Don’t blame knockoff products
Food storage container maker Lock & Lock is one of the notable Korean brands that is successful in China. The company became so popular that its items were considered a must-have among affluent Chinese households. But about a year ago, its sales began to slow, and in the second quarter of this year, its revenue went down by 44 percent compared with the same period last year. Many people have said that knockoff products affected the sales. But is that really the cause?
The company first expanded to China in 2004, at a time when there were no air-tight food containers in Chinese kitchens. And Chinese consumers raved about Lock & Lock containers. Ten years later, various similar local products are available. The technology is not so different from Lock & Lock, but they sell for half the price of Lock & Lock. And they are not knockoffs but products made with Chinese companies’ technology. It is silly to believe that Chinese companies would sit idle for 10 years and let Lock & Lock monopolize the market. When the technology is not very different, price is the most crucial factor. Naturally, consumers will choose the similar products for half the price. That’s why Lock & Lock is struggling.
Lately, Xiaomi has emerged as a threat to the Korean IT industry and Samsung’s Galaxy phones are struggling in the Chinese market. Xiaomi used to be considered a rip-off of Apple. But Xiaomi phones were not copies. It has been revealed that they made their own products with their technology to meet the demand of Chinese consumers. And they are half the price of the Galaxy. The brand name of Samsung could add value to the product, but when choosing between price and brand, many Chinese consumers choose price.
And other foreign companies also get pushed out by “knockoffs.” In 2004, China invited high-speed rail technology experts from Japan’s Kawasaki, Germany’s Siemens and France’s Alstom. Six years later, China developed technology for a high-speed train that can run at 380 kilometers (236 miles) per hour. A Kawasaki official lamented that they had underestimated China’s technology.
Lee Chun-woo, president of Caracara, which distributes middle- and low-end cosmetics in Beijing, said that when a company becomes arrogant and thinks only their products are top of the line, Chinese knockoffs will encroach on their market share. Companies need to look at price competitiveness, not just technology.
You have to offer a reasonable price in order to break into China. Instead of adhering to the premium market, companies should offer a model for the general public. Rather than criticizing knockoffs, companies should pay attention to their development progress.
The author is the director of the China Institute of the JoongAng Ilbo. JoongAng Ilbo, Sept. 22, Page 38
By HAN WOO-DUK