Today, founder of 1 World, Jean-Luc Duong, a successful TP in China discusses with us ways in which foreign brands can enter the Chinese market effectively. Below, he shares his advice, guidance and top tips on current trends, high-demand products and effective USPs in China.
China is today the world’s largest E-commerce market and the retail sales revenue is set to hit over a trillion USD this year.
China’s E-commerce market has shown exponential growth in the past five years and is predicted to continue growing by 8.6% the next five years (CAGR 2020-2024). With a window of seemingly endless opportunities on offer, the China E-commerce can prove to be extremely advantageous and beneficial to any brand attempting to enter the Chinese market – as long as it’s done the right way.
1 World is a China market entry and strategy consultancy and TP in China. The company helps international FMCG brands to get successfully established on China E-commerce and to drive their business.
Before you share with us your advice, can you explain what a TP is, its role and the importance of the TP in China to a brand?
A Tmall Partner (commonly referred to as TP), is a brand’s Chinese e-commerce partner. With the right TP in China, brands are able to manage their day-to-day e-commerce business effectively and contribute towards the overall company growth.
Effective management of the day-to-day business is fundamental as it includes store operations, logistics, customer service and post-sale service.
A brand’s store rating is based on its sales figures and consumer satisfaction, and a store rating in turn influences the sales.
In addition to the flagship store, sales can also be generated on other channels. The right TP, with a strong distribution network, can boost a brand’s sales on Taobao, Tmall Direct Import, WeChat, RED and other relevant platforms.
It is therefore absolutely vital for a brand to choose the right partner.
How can a company see whether the China E-commerce may be interesting for their brand?
To see if their brand may be a good fit for the China E-Commerce, a company could ask itself the following questions: Is the product category of our brand trending? How does our brand stand above our competitors? Do we have a long-term strategy and vision for the Chinese market?
Could we discuss these questions in detail?
1) Is your product category trending in China?
What are the most popular type of imported products in China?
In general, Chinese consumers, who can afford it, still prefer international brands as they stand for high quality and trust. The highest-performing imported product categories are mum&baby care, beauty, food, and fashion.
The last two years we saw new categories trending and these are pharmaceuticals, vitamins & dietary supplements, pet care, kitchen & homeware, and high-end sportswear. These categories are growing double-digits year on year.
Which countries are best known for products in the above categories?
Western brands as well as brands from East-Asia enjoy a good reputation among consumers. For the categories mentioned above, many of the strong performing brands are from Germany, France, the US, Australia, Japan or Korea. There are of course also brands from other countries that are doing well.
Are there any product groups that aren’t doing so well in China?
China E-Commerce is still growing strongly. Many FMCG categories are still showing an YoY double-digit growth, there are however few categories that have slowed down, to a high single-digit, which is of course inevitable after high growth.
China’s market is nowadays on every brand’s radar. The competition not only increased among international brands but also between international and local brands, as the latter ones are gaining in quality and appreciation from Chinese consumers. This just highlights the importance of choosing the right partner or TP in China to enter the market, to operate your E-commerce and to drive your sales.
How can brands get the type of information on local trends that you just shared with us? Is there an effective way of doing this?
There are constantly new and updated Chinese e-commerce studies that can be found on Google, but for best results and to ensure the most accurate and up-to-date information, I’d strongly recommend getting directly in touch with an agency in your field of interest. Partering up with a competent agency allows you to gain a clear view on the opportunities and challenges that the Chinese market can represent for your brand.
2)Branding and USPs:
You mentioned that the competition increased in China. How can brands make sure that their products stand out? What do you think are the most important brand/product attributes to have when entering the Chinese market?
Chinese consumers are nowadays spoilt by a great number of choices and are looking for brands that are trustworthy, reliable and capable of supplying a high-quality service.
Brands need to set themselves apart from the competition to attract the consumers’ attention. The brands’ USPs that work back home or in Western markets may be only partially applicable in China. There is, after all, still great cultural differences between the West and China.
It is essential that brands adapt their USPs to speak to Chinese consumers and to be relavant.
To help with this, brands can rely on the support of China strategy and market entry consultancies and marketing agencies.
The differentiator for brands that succeed in China is their level of commitment to developing their brand in China. It not only requires a substantial marketing budget but also time and dedication of their team.
3) You shared that commitment and dedication are key. Can you further elaborate?
How dedicated does a brand need to be when it comes to entering the Chinese market?
Building a brand takes time and it is not different in China. It is essential that brands that have the intention of entering the Chinese market, have not only the proper strategy and realistic expectations but also a long-term vision for the market.
Most internationally well-known Western brands are not known to Chinese consumers. This means a start from zero, which is a great challenge on any market, but perhaps a slightly greater one in China. Commitment means in this case being prepared to take time to build your brand as well as to invest in marketing.
Another important point is the partner that brands choose to support them in this challenge, as it is decisive for the brand’s success.
What sort of marketing budget is to be expected?
The market entry costs in China are nowadays comparable to international levels. Building a brand, engaging with consumers, driving traffic and such require a substantial budget. This budget will depend on the category and the expectations of the brand. A new brand may expect to invest 30 to 40% of its annual targeted GMV for the first two to three years. The ratio budget to GMV decreases to around 20 to 25% the following years, once the brand has gained brand awereness.
The first half of the budget is usually invested on on-platform marketing (i.e. Tmall) for banner ads, SEO and such to drive traffic to the brand’s flagship store. The second half is invested on off-platform brand building on the Chinese equivalent of Instagram or Twitter and also through KOLs, Livestream, as examples.
These are recommended ballpark numbers and examples. Every brand needs its individual marketing strategy
Thank you for your very useful insights on the China E-Commerce. Last questions: What are 1 World’s USPs and what are the reasons brands should choose you?
Thanks to our European and Chinese backgrounds, we fully understand the particularities of both the Western and the Eastern mindsets, cultures and values. We know how to translate the values of a Western brand to values relevant to Chinese consumers.
Over the past 13 years we built and enhanced our expertise on the Chinese market and the E-commerce industry.
Our focus on the FMCG industry has allowed us to establish a strong distribution network across various FMCG product categories and this with partners who are among the leaders in each of their category.
If would like to learn more about the Chinese E-commerce landscape, TP in China, and ways to successfully entering the Chinese market, feel free to get in touch with 1 World.
If you would like to become more familiar with Chinese social media channels, KOLs, contact HI-COM today to find out how we can help you!
HI-COM is an international communication and localisation agency with over 10 years of experience in the Chinese market. With offices in Shanghai, Guangzhou and Hong Kong, HI-COM serves its loyal customers in more than fifteen industries, including tourism, hospitality, e-commerce, and retail.
For more information about e-commerce translation or Chinese Social Media content management and Chinese KOL/Influencer marketing support, get in touch! KOL marketing is one of the most effective ways for a brand to connect with its target audience, and China is one of the most “influenced” societies in the world.