The growth of the middle class has helped precipitate the development of a more consumer-based economy in China. As with many European companies, Sennheiser have been in the Chinese market for years, but are now looking to capitalise on Chinese consumers’ increasing demands for high-quality goods. After five years working for Sennheiser Electronic, Dr Andreas Sennheiser and his brother Daniel Sennheiser were appointed CEOs of the family-run business in 2013. They talked to EURObiz about some of the challenges of engaging with the Chinese market.
Q: Can you explain a little bit about the history of Sennheiser, its founding and recent developments that have occurred?
Daniel Sennheiser: The Sennheiser family has owned the company for 73 years, and we run it in a way that focuses on the long term. Alongside this corporate vision, we have tried to develop a business strategy that focuses on the customer and tries to anticipate what we think they would want in the near to far future.
Andreas Sennheiser: In 1968 the first hi-fidelity headphones were launched, and we have always looked to innovate on this and take the audio industry to the next level. Recently, the company has focused on digital transformations in the headphones industry. Of particular interest has been the recent advances in 3D audio. While fidelity is important, it is also crucial to develop an audio experience that is more ‘spatial’ than anything that has come before. The trick to doing this is to bring together the research and development teams that have purely focused on 3D audio and those that have constantly sought to refine the overall audio experience.
Q: What was it like when you first entered the Chinese market?
Daniel Sennheiser: We have actually been in China for decades, with the company’s technology being used throughout the country. The initial breakthrough came when our high-end audio equipment started to be used in television stations across the country. Growth was slow at first, but the Chinese market has increasingly come to appreciate high-end audio, as well as the importance of employing high-quality technology in corporate environments.
Q: What are some of the challenges in marketing high-end products to Chinese consumers?
Daniel Sennheiser: While there have been strides made in the Chinese audio consumer space, more needs to be done to understand the domestic environment and market these niche products more widely. We believe that Chinese consumers do actually want high-end audio products, but the promotion of these devices needs to be more tailored to the needs of people living and working in China. This type of product adaptation can also be employed in the commercial space as well. There are certain things that can be developed and sold more locally, which we have already started doing, such as hi-fi products that are used more in Asia than in Europe.
Q: Would you consider China to be an important market for future growth?
Andreas Sennheiser: China will definitely be an important future market for the audio industry, and currently it is the third largest market in the world.
Q: Have there been any innovatory changes in audio equipment that are specific to the Chinese market?
Andreas Sennheiser: China is seeing growth in certain audio products, such as closed-back headphones, that are resulting in innovations that could be used outside of the country.
Q: Because media in China is consumed primarily via mobile phones, which are not associated with high-quality audio, does that make it more difficult to sell high-end audio equipment to the typical Chinese consumer?
Daniel Sennheiser: China has been wanting a premium audio experience for a while, although communicating and marketing to the appropriate consumer has been a learning process. Over time we have come to realise that reaching consumers and identifying their needs is best done over the platforms they are most familiar with, which we have primarily accomplished on services such as WeChat.
Andreas Sennheiser: While high-end audio was not always a priority in China, this is rapidly changing, primarily due to exposure and education. Modern interpretations of fidelity, and even what the bit-rate for an audio file means for the listener, are different today than they were several years ago. For instance, today’s technology is quickly allowing an average consumer to record 3D audio on their mobile device. Despite the slow start, the Chinese public has quickly educated themselves, and does so extremely well, on what high-quality audio is and what technology is needed.
Q: Since so much relies on brand reputation to sell quality products, is counterfeiting in China a real concern?
Daniel Sennheiser: Inappropriate branding and the counterfeiting of products will, of course, not go away anytime soon. However, the primary way to reduce its occurrence is to educate consumers and ensure they have ways to buy our products from trusted sellers. This ultimately means reducing the number of unauthorised resellers that are marketing products similar to ours. We have been somewhat successful in this, as evidenced by a reduction in instances of counterfeiting. However, as Chinese consumers become increasingly well educated about high-end and premium audio products this issue will naturally decrease.
Q: What are some challenges that have influenced your investment decisions in China over the past 20 years?
Andreas Sennheiser: China is a very volatile place, and when domestic Chinese market players set their mind on something, changes can happen very quickly. This means we have to be flexible when it comes to our dealings in the Chinese business environment, and always need to be mindful of the rapidly changing regulations that can affect our business, such as policies related to the import and export of goods. These kinds of things play a major factor when we make investment decisions, and how we market to China.
Q: How do you see the wireless headphone market developing now that big companies are starting to invest more in this area?
Daniel Sennheiser: High-end wireless equipment is rapidly advancing today and we have already contributed to this market in China. This has been extremely beneficial for us, as the average Chinese consumer is beginning to gravitate towards the best quality products.
Q: Where do you see the future of high-end audio equipment, both in and outside of China?
Andreas Sennheiser: The future of high-end audio equipment is in smart devices: those that are connected in people’s households and that make people’s lives easier. This type of technology also has interesting possibilities in China, as it is a rapidly developing country that will soon be adopting 5G technology. At the same time, people are quickly adopting mobile 3D recording technology. Sennheiser’s Ambeo Smart Headset was developed to bring together connectivity with smart devices, wireless technology, and the 3D-audio environment. While widespread adoption of this type of technology may be slow initially, we believe this is the future of audio.