This article was published in WARC, June 2024.
North American markets like Canada and the US are extremely attractive destinations for Chinese brands that are looking to internationalize, but successfully entering these markets is a complex task.
- Chinese brands often face early challenges in building mental and physical availability, especially if their category already features big, established local players.
- The large Chinese (and wider Asian) diaspora in many large cities can be an important initial target audience in building a local-market presence.
- Members of Gen Z are often the most open to Chinese brands, so targeting this audience of young consumers could be a useful approach for many brands.
Why it matters
For Chinese brands looking to drive long-term growth, international expansion is a critical task. The US and Canada, in particular, are very attractive markets due to the size and the sophistication of their consumer markets. But various tasks – from building awareness and distribution to tackling any potential regulatory issues – will need to be addressed to succeed.
Takeaways
- Markets like the US and Canada hold out enormous potential for Chinese brands, but thoughtful investment strategies will be essential.
- Building awareness, equity and distribution are critical tasks, and can be assisted through various strategies, including local-market acquisitions or gradual rollout plans.
- Launching on a digital-commerce sites like Amazon.com may be an attractive route for certain brands, as these platforms can serve as a proof of concept before seeking physical distribution.
Understanding the path to growth for Chinese brands in North America
Since the early 2000s, Chinese brands have started to expand overseas at a rapid pace.
With years of expansion, trial and error, a few of them have become global players with considerable influence in their respective industries, such as TikTok (social media), Lenovo (tech) and Temu (e-commerce).
The expansion of Chinese brands into the North American market, in particular, has been influenced by several key factors, including China’s rapid economic growth, increased global economic integration and a strategic shift by these companies towards higher-value manufacturing and services.
It has also been encouraged by potential growth drivers such as:
- Market diversification: By penetrating the North American market, Chinese firms can diversify their market base beyond China, tapping into a region known for its robust consumer demand for a huge variety of products and services.
The US consumer market, valued at US$17 trillion in annual expenditure, is inevitably the biggest draw; while the Canadian market is roughly 10% the size of its southern neighbor, it remains a significant and sophisticated business destination in its own right. - Brand internationalization: Entering North America allows Chinese brands to enhance their global visibility and prestige, which can improve their competitiveness both abroad and at home.
- Innovation/technology access: Recognizing North America as a center for cutting-edge innovation, Chinese companies frequently pursue acquisitions and partnerships to access sophisticated technology and research and development expertise.
- Capitalizing on trade policies: At various times, trade policies have made it advantageous for Chinese companies to manufacture abroad to circumvent trade barriers and tariffs, thereby maintaining competitiveness in crucial markets. At other times, especially in certain industries – most recently, microchips – the momentum has moved in the opposite direction.
The “going out” imperative
The internationalization of Chinese brands has been part of a broader strategy of “going out” encouraged by the Chinese government as part of its long-term economic development plan. This plan includes fostering brands that can compete globally and shifting from being the world’s factory to a global innovator and leader in various industries.
Tapping into this strategy, however, comes with major challenges, from developing brand recognition and distribution in new markets to, in several cases, running directly into regulatory controversy:
- Tech brand Lenovo made early inroads into North America through significant acquisitions, such as the purchase of IBM’s personal computer division in 2005, setting a precedent for other Chinese firms to follow. The Americas is now the company’s largest region by revenue, delivering US$19.6 billion of its US$56.8 billion sales for the 2023/24 financial year.
- Huawei and ZTE, in the telecoms and electronics space, expanded significantly in the late-2000s and early-2010s. As of 2022, however, they have faced regulatory bans on the sale of new and imported devices in the US due to national security concerns; Canada introduced equivalent rules the same year.
- In the home appliances category, Haier entered the North American market by leveraging technology and consumer-focused innovations. It acquired GE Electronics, a unit of iconic American brand General Electric, in 2016, greatly enhancing its local-market presence.
- Anker, the consumer electronics brand, pioneered a development model that used Amazon as its main route into the North American market. The company, best-known for its charging cables and power banks, launched on the e-commerce platform in 2011, and saw 30x growth via that channel in five years.
Having launched in brick-and-mortar Walmart stores in 2015, it now derives 40% of its sales from offline sales, with the Americas region accounting for a similar proportion of its global revenue. - BYD is jostling with Tesla for the title of the world’s biggest electric vehicle company. It has, however, opted against building a major presence for its passenger vehicles in the US to date, citing a mix of political worries, marketplace complexity and questions around soft consumer demand.
Geely, led by its Volvo subsidiary, has been more active in the US passenger sector, focusing on electric vehicles and leveraging acquisitions of established brands to gain market entry, as well as launching products that are at very competitive price-points. - TikTok, owned by ByteDance, has become a cultural phenomenon in North America, illustrating the potential for Chinese digital media companies to influence international markets. It has around 150 million users in the US and 14.9 million users in Canada, with young audiences powering this uptake trend.
The app’s explosion in usage has caused a stir among US lawmakers, which are seeking to force a sale of the wildly-popular app due to concerns – disputed by ByteDance – about potential data-sharing and access related to the Chinese government.
As demonstrated by these examples, the route to success – and likely pitfalls – vary by industry. But there are key steps that apply for any Chinese brand trying to take their first steps in North America.
A two-pronged strategy
For Chinese brands that are relatively unknown in North America, progress typically unfolds along two strategic avenues: targeting the Chinese (and wider Asian) diaspora and penetrating the mainstream market.
1) Focusing on consumers of Chinese and Asian heritage
When discussing the potential for Chinese brands in North America, it is essential to adopt a continental perspective rather than limiting the focus to the United States alone. Both Canada and the United States have significant Chinese populations – standing at 4.3 million people in the United States and 2.1 million in Canada – creating a combined market of considerable size.
And that is before mentioning the broader Asian communities in North America who are potentially familiar with, and interested in, Chinese brands. Research company NIQ estimates there are 22.4 million Asian American consumers with US$1.6 trillion in spending power; in Canada, over seven million people are of Asian ethnicity, and this cohort is the fastest-growing segment of the Canadian population.
Understanding the demographic distinctions between Canada and the US is essential. In Canada, the Asian consumer base – including Chinese, South Asians and Filipinos – form the majority, with people of Chinese heritage being the second-largest group. Conversely, in the US, Hispanic and Black consumers are predominant.
Marketing efforts in the US should also be city-specific, too, targeting areas with significant Chinese populations – such as New York, Los Angeles, San Francisco and San Jose – rather than taking a blanket approach across the country. Toronto and Vancouver might be similar targets in Canada.
One case in point: HEYTEA is a Chinese tea brand founded in 2012 and headquartered in Shenzhen. As of 2024, HEYTEA has 1,279 stores across China, with 482 new stores under preparation. It distinguishes itself from other competitors through its use of fresh ingredients such as fruits, tea leaves and premium milk devoid of synthetic additives.
And, in December 2023, the brand opened its first US store in New York City’s Broadway district, offering it access both to the Big Apple’s sizable Chinese diaspora and massive overall market. On the first day of trading, its NYC store sold 2,500 cups. The company also opened its first store in Canada, in Vancouver, last year as part of a major internationalization plan.
Staying in Canada, Chow Tai Fook – originally founded in Hong Kong in 1929, and today one of the world’s biggest jewelry brands – opened its maiden store (in Richmond, British Columbia) last year. Alongside the country’s diverse population, the company’s motivations for doing so included significant demand from Canadian shoppers who were visiting Hong Kong.
Another factor to consider is the generational status of Chinese individuals in North America. Seventy percent of Chinese Americans and Canadians, for instance, are first-generation immigrants.
However, second-generation Chinese consumers, who may have varying levels of brand awareness, should not be overlooked. They often maintain a bi-cultural identity, celebrating traditional festivals like Lunar New Year and the Mid-Autumn Festival. Many of them grew up in their parents’ homes, so they absorbed Chinese culture, but they are also fluent in American culture, too.
WeChat, a multifunctional messaging, social media, and mobile payment app that is widely used in China and was developed by Tencent, has become an essential tool for many Chinese immigrants and expatriates in the US to stay connected with friends and family in China.
Recognizing its entrenched user base among Chinese Americans, Tencent has expanded WeChat’s functionality to include services tailored for users in the US, facilitating everything from communication to business transactions. This strategic focus has not only solidified its presence among the Chinese community but also attracted a broader user base interested in its versatile features.
On its part, Alibaba, the Chinese multinational conglomerate specializing in e-commerce, retail, and technology, has successfully tapped into the Chinese diaspora through its AliExpress platform. The site offers products that appeal to Chinese consumers living abroad, including items that are hard to find outside of China.
By providing a familiar shopping experience and access to Chinese goods, Alibaba has maintained a loyal customer base among Chinese Americans, which has also helped expand its reach to a wider US audience.
JD.com, another big name in Chinese e-commerce, has also strategically targeted the Chinese diaspora by offering direct sales of Chinese products in the US. Known for its reliability and authenticity, JD.com appeals to Chinese Americans seeking products from home, and ensures that they receive genuine goods, which is a significant concern among consumers interested in overseas products.
Last year, JD.com also opened a “Pavilion of Canada” section on its platform to showcase a range of brands from the North American country to consumers living in China. This hints at prospective two-way benefits that come with the expansion of Chinese brands internationally.
Reaching consumers of Chinese heritage in the US also requires an understanding of their particular media habits.
While they engage with mainstream North American social media and media outlets, a significant portion of this audience consumes content in Chinese on platforms, too. Chinese and Korean dramas, along with other culturally resonant content, provide an avenue for in-language and in-culture marketing, giving Chinese brands a competitive edge in voice share over North American counterparts.
Research firm Nielsen has studied media preferences of US consumers speaking Chinese, Korean and/or Vietnamese – the three most-common Asian languages spoken at home, and an audience representing about 40% of Asian Americans – and discovered far higher levels of trust for media content in these languages than for equivalent material in English.
Influencers also play a more substantial role in the purchasing decisions of Chinese consumers compared to mainstream audiences, with a 23% influence factor among Chinese compared to 10% to 12% in the mainstream market.
Jiangsu Guowei Motorcycle Co., which specializes in the production of motorcycles and trikes, has successfully tapped into this trend. The company has experienced a surge in global sales, and helped facilitate this process in the United States through a partnership with a prominent US-Chinese Douyin influencer known as Bobo在美国 in early 2024.
2) Crossing over to the mainstream
Targeting the mainstream market significantly broadens the audience for Chinese brands but also greatly increases their outreach costs.Brand presence, recall and visibility are crucial in the mainstream market.
A case in point: Lenovo, after acquiring IBM’s PC division, invested heavily in NFL and Olympic sponsorships to gain consumer trust as it competed against established brands like Hewlett Packard and Dell.
Hisense, an electronics manufacturer particularly well-known for its TVs and home appliances, had a reputation with Chinese Americans for making high-quality electronics at competitive prices. To aid its acceptance in the wider US market, the brand utilized strategic sports sponsorship and advertising – for instance, during major events like the FIFA World Cup – to boost brand visibility and trust.
Similarly, e-commerce platform Temu’s Super Bowl ads, and an accompanying US$15-million giveaway, in early 2024 spiked brand searches, demonstrating the effectiveness, and high cost, of mainstream advertising. This investment also sparked a huge volume of consumer attention and media coverage.
The brand, supported with its “Shop like a billionaire tagline” and pocketbook-friendly prices, now has an estimated 17% share of the US e-commerce market; its launch in Canada last year was also marked with instant success, as its app soared to the top of the download charts for both Apple and Google devices.
Like TikTok, Temu is especially popular among young consumers. For digital-first brands, in particular, reaching these early adopters might be a useful approach – particularly given they are often the most open to using Chinese brands, according to a US survey from research company Morning Consult.
Answering the big question
When entering the mainstream market, it’s vital for Chinese brands to assess the competitive landscape. It is crucial to identify direct competitors, their market share, distribution channels and advertising spend. They must identify their products’ unique selling points, whether functional or price-related. This is key to convincing mainstream consumers to choose a brand.
Put simply, the job is to answer the most important question in business: “Why choose you?” Brands need to be able to answer the question for both Chinese consumers and the marketplace as a whole. If they can effectively do so, they can set the groundwork for success.
The long-term journey rests on understanding local consumer behavior and the broader geopolitical landscape. For Chinese brands, success in North America has often hinged on their ability to navigate complex trade policies, cultural nuances and consumer expectations.
As these brands continue to expand their global footprint, they offer valuable case studies in globalization, illustrating the potential for other emerging markets to follow suit.
Moreover, the role of media consumption and influencer impact in shaping consumer preferences has been critical. This dual approach of targeting the diaspora while appealing to a wider audience through relatable and innovative marketing strategies highlights a robust model for international brand expansion.
About the authors
Howard Lichtman is Founder & Partner of Ethnicity Matters and Vice President of the Board at The Asian American Advertising Federation (3AF) is a national trade organization comprised of Asian American advertising agencies, Asian market advertisers, Asian media companies and other industry specialists. See 3AF.org for more details.
Iris Yim is Principal and Chief Strategist at Sparkle Insights and Research Committee Chair and a Board Member at The Asian American Advertising Federation (3AF).