Mattel's Barbie - A Great Case for Doing Business in China the Right Way

What could go wrong? You've got an enormous growing consumer sector, the world's largest economy and the world's best known doll. Well as it turns out everything can go wrong. Mattel is another high flying victim of failing to understand China before jumping in and assuming they'd make enormous amounts of money easily.

They've just announced the closure of their flagship Shanghai store a six storey heaven (or hell) of pinkness. A Barbie bar and a staircase embedded with over 875 of the dolls themselves couldn't save the brand here.

So what went wrong?

Mattel's biggest mistake was assuming that because the brand is well known in the West it would automatically be well known in China. In fact by and large Chinese people don't know much about Western brands at all, excluding clothing and cars that is. So given a wealth of locally made much cheaper equivalent products, the Chinese voted with their wallets.

The country's little girls simply didn't care about Barbie and why would they? Barbie's blond hair and blue eyes may reflect the archetypal American teen but it's not really a reflection of China's realities is it?

To compound their error the company decided to launch in Shanghai, one of the country's Tier 1 cities, a mistake that no Chinese retailer would make. It's well known that local companies don't test market in the highest visibility locations for a reason. Firstly they're expensive and secondly failure in these positions would be seen as a drastic "loss of face".

Smart retailers test market in Tier 2 cities, and not usually regional capitals but those cities that fall in the grey area around them. It's much lower cost strategy because rents are cheap and there are decent incentives to open businesses in these cities. They also have their fair share of high and low income families, who can give feedback (with their wallets) on a new range before making a high profile song and dance about it.

The keys to doing successful business in China

Market Research - it seems astonishing at how little research major retailers are putting into their market entry strategies. Without engaging with the Chinese consumer how can Western companies even hope to be successful? Consumer spending habits are very different as is brand recognition. The culture of the country is such that the "big bang" style launch may well be perceived as "boasting" rather than the intended "here we are" too.

Test Markets - There's way too much focus on Beijing and Shanghai and not enough understanding that there's an enormous number of other cities that are far less visible to gauge the market. No major Chinese brand starts off in these cities, they head to the more obscure Tier 2 cities make sure they have their formula right and then move up. There's a huge wave of Chinese brands making their way up through these easier to access markets now, and soon they'll be competing head to head with Western brands in Tier 1 cities on equal terms.

Mattel will be back in China, there's no doubt that the pull of the biggest consumer market in the world is too much to resist. Let's hope they do their groundwork properly this time.