In just three years, Australian vitamin brands Swisse and Blackmores have carved out a $500 million export business in China — a success story that’s seen many other brands, in many other categories, consider following suit. And with marketing at the centre of that cross-border success, businesses are keen to understand the lessons learned.
Marketing is about creating and selling a product that consumers need. It’s about understanding a consumer group so well, you can develop the right product for them, at the right price, promote it to them, and make it available to buy at a convenient place.
China’s consumers have evolved rapidly. The rise of the urban middle class, which is expected to grow to 350 million people by 2020, has led to the adoption of a more Western lifestyle and diet. The Chinese over-60s market is the biggest in the world, and will have more than 220 million people in it within five years. The move away from the one-child policy adds 16 million babies to the market every year.
Combine that with the swift industrialisation of the country, and China is now the world’s second-largest economy, and like Australia, has gone a quarter of a century without a recession. But that industrialisation has meant air pollution problems in its biggest cities. And the increasing number of children leaves a tertiary education system struggling to keep up, with only 5 per cent of high school graduates able to gain a university spot. The Western lifestyle and diet is also creating growing health issues.
So the needs of the Chinese consumer now include reducing stress, restoring energy, getting more sleep, optimising their kids’ health, ensuring healthy pregnancies, fighting off allergies and battling ageing. It’s little wonder the Australian and US vitamin companies, as well as fresh produce brands, have done so well. They were there for the 101 of marketing: meeting a consumer need. And it only took one or two of their products to meet the needs of such a massive group of people, to generate huge sales.
But for marketers, having the right product to meet a consumer need only gets you to the starting line. The real race is in the pricing, promotion and distribution of that product. And there are many differences to be aware of between the Chinese and Australian markets, in all three of those areas.
There’s no Google, Facebook, Instagram, Pinterest or Twitter. Likewise, when it comes to selling a product online, there’s no Amazon or eBay. Instead, Chinese conglomerate Alibaba dominates the online shopping space on mobile devices, with 86 per cent of the market going through its Tmall and Taobao sites. As to the digital channels driving consumers to those sites, they are dominated by search engines Baidu and Sogou, and social media platforms Weibo and WeChat.
WeChat, owned by the large Chinese company TenCent, has only been in existence since the start of 2011. Since then it has attracted 762 million active users, and is the most advanced social messaging platform in the world. Besides the normal messaging and newsfeed features, you can also shop on it, pay bills through it, access third-party apps, renew your passport and transfer money to friends, and for marketers it has a full customer relationship management capability.
One group in particular has made the most of WeChat’s CRM capability, turning it into one of the major channels through which Chinese consumers can buy Australian brands. That group is the daigou. They’re the people you hear of who are clearing the Australian supermarket and pharmacy shelves of vitamin and baby products such as formula, as they use WeChat to onsell them to their customers in China. There are more than 40,000 daigou providers operating in Australia, and this “grey” market is estimated at $1 billion worth of sales annually. In Blackmores’ case, Credit Suisse believe that 70 per cent of their sales have come via daigou.
These providers have been strong marketers in their own right, making the most of the Chinese retail calendar with sales around not just Chinese New Year, but Singles Day, Children’s Day, International Workers Day and others. They’ve encouraged brands exporting to China to better tailor their packaging to the Chinese market — smaller pack sizes to encourage trial, and nicknames for products to drive stronger awareness.
Some marketers have been getting their brands endorsed by celebrities and key opinion leaders. They’ve been carefully monitoring social media conversations, online rating and reviews, to ensure the right product knowledge is at the fingertips of the 413 million Chinese e-commerce shoppers.
As the Australian vitamin and infant formula brands have seen, the China export market is a substantial growth opportunity. But that opportunity will only be optimised with a strong marketing plan behind it.