Overcoming the Chinese challenge: How a Singapore e-commerce platform is benefiting local supplement firms
Kinofy, a local company owned by supplement brand Kinohimitsu, was started after the latter had enjoyed a decade of success in China with its signature functional collagen drink.
Headquartered in Singapore, Kinofy has also set up offices in China and Malaysia. The firm positions itself as a platform that helps companies "kickstart their business in China by leveraging the power of social retail technology".
Essentially, it provides an extensive range of services required for Singaporean companies to bring their products to the Chinese market: after an initial consultation, the firm helps its clients to register their products in China in a matter of weeks, while conducting training and education programmes to help familiarise these clients with consumer demands and market conditions in China.
Kinofy also helps to secure logistics and warehousing in China upon successful registration, and sets up a channel between end-users and brands through WeChat, where customers can be notified of new products and promotions, and place their orders to be delivered to their addresses.
At the same time, businesses are given access to back-end app that uses analytics to allow them to track their sales, customer traffic and conversion rates.
Companies that use the platform include supplement and food firms, as well as skincare, cosmetics and personal medical device manufacturers.
Business development manager Jordan Ng told NutraIngredients-Asia: "We provide a one-stop solution for Singapore-made products whose manufacturers want enter the Chinese market but do not have the avenue to do so.
"Dietary supplements, health foods, skincare and infant nutrition products are some of the most high-volume products our clients sell to China through our platform."
He added that one of the main challenges such businesses face when trying to enter China is product registration: the dosage of different ingredients present in health supplements, as well as the format of the final product, tend to comprise the bulk of this challenge.
Ng said, "Ingredients like camphor, for instance, are strictly prohibited. Even with a popular product like bird's nest, there are further regulations to consider: in its raw form, it cannot be imported into China, and must always be sold in bottled form.
"Plasters or heat packs for treating bodily injuries are also not allowed to be registered if they contain glucosamine, but the oral form of glucosamine is allowed. Our ability to navigate these complicated rules lets us add value to our clients, by guiding them through such product registration issues."
Another common challenge is the cost of product registration, which can be as high as US$3,000 to US$4,000 per SKU (stock-keeping unit). Many companies run into roadblocks in this area, especially because of translation issues — they have problems accurately describing their products in Chinese, as is required when registering their products.
Ng added: "They also tend to have problems declaring their products according to the correct international HS (Harmonised System) code — if they are registering a health food product, they need to also declare what type of food product it is, as well as the individual ingredient percentages it contains.
"Often, they do not know which codes correspond with the categories their products fall under, and this is where we help them to successfully register their products."
Ng further said that in order to avoid the problem of products being misplaced or going missing en route to China, Kinofy works with "only the most reliable and reputable distributors in China", so that "all our clients' items reach the end-consumer in good condition, with nothing broken or missing".
"We also go through China customs and secure our official importation permit before helping to move our clients' products into the country."
Ng also emphasised the importance of WeChat for business selling to China, saying: "Our WeChat platform is one of the keys to our success: to our clients' customers, it may serve as just an online shop.
"But to us, it's part of the foundation: we first must build a base of followers, and only then can we be successful on the Chinese market."
Growth through government
To add further value to its Singaporean clients, Kinofy has also been collaborating with local government agencies, such as Enterprise Singapore, the Singapore Productivity Centre and Skills Future Singapore, to provide grants to local SMEs.
While the company charges clients a yearly fee of US$25,000 each for access to its full range of services, Singaporean SMEs are given a 70% government subsidy, slashing their annual fee to US$7,500.
Kinofy also works with the Singapore Institute of Retail Studies (SIRS) to provide training for its clients.
Ng said: "The SIRS has qualified trainers in the digital space — they may be Taobao-, WeChat-, or similarly certified, and are very familiar with how things work in China.
"One type of training we offer merchants is to help them properly understand the social planning tools in our platform and how to use them — these tools cover customer rewards, loyalty programmes, points systems, O2O (online-to-offline) strategies."
The government agencies involved are kept up-to-date on the progress of local SMEs through Kinofy, something Ng refers to as the firm's "report card".
While most of Kinofy's clients are Singaporean companies, it has also attracted interest from brands in Australia, South Korea, the UK, France and the US.
These brands are introduced to the firm via the government-to-government — or G2G — channel, whereby their countries' respective government agencies approach Singapore's to establish a working relationship with Kinofy and facilitate easier trade with China.
Unlike local SMEs, these foreign clients are not eligible for any government subsidy. However, Ng said, "They have found that even though they have to pay the full subscription fee to use our services, it's still cheaper than having to register in China themselves."
At the same time, while Chinese consumers have a strong preference for health foods and dietary supplements from Australia and New Zealand, Singapore is also highly regarded in their eyes.
Ng said the 'trust factor' for Chinese consumers when it came to Singapore-made supplements and health foods was high, especially since multiple food safety scandals throughout the years have made these consumers wary of China-made products.
"Singapore isn't known for its agriculture or locally grown produce, but it has a strong reputation in terms of food safety standards, which is key to conducting business successfully with China," Ng said.