Local Challenger Takes On Foreign Brands In China’s Supplement Market

In April, we wrote a popular post on how China’s Saturnbird Coffee is taking on Nestle in China’s instant coffee market. Given we love innovative products that unlock new growth, here’s a new example in China’s Supplement Market: BUFFX.

BUFFX is a vitamin and supplement start-up that launched in April this year, not long after China returned to work after a pandemic-induced lockdown. BUFFX attracted two sets of seed investment before its products launched online in September. In its first two weeks, BUFFX accrued CNY 1 million in sales. To us, this is a signal that the brand is doing something right. We think they’ve got plenty of success ahead of them.

Below, we outline what BUFFX did to secure early success in the China Supplement Market:

  • Solve a consumer pain point
  • Go where others are reluctant to go
  • Be bold and distinctive
  • Get investors to support launch

Let’s look at each of these in turn. If you work in FMCG, you’ll find the learnings practical and relevant.

BUFFX Solves A Consumer Pain Point In Vitamins And Supplements

Vitamins and supplements are a fast-growing category, posting a CAGR of 10% between 2013 and 2019 – much faster than the FMCG category average.

Vitamins and supplements are traditionally an area where imported brands, such as Swisse and Blackmores, have performed well. Given concerns around the quality and efficacy of domestic vitamins and supplements, the category is highly conducive to cross-border e-commerce.

However, there’s a consumer pain point which has long been overlooked by imported brands – consumers are daunted by imported vitamin and supplement pill sizes. If you compare pills and caplets in China to overseas, you’ll find there is a demonstrable size difference. Through in-home interviews, our research team has found that difficulty swallowing a supplement is one of the top reasons Chinese consumers stop taking supplements.

China Supplement Market - old style packaging

BUFFX understood this and designed a gummy supplement – the type that you might typically find for children. This has a taste and texture profile which is far more palatable to local consumers, which increases the chance consumers will make purchasing BUFFX a consistent habit, rather than a once-off.

BUFFX Goes Where Others Are Reluctant To Go

Common supplements in China include Vitamin C and E.

BUFFX wasn’t content with making a gummy version of Vitamin C and E supplements. Instead, it looked at specific niches. Skin, sleep, eye care and digestion are commonly-reported ailments among young Chinese consumers. That’s exactly where BUFFX went. Its initial SKUs include formulations for sleep, eye care, digestion and virility. In the category, eye care and virility had been overlooked in recent years and hadn’t seen much new product development.

We can’t stress how important this type of research is – looking for mismatches between consumer needs, existing propositions and new product development.

BUFFX Is Bold And Distinctive

A quick look at BUFFX’s packaging shows how bold and distinctive they want to be.

China Supplement Market - Buffx packaging

BUFFX have a clear ambition to be the most distinctive vitamin and supplement brand in-market. This marks a break from the minimalist design features which have defined consumer goods in recent years.

We also think the name BUFFX is important. First, it’s easily searched online. Second, it’s memorable. Third, the term ‘BUFF’ is understood by China’s gamer generation as a term which means an enhancement. That flips traditional impressions of supplements on their head – instead of fixing a deficiency, BUFFX augments and empowers.

This sort of branding and positioning work is essential if you’re looking to build a lasting brand in-market.

BUFFX Used Investor Support To Launch

Launching and succeeding in China isn’t for the faint of heart. You need to play to win. One of the first questions we ask brand partners is what resources they can commit to their expansion in China. That’s because we know that China is a commitment. Even n iterative, test-and-learn approach needs to be adequately supported.

As a start-up, BUFFX didn’t have the resources of category leaders like Swisse or GNC. So, it went to investors and pitched the idea – gummy supplements with distinctive packaging, targeting graduates who want to work and play hard. These investors are no doubt pleased with BUFFX’s launch in September – expertly timed for traction and a pop over this year’s Single’s Day.

Now’s your chance!

Alibaba wants to bring 1,000 overseas brands to China. Last year, Tmall Global piloted the incubation program with brands like Fenty BeautyDPC and Brandfree. However, to get backed by Alibaba, brands need to put in the work. We think BUFFX is a good example.

If you like the sound of BUFFX’s approach to market, our team has the requisite skills across research, marketing and commerce to launch a product from scratch, or adjust your product and business model to the needs of China’s consumers. Get in touch to find out more.

China Market Entry Checklist For Foreign Brands

So, you’ve read our market updates and would like to see if your brand has any potential in China. But where to start? No worries! We are here to help.

We’ve come up with a short checklist to help you put together the most relevant details to decide if the Chinese market is right for your brand.

TIP: Have this guide ready as you navigate your first consultation with one of our experts. 

China Market Entry Checklist

China market entry checklist

(click here to download the Chinese market entry checklist as pdf)

Next Step in your China Market Entry

Once you’ve tried to answers the questions on the Chinese market entry checklist, you’re in a better position to take up your free consultation with us. But if you are not able to answer all of the questions yet, don’t worry! Our China Experts are ready to help you complete the list during your first session.

At this point you may wonder what the first stages of a route to market would entail. To give you an idea of a typical China market entry engagement with AgencyChina we made the overview below:

china market entry process

We hope this gives you a little more clarity about what you can expect from us, and what we hope we can expect from you as a potential partner. If you’re looking for services other than market entry, then you’re still in the right place – we do everything from consumer surveys, to social media audits, to marketing & e-commerce operations.

The future of e-commerce on Douyin and 5 tips how to prepare

Douyin is TikTok’s namesake in China. It’s a wildly popular short video app with over 600 million active daily users. That’s half of China’s population.

Unlike TikTok, Douyin has clear e-commerce integration. Douyin users can click links within each short video and complete purchases inside the app. This makes Douyin a potential sales channel, well suited to impulse purchases.

e-commerce on douyin - how it works

Source: Walk The Chat.

This feature is also complemented by livestream e-commerce, which we’ve covered extensively here.

Douyin’s owner, Bytedance, has formed an e-commerce business unit to oversee its e-commerce businesses unit. This is perhaps the sign of some important changes to e-commerce on Douyin.

So, what might be in store for e-commerce on Douyin? What should you do now to capitalize on the opportunity? Read on to find out!

Douyin Future E-commerce Moves

We predict Douyin’s future e-commerce direction looks something like this:

  • A virtual mall built housed within a Douyin mini-program. Mini-programs allow users to access various services without leaving the app. As we imagine it, a virtual mall Douyin would contain various lists and product recommendations. Think of it as a miniature Tmall, housed within Douyin.
  • Brand Zones that appear in Douyin’s search results, similar to WeChat and Tmall. Brand zones give brands the opportunity to directly display products and services to consumers that have searched for the brand.
  • Official account pages that have “Must Buy” or “Hot Recommendation” lists. This has important implications for branded accounts, as well as Douyin KOL accounts. We think brands and influencers will be able to display “hot products” on their home page well after they post a video containing the product.
  • Advanced video-based product recommendations, which were trialed late last year. We expect to see these back with more accurate recommendations and more appealing presentation. This will be complemented by powerful video-based search, another feature trialed last year.
e-commerce on douyin - video based search

Should you take your brand online on Douyin?

If you’re not on Douyin now, use our below framework to work out whether it’s the right think for your brand at this point in time. You can even get in touch for us to walk you through everything.

What do you do when you are already on Douyin?

If you are on Douyin now, then assess your Douyin game:

  • How is your content performing?
  • Have you run sales campaigns through the platforms?
  • What type of influencers are you working with?
  • How do your efforts compare with dairy brands Yili and Mengniu, beverage giants Pepsi and Wang Lao Ji, brewers like Snow and Harbin, conglomerates like Nestle and convenience food brand Kang Shifu?
  • Can you learn anything from the efforts of these brands?

The best way to prepare for future of e-commerce on Douyin’s e-commerce future:

  1. Experiment with livestream e-commerce: Increase livestream frequency with brand-owned accounts or influencers, to test how many fans you can attract to watch your livestream and get a better sense of conversion rates.
  2. Try e-commerce integrations: Get a sense of whether your short video game is good enough to entice immediate purchase by setting up e-commerce integration on Douyin.
  3. Increase content output: Douyin’s recommendation algorithm values viral hits, and brands need to balance quality with quantity.
  4. Learn to partner with small and medium KOLs: instead of aiming for partnering with megastars, brands can work with many small influencers, giving you broader access to fan bases across the country.  
  5. And last but not least… Subscribe to AgencyChina’s newsletter, to learn about the latest developments in Douyin e-commerce.

3 Key Opportunities in China’s Haircare Market

China’s haircare market is significant, and there’s plenty of headroom to grow. Mintel, a market research firm, estimates China’s haircare market will grow to RMB 53.6 billion (USD 7.6 billion) by 2021.

The market’s increasing growth is driven by premiumization and specific haircare issues affecting the Chinese population. 

In terms of premiumization, sales of premium hair care products are increasing in all geographies. China’s wealthier coastal provinces – Shanghai, Zhejiang and Guangdong – lead the way. Premiumization is taking consumers from shampoos and conditioners priced between RMB 50 and 100 to products well over 100 RMB. This trend works in imported brands’ favor.

Alongside premiumization, China’s consumers are struggling with premature baldness. The China Association of Health Promotion and Education reveals that China’s premature hair loss population stands at a whopping 250 million, most of them between 20 and 40 years old. The desire to stave off premature baldness drives additional consumption and increased sophistication when looking at hair care formulations. 

hair loss china's haircare market

Image source: VCG Photo

With that context in mind, let’s have a look at the three key opportunities in China’s haircare market for imported brands.

1. Anti-Breakage Shampoo in China’s Haircare Market

One of the first courses of action for young consumers suffering with early onset hair loss is strengthening or anti-breakage shampoo. There are over 50,000 product reviews of anti-breakage shampoos on Little Red Book. From these reviews, we can see consumers are looking for formulations result in less shedding after showering and during sleep. However, brands should be aware that most consumers are anxious for solutions to work quickly – they’re looking for some small signs of progress after a few washes!

From our analysis of product reviews, and previous projects in the category, imported anti-breakage shampoos that hit the mark with consumers include:

  • Furterer
  • Alpecin
  • Shisheido
  • Living Proof
  • Amino Mason

2. Volumizing Shampoo in China’s Haircare Market

Outside anti-breakage shampoo, consumers are also looking at volumizing shampoos to deal with thinning hair and receding hairlines. More volume and texture gives consumers confidence that issues with thinning hair can be masked or disguised. Relative to anti-breakage shampoos, volumizing shampoos have lower levels of awareness but higher levels of spend per item. This suggests that those who are in the know are prepared to spend on solutions that work.

There are over 10,000 product reviews of volumizing shampoos on Little Red Book. From our analysis of product reviews, the brands that consistently hit the mark with consumers in this sub-category include:

  • Pola
  • Kerastase
  • Living Proof
  • Philip B
  • John Masters Organics
  • Kiehls

If you’d like to know more about why these brands resonate, get in touch with our team for a free consultation.

3. Color and Style Products in China’s Haircare Market

While premature hair loss is an issue for China’s millennials, it certainly isn’t the only opportunity in China’s growing haircare market. Indeed, CBNData’s “High-End Hair Care Industry Consumer Insight Report” (2019) showed that hair dye had some of the fastest growth on China’s e-commerce platforms. COVID-19, which forced lockdowns across China, has accelerated this trend.

Post 95s, who make up 30% of the DIY hair dye sales, are looking for new ways to express themselves, and turn their hair into a canvas for self-expression.

Compared to the previous two opportunities, many of the most popular brands in this sub-category come from Japan and South Korea. They include:

  • Kao
  • EZN
  • Rishiri Kombu
  • Aderans

Image source: Tmall EZN product page

Each of the above sub-categories are rich with opportunities. Consumers are still discovering the best solutions that work, and they’re open to trying niche imported brands. If you’re looking at this market, talk with our research and e-commerce teams to work out the best approach for you to gain traction with hair-obsessed millennials. 

3 Invaluable Lessons About Gen Z Consumers in China from Bilibili’s CEO

Chinese “Gen Z” shoppers in their early 20s are emerging as an increasingly powerful force in China’s consumption landscape. They are the recipients of generous allowances from their parents. Our internal research estimates that, close to three-quarters of Gen Z consumers in China who are currently studying or looking for work receive an allowance higher than the minimum wage. This facilitates a lifestyle of exploration, instant gratification and experimentation.

A great window to begin to understand Gen Z consumers in China is Bilibili. Bilibili is an ACG (anime, comics, and games) entertainment platform. It currently has over 100 million users, who spend an average of 80 minutes per day entertaining themselves. A great primer on Bilibili has been published by our friends at Jing Daily.

Below, we’ve gone deeper by translating and synthesizing previous media interviews from Chen Rui, Bilibili’s CEO. We hope this can give you an insight into China’s Gen Z consumers that isn’t readily available from other sources.

Without further ado, here are three things Bilibili’s CEO tells us about China’s Gen Z.

1. Gen Z consumers in China have internal contradictions

Chen Rui believes that one of the keys to understanding China’s Gen Z is their internal contradictions. They are simultaneously picky and tolerant. Here’s what he means:

  • Gen Z are picky about cultural content. They have high expectations for anime, comics and games they enjoy. They also have high expectations for objects or art forms that take inspiration from anime, comics, games, novels, movies and Chinese culture. When it comes to products, services and content, if the details aren’t right, then Gen Z will struggle to appreciate it.
  • Gen Z are respectful of makers and creators. This respect extends to tolerance of mistakes – they don’t mind if a new game has a few glitches, or their favorite vlogger forgets what they’re trying to say. For brands that make their products with a strong sense of design, they key is to find ways to take Gen Z ‘behind the scenes’ and further appreciate what goes into making or creating the products Gen Z enjoys today.

First thought provoking question:
How can brand use co-creation to involve China’s Gen Z consumers in the creative process?

2. Gen Z Consumers in China ‘Go All In’ on the things they’re interested in

By now, you’re probably familiar with hobbyists and enthusiasts who spend time, effort and hard-earned cash on their passions. Consider our favorite enthusiast, Yan Shaoting, who won a Red Dot Design Award at 16 years old. He makes Iron Man Suits in his spare time.

Yan shaoting - Gen z consumers in China

Yan Shaoting poses with armor he designed and produced. Image source: Sina Weibo

But, to Bilibili’s CEO Chen Rui, what makes China’s Gen Z different is they hope their commitment to hobbies and passions can propel their life forward and open new possibilities. That is to say, a creative outlet isn’t just a thing that’s done on the weekend. Maybe it leads to new friends. Maybe it leads to fifteen seconds of (internet) fame. Maybe it leads to a side hustle. Whatever the outcome, the passion should be a force for momentum and progress.

Second thought provoking question:
How can brands facilitate pathways for enthusiasts to ‘level up’ their hobby?

3. China’s Gen Z Consumers Want To Have ‘Cozy’ Feelings Wherever They Go

Chen Rui believes Gen Z have grown up in a period of relative stability and harmony. Born into single-child families, China’s Gen Z have grown up with their parents (and even grandparents) attention and monetary support. This makes Gen Z highly accustomed to a level of comfort, and heightened sensitivity to things that make them feel uncomfortable. We call this feeling ‘cozy’.

What this translates into is earlier forays into luxury goods, greater affinity with products that match their needs, greater spending to refresh wardrobes and higher willingness to use consumer credit to fund impulse buys. What each of these instances tell us Gen Z consumers aren’t afraid to spend to extend how and when they feel comfortable and at ease.

For brands to resonate with Gen Z, they will need to have a strong appreciation of what type of comforts this young generation expects and what types of discomfort they seek to avoid. Consumer research can help brands understand these need states with greater clarity and precision.

Third thought provoking question:
What new levels of customer care and attention will Gen Z inspire?

Gen z consumers in China

Image source: luxe.digital @Thehautepursuit

That’s a wrap of the three things Bilibili CEO Chen Rui has taught us about China’s Gen Z consumers. It certainly leaves us with a lot to think about. We hope you learned a few invaluable things about this crucial generation of Chinese consumers.

Mercedes clarifies Bottas’s ‘Wuhan bat’ comment in Chinese social media post

No industry is safe from Chinese Netizen’s scrutiny. Not even Formula 1. During Sunday’s Grand Prix Bottas finished 14th, ending his chances of possibly becoming world champion. Afterwards a television broadcaster asked him: “If there was one day from 2020 you could skip from your calendar would it be today?” Bottas replied: “Today, yes,” then added jokingly, “or maybe the day when someone bought a bat in Wuhan.” Following heavy criticism of Bottas’s remarks on Chinese social media, Mercedes issued a clarification from their official account on Weibo. Read on for the full story!

New Opportunities In China Imported Food Market

China is a major food importer. Although the majority of Imported Food To China are meat, dairy, and seafood, there are also signs of broad consumer interest in imported processed foods and alcoholic beverages, among other specialty items. Indeed, in 2019, there were 2,283 kinds of imported foods from 176 countries and regions registered in China’s market access management system.

Imported food is commonplace in Chinese homes. As early as 2015, more than 96% of Chinese households in large urban areas reported buying imported foods or drinks.

So, what’s next for China Imported Food Market?

We sat down with AgencyChina’s Managing Director, Jay Xie, who relayed what he and AgencyChina’s e-commerce team had found as they operated e-commerce operations for a number of international brands.

Below is an edited transcript. If you like what you hear, you can sign up to arrange a free expert call with Jay, now available till February 31. A unique chance to get some great first-hand China knowledge!

Editor: We’ve just had a massive Singles Day. What are some of the imported food trends you observed?

Jay Xie: We saw a confirmation of a few different trends, such as increased in plant-based, organic and functional foods and beverages. Importantly, we saw consumers continue to be adventurous, ordering more products from niche brands from Eastern Europe, the Middle East and Africa. I think this highlights how important cross-border marketplaces are in connecting varied consumer demand with distinctive brands from all over the world.

Editor: What categories of imported food and beverages are you most excited about?

Jay Xie: As an avid fitness enthusiast, I’ve personally witnessed the changes in how China’s consumers approach nutrition. I think there are still many untapped opportunities in food and beverages that support weight loss, muscle gain and sports performance. However, it’s important for incoming brands to note that it might not just be as simple as selling your existing products to Chinese consumers – you will have to localize the product and packaging. 

Having talked about fitness, I also really like the prospects for comfort food. China is a high-pace, high-stress society and I do think that creates pressures which result in snacking occasions. For that reason, I think biscuits and chocolate will continue to outperform.

Editor: One thing we haven’t talked about is early-life nutrition, which is a real strength of AgencyChina. What trends do you see in food for infants, toddlers and children?

Jay Xie: We’re lucky that we operate the online store of one of the top five sellers of infant formula on Tmall. Imported brands continue to have key strengths online relative to domestic competitors across infant formula, baby food and toddler snacks. The three areas where I hope we see more innovation from imported brands to keep their lead is: low-calorie snacks for children, a greater range of fortified food, and incorporation of superfoods.

Don’t forget, you can book a free consult with Jay until February 31st, Book your time now to talk with him and get your China adventure started!

Imported Food Market China - expert call

Chinese Budget E-Commerce Platforms

We’ve just passed Double 11, the largest e-commerce extravaganza in the world. Given the occasion, we’d be remiss if we didn’t discuss e-commerce. Before we get to our annual summary of top trends, we thought we’d clarify a few things about Chinese budget e-commerce platforms.

China’s e-commerce landscape is rich and diverse. Currently sitting at a quarter of China’s retail sales, China’s e-commerce platforms includes online retailers, marketplaces and affiliate platforms. Within that range, there’s a number of different platforms catering to specific spending habits.

Indeed, one of the key themes over the last two years has been thrift – consumers are looking for the best deals they can find, whether online or offline.

Previously, we’ve talked about Pinduoduo. Pinduoduo, as you may recall, used group-buying as a way to blower prices of items on its platform. There’s also livestream e-commerce, which we’ve covered extensively. One of the reasons livestream has been a breakout hit is because livestream hosts negotiate with brands to guarantee the “lowest price on the internet” for their fans.

Chinese Budget E-Commerce Platforms Pinduoduo

Image: Pinduoduo APP

Below, we’ve categorized China’s budget e-commerce platforms and functions, listing whether they’re suitable or not for brands looking to enter China.

Summary of Chinese Budget E-Commerce Platforms

Platform Description Positives Negatives AgencyChina Assessment
683 million active buyers

Pinduoduo is China’s second-largest e-commerce platform in China.
Pinduoduo has taken the lead on several new trends, including social e-commerce, team purchase, and consumer-to-manufacturer demand models (C2M).

To encourage its users to spend more and buy a wider range of goods on their platform, Pinduoduo has decided to enter cross-border e-commerce. Pinduoduo’s cross-border e-commerce offer is called Duoduo International. Large international brands with multiple distributors must take care to ensure:
(1) no counterfeits
(2) distributors sell on Pinduoduo using an agreed price architecture
We believe Pinduoduo’s cross-border e-commerce platform, Duoduo International, is a net positive for brands looking for exposure to consumers in China’s lower-tier cities.
Juhuasuan (inside Alibaba)
Users: Undisclosed
Juhuasuan is a marketing platform for flash sales and group-buying deals inside Alibaba. It uses data analytics to offer flash sales to certain sub-segments, such as price-conscious consumers.Juhuasuan is available to most brands who have a Tmall Flagship Store. Using a steady stream of flash sales and group-buying deals to unlock new consumer segments can be seductive, but it doesn’t replace a clear in-market strategy.We believe Juhuasuan should be part of a brand’s mix of e-commerce tactics in China. It’s best used when the brand has a track record of operating on Alibaba’s e-commerce platforms.
33 million active buyers
VIP is arguably China’s largest online discount retailer. It’s an e-commerce platform that specializes in time-sensitive discounts, called flash sales. VIP typically stocks out-of-season inventory from leading brands.VIP is well known for offering flash sales for branded fashion, home goods, apparel and accessories.Given all other e-commerce platforms have flash sales, the distinctiveness of VIP’s model has diminished over time. We believe VIP is an effective way for fashion and accessory brands to clear excess inventory.
Taobao Deals
70 million monthly active users
A standalone e-commerce app from Alibaba that sells items under RMB 50.
It is reported Taobao Deals was released to combat Pinduoduo’s stranglehold of consumers in China’s lower-tier cities.
There is limited upside for most foreign brands to place their goods on this platform, unless they specialize in daily essentials, such as toiletries. There is limited possibility for items to exceed RMB 50, in the short-term. We believe Taobao Deals is ill-suited for foreign brands to use.

We trust you found that summary useful. If you’re looking at entry into China via e-commerce, talk with our research and e-commerce teams to work out the best approach for you to gain traction with online shoppers.

How German Beauty and Wellness Brands are Winning Chinese Consumers

Germany, long famous for its beer, sausages, soccer and sedans, is now increasingly catching the eye of young Chinese consumers seeking premium cosmetics and health products. It’s happening thanks to a new class of digitally-minded German brands establishing a strong presence in China through e-commerce, said Karl Wehner, managing director of the Germany, Austria and Switzerland markets at Alibaba Group.