China: The World's Most Competitive Market

China is the most competitive market in the World. Many brands have dramatically underestimated the scale of competition and have not calibrated their marketing spending to the right level of competition.

Across almost all industries and categories, China has the largest number of competitor brands per category. A brand entering China from another market can expect to face 5-10 times the number of competitors in China as they would in their home market.

China has been viewed as the big prize and everyone has gone after it. And, with barriers to entry being low over the past 15-20 years, there have been a lot of brands coming into the market to take a shot at capturing a share of the market. With entry costs have been very low, for a long time, there were (and are still) a lot of brands viewing China growth as a one-way bet.

Entry costs and growth costs are however two very different things. Entry costs are low but winning costs are very, very, very high in China. For many brands, low-entry costs could be misleading toward what the costs for winning in the market look like.

As the leaders continue to build and consolidate market share, the middle-of-the-pack brands are going to have a hard time rationalizing their place in the market. The question that will be asked by many is; ‘why am I battling it out as the number 22 ranked brand in my category, with only a 0.5% market share, now as costs continue to rise and our margins are shrinking.’

More Brands Per Category

There are more brands per category in China than in any other market worldwide. Brands from US, EU, Asia are all competing for what is seen as the big prize of China’s 1.4 billion people.

Take a category leader from Europe who is in China. That leading brand from Europe is joined by the other leaders from Europe, together with the leaders from the US, leaders from Asia, competitors from rest-of-world, as well as the best from China itself.

The number of competitors from China has been growing the most quickly in recent years and they are the most formidable -with most aggressive, market-ready tactics.

Middle Of Pack Brands Are Struggling While Top Brands Control Categories

The concentration of market share - by top players -per category in China is looking very similar to the level of concentration seen in other countries such as Europe and North America.

While the level of concentration varies by category, it is common to see the top 10 players in a category controlling 50-75% of the category sales and the top three per category controlling 25-50%. In less competitive markets, there might be enough share to go around for brands outside the top tier. But, in China there are often in excess of 100 brands per category, so the share for ‘the pack’ is very small and market share is becoming concentrated with top 5-10 players per category

Collectively the top five brands typically account for 35-65% of market share. For most categories in China, there are 70-100+ players per category (the middle of the pack is very large) while, niche brands (inc. DTC) have low market share but strong audience loyalty.