Think beyond e-commerce and Tier 1 cities: Advice for long-term supplement success in China
That was the advice given by Tom Ellis, investment director at Australian investment group MAI Capital, ahead of his presentation at next month's Naturally Good Expo in Sydney.
He told NutraIngredients-Asia: "Increasingly, we are seeing an O2O (offline-to-online) trend emerging. There is a resurgence of combining online platforms with brick-and-mortar stores, so establishing a domestic presence is going to be needed for brands that want to have long-term success in China."
Still, he maintained that brands would do well to make e-commerce a core sales channel when doing business with China, as that market is 'huge' and "not going away anytime soon".
Lower-tier, high chances
He added, "Huge opportunity remains in the lower-tier (Tiers 2, 3 and 4) cities, as these cities will develop significantly over time."
He explained that while Tier 1 cities represented China's biggest markets and gave consumers an almost infinite range of choices, the advantage of successfully entering lower-tier markets was establishing a presence earlier than other companies, and likely having more time to gain consumers' trust and loyalty.
Obstacles to overcome
When broaching the topic of barriers to entry, Ellis — whose firm invests in companies looking to expand into China — highlighted that supplement firms often lack a good understanding of the Chinese market.
He said, "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'."
In terms of the risks surrounding market entry, he said a lack of preparation, insufficient stock, and the mishandling of customs and logistics were among the most common.
He also emphasised the importance of selecting the right partners, and not being blinded by the "China is big" opportunity, which hinders one's understanding of the market.
Examples to follow
Australian supplement brands have been doing well in China, with companies such as Blackmores and Swisse among the more prominent successes.
Ellis attributed this to the positive 'Australian brand image' such firms enjoy in China, especially in the health food and supplement sector, where product quality is paramount.
He said, "It's also been great to see companies like Chemist Warehouse partnering with sales platforms to get their products out there, particularly around key sales events like 11/11, which are crucial to understand for building brand awareness and launching new products."
Beyond the Great Wall
While China has been a lucrative market for a good number of Australian supplement firms, Asia on the whole also presents a wealth of opportunity.
Ellis said, "Countries like Indonesia, Vietnam and Korea are all huge growth areas, particularly as the middle class change their tastes and awareness around food and nutrition."
The Naturally Good Expo, to be held at the ICC Sydney Exhibition Centre on April 29 and 30, will be preceded by the Naturally Good Expo Business Summit on April 27.
The expo will feature exhibitors across the F&B, complementary medicines, and natural beauty sectors from Australia, New Zealand, China, Hong Kong, Southeast Asia, South Asia, Europe, the UK and the US.
Ellis will be one of the industry experts leading education sessions at the expo, and will also be on an industry panel at the business summit for a session on Australian health brands looking to enter the Chinese market.