Starting out at the top

Preston said it is possible for most of the foreign brands to go in for higher positioning, as there are still a lot of misconceptions among Chinese consumers.

"It is also more of a cultural thing. In India and Brazil, customers don’t buy the product to show off their wealth. But in China, using expensive products is considered a status symbol.

"There are lots of opportunities for foreign companies to further upgrade their image in China. With more than 500 million Chinese people still living in villages, it will take decades for many of them to urbanize and accept the new concepts."

But that does not mean that the road ahead is smooth. There are potholes ahead, Preston said, adding that "competition will be fierce as more second-tier brands are now moving to China".

Foreign card

While the higher positioning has been advantageous for brands like Days Inn, in the case of many others like Swedish furniture maker Ikea, it has more been a case of passive re-branding. Yvonne Yin, public relations manager of Ikea Retail China, said that the company adopts the same kind of positioning everywhere in the world and its products are targeted at the mass market.

But in China, the company is still considered a novelty by most of consumers.

Such has been the draw of the brand that it is not uncommon to see people speaking various dialects thronging the company’s stores in China. Most of the visitors to its stores are women aged between 20 and 50, including a large portion of white-collar workers.

In the traditional Chinese home decoration concept, tidiness and order are highly appreciated — walls are often snow white and furniture is placed along the wall. But in the Ikea outlets, Chinese customers can often be found making a beeline for the living room sofas, bookshelves that can be nailed onto the wall, and flowers hanging from the window.

"Most customers treat Ikea as a symbol of Western way of life," Yin said. "That’s why we are considered a 'petit bourgeoisie’ brand, maybe because of our display, but not because of our intention to do so."

Preston at Nielsen said that he can understand the kind of "passive upgrading" that is happening to companies like Ikea.

"When a brand of a particular category enters China, it’s a novelty at first, and people want to try it. Later on it becomes a premium brand as it’s different, much like what McDonald’s did some 20 years ago," Preston said.

But when the overall wealth of the society grows further and people get used to the novelty, the brand will revert to its original status, he said.

Ikea is not the only foreign brand that has captivated Chinese customers with its strong "foreign" aura. Clothing brands like Zara, H&M and even Forever 21 have gained better recognition in China for their authentic US or European designs.

"Western clothing brands like Zara and H&M are targeting younger customers who want to feel and dress like Americans, but cannot afford to spend a lot of money to do so," said Mike Bastin, a researcher at the School of Contemporary Chinese Studies at Nottingham University in the United Kingdom.

"The Zara and H&M stores are seen as outlets that are affordable, have good music and sport Western designs."