China access specialist Paul O’Brien shares his most recent observations about the world’s biggest and most dynamic marketplace.
Paul O’Brien, former CEO and GM Asian Sales for Easiyo and now business manager nutraceuticals at Douglas Pharmaceuticals, has had many years’ experience in researching and accessing the highly challenging Chinese market. More than anyone, he knows that knowledge is empowering. He also knows that in China the playing field for doing business is constantly changing and developing.
Douglas Pharmaceuticals has signalled its intention to enter China in a measured and professional manner using consumer research, NZTE support and a market-led strategy for its CLINICIANS® range of nutraceuticals.
So, here, and in no particular order, are 10 of his most recent observations on China since being at Douglas; observations that Paul hopes will help you to understand this highly complex and highly challenging market.
1. E-commerce/cross-border trade is now massive and dominating FMCG sales in China.
In fact, e-commerce is so rampant in China there is now a new process underway called O2O, which means Online to Offline; in other words, e-commerce traders are now thinking of ‘bricks and mortar’ – almost the opposite to what’s happening in New Zealand.
2. Most Kiwi companies seem to want a site on an e-commerce platform in China but forget about market research and brand investment for future equity. Just having a site on a platform will encourage price discounting which is a slippery slide downhill.
Ideally you want an online selling site as well as a Chinese language own brand site to show legitimacy and authentication. Both sites should be linked together so that sales and brand information are easy to follow.
3. ‘Blue Hat’ (a term that refers to the official registration process to allow bulk healthcare lines into China) is recommended as an alternative to the cross border e-commerce process. It is typically a two-year project and will cost you NZ$12k to $15k for each SKU. But, the rules may change in the future so no guarantee of how sustainable this process may be.
4. Setting up a flagship mall sales website on the highly popular T.Mall or JD.com platforms will set you back around NZ$40k to $70k. These are the big two B2C sites in China, whereas Taobao is still dominant as the C2C platform in China.
5. Social media activation is a very important part of the marketing mix when accessing Chinese consumers, and blogging is rampant. KOL (key opinion leaders) are around NZ$5k minimum to secure and they are essential for blogging action. KOLs can be incentivised with a link to sales so they ‘clip the ticket’ on sales activity.
6. Social media games can cost NZ$10k to $20k and perform well in China – a good example is the recent Air New Zealand Queenstown ‘shake game’, where you have to shake your mobile for 60 seconds to see if you qualify for the draw. The shaking draws attention and encourages more entries from people nearby.
7. The Free Trade Zones in China are growing rapidly; the Chinese Government are monitoring the massive growth and may make changes in the future. The tax on health supplements is currently ten percent, but for skincare products it is much higher at 50 percent.
8. Whilst the Chinese GDP may have slowed down a little in recent times, I have seen no slowdown in demand for premium healthcare, food and beverage products. When I was in Hangzhou in December the Chinese President visited AliBaba the same day as I did to see Jack Ma and discuss e-commerce strategy. I suspect the government is happy with the rise in personal consumption as it helps GDP keep rolling along at six to seven percent per annum.
9. New Zealand Trade and Enterprise (NZTE) has been very supportive to me in my export career and at Douglas currently; a relationship helped somewhat by our consumer research programme and serious marketing investment in China.
For larger companies NZTE offers Beachheads support in-market which is extremely helpful.
10. The NZ Story is a must have for world class marketing collateral; it is sector specific and great for in-market presentations. This marketing material should be built into your brochures, videos and online formats. Don’t leave home without it! (See: www.nzstory.govt.nz)
