Insurance rolled out a rather unusual insurance product.  For a nominal premium, customers get insurance for the viewing of a bright and unobstructed moon.  "Mid-Autumn Festival" is an important Chinese holiday where families get together to enjoy the view of the full moon and eat moon cakes.  Without the full moon, the holiday would leave much disappointment.  Allianz cleverly offered this unique niche product that can only make sense to the Chinese.  And as a result, they've succeeded in getting their names out to many new customers.


And speaking of moon cakes, Haagen Dazs in China launched "ice cream moon cakes" in time to celebrate the holiday.  And reversely, Godiva introduced chocolate moon cakes in the U.S., an innovated move that helped it attract and retain Asian and non-Asian customers alike. 


How do you go about getting it right to localize your products and businesses in China?  A few key things:


1.   Utilize Local Talents

Get serious about using local talents to help you learn about the Chinese market.  Give local talents latitude to come up with ideas.  Chinese talents can be very entrepreneurial but they need a supportive environment to let their creativity shine.  Where possible, establish a local R&D team that focus on product modifications and innovation that suit the Chinese market.

 

2.     Withhold Judgment

Some "unique" products or product experiences in China can seem so unusual and even "culturally unacceptable" from the western point of view.  Withholding judgment can be more easily said than done for western executives who often make the final calls in product decisions.  It is therefore extra important to try to "put yourself in the Chinese's shoes".  The reward can be very handsome.

 

3.     Learn Chinese Culture

Needless to say, how successful a company can localize their products and user experiences are closely related to how well it understands the local culture.  For western executives who oversee the China market, wheather you are physically in China or away, it is imperative to continuously study and learn about the Chinese culture and customer behaviors at a deep level.   The more one is in tune with the local culture, the better off he/she will be in navigating the unpredictable Chinese market.

 

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