Fitbit is a story of hope. After its entry into China in 2014, it had a lackluster two years. But then it completely changed its strategy to be more China-specific and has been rewarded for doing so.
In the beginning, Fitbit really did nothing special to sell its products there and was instead riding the hype and “cool factor” that was associated with its product being a new concept in America. While this is not an awful strategy to sell gadgets, it can very easily turn a company into a “one hit wonder” with little prospect of long-term sustainability.
Beyond the standard struggles Fitbit was having, wearable exercise technology was an over- saturated market in China with the heavy majority of the options being significantly less expensive than a Fitbit of any model. One advantage which allowed Fitbit to survive long enough to change its strategy and eventually thrive was that the Chinese market has a huge bias towards recognizable brands for reasons of quality and status. With the continuing middle-class growth in China, more consumers are able to purchase brand name items as a status symbol. And many Chinese consumers feel pressure to do so.
While Fitbit never came out and acknowledged that its Chinese market share was falling near the end of 2015, its primary competitor, Misfit, a company heavily invested in by Xiaomi (owner of JD.com), made sure to let the world know how rapidly its products were gaining market share against Fitbit. Misfit was playing China the right way with its Xiaomi partnership since Xiaomi was using JD.com to spoon feed Misfit to Chinese consumers. As discussed earlier in connection with WalMart (see the fourth installment), JD.com is China’s largest e-commerce site. Even though Misfit is a company based in San Francisco with only a few dozen employees, it conducted a $40 million USD Series C funding round in which Xiaomi was a large investor. After this funding, Misfit began to quickly gain traction in China with the help of its new partner, Xiaomi.
Learn from Fitbit’s pivots
Every American company thinking about going to China should take notes from Fitbit’s ability to learn and pivot. Seeing Misfit’s success, Fitbit worked hard to find the right partnership and develop guanxi with another major player in China. It did this by partnering with a subsidiary of Alibaba, Tmall (discussed in the sixth installment of this series). The reason this move was so incredibly clever is that Alibaba is a natural competitor of Misfit’s investor, Xiaomi. And the purpose of Tmall is to provide a channel for luxury brand items that are verified to be legitimate and sold directly to the Chinese consumer. This, of course, is very helpful to Fitbit.
In addition to its efforts to develop corporate guanxi, Fitbit has developed a good relationship with the Chinese government. It joined in an effort important to the Chinese government by being one of the partners for Alibaba’s government-sponsored initiative “China is Getting Fit.”
There is an enormous difference between the companies described earlier (in the second through the sixth installments of this series) who failed in China and Fitbit, who developed strategic partnerships with Chinese companies and befriended the Chinese government through helping to represent its health initiative. It cannot be stressed enough that while Fitbit is incredibly innovative and smart for its approach, any company could follow a similar path.
The author is Clayton “CJ” Jacobs, who is currently an Entrepreneur-in-Residence with, and the Head of Cross-Cultural Design at, ReadWrite. An area of focus for him is helping American companies understand and enter the Chinese market through taking a modern user-centric product design approach. You can contact him directly at clayton.michael.jacobs(at)gmail.com or find him on Twitter & LinkedIn.