MAI Knowledge

Further Advice on China Expansion

April 4, 2018

In a few weeks, I will be giving a presentation at the Naturally Good Natural Organic & Healthy Products Expo in Sydney.

Ahead of this, Nutra Ingredients-Asia reached out to get some general advice for companies specifically in the health food and supplement space that want to expand their products to China, covering a range of interesting topics.

You can find the full piece that they did on their site:

https://www.nutraingredients-asia.com/Article/2018/03/14/Think-beyond-e-commerce-and-Tier-1-cities-Advice-for-long-term-supplement-success-in-China

I thought that some of the broader advice given is applicable to most companies more generally and so it’d be a good idea to share some of that here.  

Key Obstacles to China Market Entry:

One of the major obstacles we find is that companies have a lack of understanding of the market. You need to not only understand your customer, but also regulations, timing and cultural differences in both business and consumer behaviour.

You also need a clear sales and marketing strategy that goes beyond just ‘selling on key e-commerce platforms’. Really think long term about how you are going to communicate with your Chinese customers, and where your product is to be seen and sold.

The Opportunity in Cross Border E-commerce and other Emerging Sales Channels:

The Chinese E-commerce market is huge, and it’s not going away anytime soon, so it must always be considered as a core sales channel when dealing with China. Many brands have been successful in the past using this channel as a key entry method.

Increasingly we are also seeing an O2O trend emerging, there is a resurgence of combing online platforms with bricks and mortar stores, so establishing a domestic presence is going to be needed for brands that want to have long term success in China.

The Opportunity in Lower Tier Cities:

Huge opportunity remains in the lower tier cities, as these cities will develop significantly over time. Brands that can successfully reach these markets will have an advantage being present earlier on, obviously Tier 1 cities represent the largest markets, and so the number of brands that operate in these markets means that sometimes consumers have almost infinite choice. For example, there are tens of thousands of choices for imported water in Tier 1 cities.

That is not to say that there is no more opportunity in Tier 1 cities, it just highlights that for some companies, there may be good opportunities to expand into lesser known (and often less competitive) markets, depending on your product.

Biggest Risks Entering the Market:

There are many risks that need to be considered, some of the most common are not being fully prepared, falling short on stock, handling of logistics and customs which can often create unexpected issues or setbacks.  Selecting the right partners is also highly important, as is being blinded by the “China is big” opportunity and not realizing that it takes some time to activate and understand the market.

Opportunities in Broader Asia:

Asia more holistically is a great opportunity for Australian brands. Countries like Indonesia, Vietnam, Korea are all huge growth areas, particularly as the middle class change their tastes and awareness around food and nutrition. Most people understand the huge opportunity that exists in the Asia going forward, and Australia is very well positioned to capitalise on these opportunities given our close geographic proximity and our already strong relationships.

The Natural Organic & Healthy Products Expo will be in Sydney on the 29th-30th of April. Hope to see some of you there.

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