Chinese brands expand globally, shift from value to premium

Haier transforms its appliance business into an ecosystem of products, services

Doreen Wang
Global Head of BrandZ™

The journey from value brand to premium is not an easy one. But it’s one that many Chinese companies are trying to make.

The imperative is not just to appeal to local consumers but to build awareness and recommendation in every country around the world, partly in response to President’s Xi’s clarion call to Chinese businesses to go global, but also highlighting the changing culture among Chinese businesses.

The success of these efforts can be seen in the BrandZ™ Top 100 Most Valuable Global Brands 2019 study, with Chinese brands taking eight of the top 10 places in the most valuable Asian brands ranking and 15 places in the overall listing.

Limited brand awareness in international markets, a lack of trust due to historic quality issues, and a reluctance by Chinese brands to invest in impactful global advertising campaigns may have put Chinese brands at a disadvantage in the past but those issues are clearly being dealt with.

E-commerce behemoth Alibaba, No. 7 in the Global ranking with $131.2 in brand value, and smartphone maker Xiaomi (No. 74, $19.8 billion) are among a host of Chinese brands perceived as being innovative and cutting edge by young consumers all over the world.

Haier (No. 89, $16.3 billion) is another company making the same journey. Since being founded in 1984 it has expanded via a combination of organic growth and global brand building to become the world’s largest provider of white goods. It now has more than 80, 000 employees and a global revenue in 2018 of around $35 billion, up 25 percent since 2015.

Haier’s journey is something of a legend among business leaders. Its premium positioning is now centered on two key factors: the company’s ability to create an Internet of Things (IoT) ecosystem and a management philosophy called Rendanheyi that’s designed to put customers and employees (seen as entrepreneurs within the company) first.

Connected appliances and competitive advantage

While many have laughed about the connected fridge, Haier and its brands, which include GE Appliances in the US, are turning the connected appliance into a competitive advantage. The company has built the delivery of Internet of Things type services into its devices.

For example, food and drinks ordering from Haier fridges and wine cabinets and the ecosystem behind them will ensure that users never run out of milk or an essential ingredient for a recipe. The technology is open so that it can also connect to new services such as Alexa.

The construction of the ecosystem brand is designed to build value interactions that go far beyond the traditional transactional relationship that consumers have with white goods brands. It creates contact points that can help the company perceive and identify user needs. This enables Haier to not only deliver better, more personalized services but also expand its user base as it identifies and senses groups with more diverse needs.

While the ecosystem doesn’t directly generate revenue through charging customers, it is proven that it does generate greater value potential to Haier and its brands, in turn making the brand more valuable.

By providing connectivity as well as a premium ecosystem of available partner services Haier is able to command a greater value potential, so that it can get access to a higher ecosystem revenue. In fact, having an ecosystem of services that are fast is becoming one of the big drivers for consumers to stay with the brand or indeed to invest in it for the first time. The value services provide to their lifestyle has a positive impact on the overall brand experience.

Global rollout, local ecosystems

Creative product design, easy access to a premium lifestyle and existing heritage of the brands in Haier’s portfolio is fueling the global rollout of local ecosystems so that the advantage of connection can be applied beyond China and the US.

This approach not only ensures that Haier is less vulnerable to price wars in consumer goods, partly caused by online marketplaces like Amazon and Alibaba as well as changing consumer behavior.

It also increases brand value and the ability of Haier to command premium pricing and a “stickiness” that will see shoppers continue to buy Haier products and services for years to come.

In tracking the growth of the world’s most valuable brands since 2006, we’ve identified that factors such as making people’s lives better; behaving in a socially responsible way; trust; being perceived as innovative and providing an enjoyable user experience are vital to the premium positioning.

The bottom line is that consumers put higher value on the services and products that improve their overall quality of life, often as part of a complex ecosystem. We may be familiar with that in the technology space, but Haier is bringing the same premium philosophy to white goods.

The ecosystem that Haier is building will be key to its continued brand journey and future business growth.