It’s our observation that Chinese domestic brands’ success is poorly understood. It’s often been simplified to patriotic consumer preference. We created a workshop exercise, called the “Domestic Brand Rorsarch Test” to break the idea local brand success can be simplified to one cause. Here’s an extract from the exercise (which you can download here) to show you the multitude of factors at play.
Have you heard of Oatly? If so, chances are you know a little about the market for milk alternatives. But what are the prospects for milk alternatives in China?
Read on to find out what China’s market for milk alternatives looks like today, with a focus on oat milk.
Growth Tailwinds for Oat Milk In China
Before getting into some of the tailwinds, it’s worth noting that Chinese cuisine already has a number of alternative milks, like soy milk, almond milk and peanut milk. Indeed, these kinds of milk are alreadt enjoyed at breakfast tables across China. We think this means the barriers for consumers to accept alternative milks are lower in China than other countries. Further, when you consider some 90% of Chinese adults may have some level of lactose intolerance, you get a sense of alternative milks’ potential in China.
So, what does the size of China’s alternative milk market look like?
In 2020, China’s alternative milk market was worth RMB55 billion (USD$8.5 billion). This includes a wide-range of beverages, principally soy milk, almond milk, oat milk, walnut milk, peanut milk and coconut milk. You could say 2020 was a watershed moment for plant-based milks in China. Tmall’s Plant-based Protein Beverage Innovation Trend Report showed an 800% increase in plant-based protein beverages sold through the platform.
We expect this market to grow between CAGR 2% and 4% to 2025. Outside of lactose intolerance, the other factors driving growth in alternative milks are:
Perceived nutritional benefits
Low fat and low cholesterol properties
Purchase convenience, availability and affordability
Are you looking to find out whether your food or snack brand has a taste profile that works for Chinese consumers? Contact us to see how research solutions like focus groups and product trials might be able to help!
Early Movers for Oat Milk In China
Oatly has had much success in China. Indeed, some commentators have gone as far as to say that Oatly’s future fortunes are tied closely to success in China. However, Oatly isn’t running this race alone. In May this year, it was observed that there are over 50 oat milk brands on Alibaba’s Taobao and Tmall, an increase of 152% year on year. Of these, the brands who have raised VC funding and have a compelling go-to-market proposition include:
Ongoing Themesfor Oat Milk In China
Whether optimizing their own nutrition, pursuing new beverage trends or experimenting with healthier lifestyles, Chinese consumers will likely have plenty of alternative milks to choose from.
What’s particularly interesting about alternative milks in China is that it marks the intersection of a number of themes in China’s food and beverage market: weight concerns, changing lifestyles and new preferences.
Last December, Douyin flagged its intentions to help merchants sell through Douyin via cross-border e-commerce. It subsequently started onboarding merchants in January 2021. Kuaishou quickly followed and began onboarding cross-border e-commerce merchants in May 2021.
This means overseas brands can launch an e-commerce presence on Douyin and Kuaishou, China’s largest short video platforms, without having a local Chinese business entity.
Why Douyin or Kuaishou For China Cross-Border e-Commerce?
When people think of China cross-border e-commerce, they typically think of Tmall Global. By GMV share, Tmall Global is the leader in China’s cross-border e-commerce channel. However, there are compelling reasons why Douyin or Kuaishou may be suitable for China market entry for cross-border e-commerce.
Douyin and Kuaishou are among China’s largest apps. Douyin is reported to have 600 million Daily Active Users. That places it as one of China’s largest apps. Kuaishou is no slouch, either. It has Monthly Active Users.
Douyin and Kuaishou have significant e-commerce ambitions. By GMV, last year Douyin transacted around $28 billion and Kuaishou transacted $56 billion in GMV. These figures pale in comparison to established e-commerce players, such as Alibaba ($1.2 trillion of GMV in 2020), JD ($398 billion of GMV in 2020) and Pinduoduo ($255 billion of GMV in 2020). However, these com[anies have grand ambitions for e-commerce. Douyin’s parent company, Bytedance, has ambitions to triple e-commerce GMV this year. Kuaishou reckons its GMV will double this year. As such, the excitement around Douyin and Kuaishou’s burgeoning e-commerce businesses comes from future potential, rather than current scale.
What Are The Advantages of China Cross-Border e-Commerce?
Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Tmall Global, Kaola, Douyin and Kuaishou at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business in China.
Test Market Demand: A launch via cross-border e-commerce allows new market entrants to de-risk their entry into China and assess market demand over a 12 or 18-month period, before looking to commit further resources and explore distribution opportunities within China’s massive consumer market.
Validate Market Entry Business Case: North American and European brands prefer test-and-learn approaches to market entry. Entry through e-commerce allows brands to gauge what sort of effort and resource commitment they’d need to pursue entry into China. In addition, it also allows newcomers an opportunity to test and finesse assumptions about their unique value proposition, marketing, pricing, merchandising and relative strength against domestic and international competitors.
Build in-Market Presence: Although there are indirect channels to reach Chinese shoppers (like overseas influencers and airport retail), these don’t deliver the return-on-investment that in-market presence does.
What Are The Next Steps To Enter China via Cross-Border e-Commerce?
Overall, cross-border e-commerce is an effective channel for overseas businesses to test and learn market entry China. With Douyin and Kuaishou in the mix, brands have more choices about which cross-border e-commerce channel they enter China with – they can enter through Tmall Global, Kaola, Douyin, Kuaishou or even Pinduoduo. If you’d like to know more about cross-border e-commerce, please get in touch with one of our team.
China’s popular short video apps, Douyin and Kuaishou, are significant marketing channels and are rapidly gaining scale as e-commerce players. Brands are not only directing their content marketing budgets towards these apps, but also using them to create multi-million-dollar sales channels. For instance, L’Oréal Group recently became the first major international brand to open a Douyin flagship store, which it’s reported raked in more than CNY 22 million (USD $3.42 million) in Gross Merchandising Volume (GMV) between April 30 and May 6.
If you haven’t seen China’s see-now, shop-now livestream e-commerce format, check out this video before reading on.
Douyin e-Commerce Isn’t The Biggest Player in Town
While there might be plenty of media talk of Douyin’s e-commerce ambitions, Douyin is still a small player in China’s e-commerce scene. By GMV, last year Douyin transacted around $28 billion. Douyin’s rival, Kuaishou, transacted $56 billion in the same period. These figures pale in comparison to established e-commerce players, such as Alibaba ($1.2 trillion of GMV in 2020), JD ($398 billion of GMV in 2020) and Pinduoduo ($255 billion of GMV in 2020).
However, Douyin’s potential as an e-commerce player lies in its current scale. Douyin is reported to have 600 million Daily Active Users. That places it as one of China’s largest apps. Further, Douyin’s parent company, Bytedance, has ambitions to triple e-commerce GMV this year. As such, excitement around Douyin’s burgeoning e-commerce business comes from its future potential, rather than its current scale.
Douyin e-Commerce Isn’t Just Livestream e-Commerce
Douyin e-commerce started as livestreaming e-commerce. However, it would be a misconception to think that all Douyin e-commerce is livestream e-commerce. In March, Douyin expanded its e-commerce services with thelaunch of flagship stores for brand accounts. That takes Douyin a step closer to a mobile e-commerce marketplace. Other e-commerce marketplaces started from product listing and moved to recommendation feeds, flash sales, livestream e-commerce and other formats. Douyin, however, has evolved the other way.
Douyin anticipates flagship stores will increase brand exposure. A spokesperson for Douyin predicts the ratio of product views to total page views from the account’s homepage should jump from 17 percent to 80 percent, and click-through rates will also rise.
Whatever Direction Douyin e-Commerce Goes In, TikTok Will Go Next
Bytedance is the parent company of Douyin and TikTok. In both apps development, a good rule of thumb is that whatever happens on Douyin, TikTok will follow soon thereafter. Take livestream e-commerce as an example. This was Douyin’s foothold in e-commerce. Now, TikTok is doing the same in select markets, like Indonesia. Like Douyin, TikTok has very clear e-commerce ambitions. Per this article, TikTok has briefed advertisers on three new eCommerce integrations coming soon to the app:
A tool that lets its most popular users share links to products and automatically earn commission on any sales
The ability for brands to showcase catalogs of their products on the platform
“Livestreamed” shopping, a mobile phone version of television shopping channels, where users can buy goods with a few taps after seeing them showcased by TikTok stars
Sound familiar? That’s right, this is a carbon copy of Douyin’s e-commerce playbook. Accordingly, if you’re in China and have operations overseas, you can give your overseas colleagues a big head-start by sharing knowledge of local practices. Alternatively, you get in touch with one of our experts to give you a download on what’s happening in China e-commerce.
China’s economic planners have set a 6% GDP growth target for 2021. China, it appears, has shrugged off the worst of COVID-19. This has many brands asking:
Where are the export opportunities to China in 2021?
We sat down with AgencyChina’s Research & Strategy Manager, Michael Norris, who relayed what he and his team of Chinese market research professionals had found on a few recent projects.
Below is an edited transcript. If you like what you hear, you can sign up to arrange a free expert call with Michael Norris, now available till May 31. A unique chance to get some great first-hand China knowledge!
Top Export Product Opportunities in China
Editor: What product categories do you think have the best prospects in China this year?
Michael Norris: I think the pillars for imported brands in China will remain largely unchanged this year – skincare, haircare, pet care and nutrition continue to have strong tailwinds. Principally, the purchasing power of China’s middle-class continues to increase and there’s a universal desire among the type of middle-class consumers we work with to look and feel their best.
However, what we continue to advise new market entrants is China is now a level playing field. That is to say, the ‘halo effect’ imported brands once enjoyed has faded away. As such, brands need to do their homework before they enter.
Top Export Product Niches in China
Editor: Drilling down, what niches do you expect to have strong growth this year?
Michael Norris: There are five niches I really like this year. The first is toothpaste, which is seeing ingredient and format innovation. This driven by a focus on dental beautification – straight teeth and a bright smile.
The next is cat food. Cat ownership is growing faster than dog ownership, and, if current trends continue, cats will become China’s most preferred pet in a year or two.
A further changing preference is perfumes and fragrances. Fragrances are increasingly signifier for style and taste among China’s younger white-collar types, both male and female. Recognizing this demand, Tmall has even opened up a direct air route to carry over niche perfumes by air freight.
When it comes to personal style, we can’t go past hair. I like the prospects of a number of hair care niches, especially anti-breakage and strengthening shampoos. The China Association of Health Promotion and Education reckons that China’s premature hair loss population stands at a whopping 250 million, most of them between 20 and 40 years old. Any help brands can give here is undoubtedly welcome.
I know it’s bigger than a niche, but I do have to say it as it’s one of my favorites: male skincare and cosmetics. We expect the average number of skincare products male consumers to rise from 1.5 to 3.5 over the next five years, which will drive significant category growth.
Advice For Brands Entering China
Editor: What can brands do to keep up with changes in China’s consumer preferences?
Michael Norris: Top performing brands tend to have a strong sense of what they already know and what they want to find out about the consumer. They then craft a research agenda around those things to make sure they keep up to date. There’s a quick mental quicklist anyone can use to start their own research agenda.
What are the three things you’d most like to know about your Chinese consumers current habits? How are these things important to your business？
What are the three things you’d most need to learn about to prepare your business for the future?
What evidence do you have about these things already? How would you rate the quality of that evidence?
What plans do you have to update existing evidence or gather new evidence?
AgencyChina is a full-service agency, covering market research, marketing and e-commerce operations. That means we’re in a great place to help new and established brands at any point in their journey.
We can help size up an opportunity and build a business case, use consumer interviews to understand changing needs, create a distinctive brand in-market, or identify which parts of a brand’s e-commerce operations need some fine-tuning.
I always encourage folks to have an open dialogue with us. Let us know where you’re at, and we can see whether we’re a good fit.
It’s no secret that China’s Post 90 and Post 95 consumers are turning towards healthier snacking. Healthy snacking in China represents a desire to treat oneself, minus the guilt of becoming a couch potato.
So, which brands deliver best on China’s healthy snack trend? We asked our e-commerce data insights manager, Teddy Wang, to give his top three picks. If you’d like to get more insights, book a free consultation with one of our experts here.
Trending Healthy Snack in China #1: Sugar-Free Yoghurt
The first trending healthy snack is sugar-free yoghurt. Last year, amid the pandemic, dairy products rose to prominence after local dairy lobbies put dairy products’ immunity benefits up in headlights.
Simple Love, a diary brand hailing from Guangzhou-based Honest Dairy, is a beneficiary of this trend. It produces a high-protein spoonable yoghurt, a classic plain spoonable yohgurt and a drinking yogurt. The name – Simple Love – comes from the fact the brands ingredient profile is exceptionally simple. The dairy range contains only high-quality milk and probiotics from Finland-based dairy company Valio.
Trending Healthy Snack in China #2: Cereal and Muesli
The next trending healthy snack is cereal and muesli. China’s consumers have been warming to cereals and muesli for a little while now, with names like Quaker, Calbee and Wangbaobao making their way into kitchen cupboards across China.
While cereals and muesli may seem old hat to overseas readers, for Chinese consumers the appeal lies in versatility – cereal can be eaten dry, combined with yoghurt, combined with fruit, added to warm milk or even used as part of DIY desserts.
If you’re thinking about bringing a cereal or muesli into China, you’ll need to understand and cater to what consumers appreciate – low sugar, baked oats with chunky pieces of dried fruit.
Trending Healthy Snack in China #3: Fortified Gummies
Fortified gummies, as typified by BUFFX, are Teddy’s third pick for trending healthy snack.
By way of back story, BUFFX recognized that Chinese 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. BUFFX understood this and designed a gummy supplement – the type that you might typically find for children.
These gummies have a taste and texture profile which is far more palatable to local consumers, and far closer to a snack than a supplement. Indeed, most consumers we’ve come across treat them as a snack – which is why they make this list.
What can you take away from this?
The biggest takeaway here is Chinese consumers want it all – the indulgence of snacking, high-quality ingredients, great taste, and low-calorific content. That sounds like a high bar, and it is.
The good news?
Chinese consumers are happy to pay a premium for brands that can deliver against their high expectations.
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 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.
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.
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.
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’s not a unified, single market. Rapid urbanisation has led to 113 cities with more than one million inhabitants. You may already know a few of China’s mega-cities. However, less than 10% of China’s population live in those massive metropolises. By contrast, over two-thirds of China’s population live in lower tier cities.
Unfortunately, even after a number of years touting the promise of lower-tier cities, we still find that China’s lower-tier opportunity is misunderstood. There are three main misconceptions, which this article tries to dispel.
Read on to help bust some myths about China’s lower-tier cities.
Myth #1: Lower Tier Cities Means Rural
The first misconception is that “lower-tier” means “rural”. That’s not true. China’s 252 third-tier cities are prefecture-level cities. What’s a prefecture-level city, I hear you ask? Well, that’s a city with the following characteristics:
An urban centre with a non-rural population over 250,000
Gross output of value of industry of 200,000,000 RMB (US$32 million)
To give you a sense of what that looks like, here’s a couple of snaps from Putian (Fujian Province), Maoming (Guangdong Province) and Nantong (Jiangsu Province). You’ll quickly appreciate that these cities have a similar retail environment to most European cities you’ve been to, minus some of the cosmopolitanism.
Myth #2: Consumers In Lower Tier Cities Are Conservative Spenders
Now that we’ve clarified that lower-tier doesn’t mean rural, let’s have a look at some of lower tier consumers’ spending habits. Morgan Stanley estimates that private consumption in smaller cities may triple between 2017 and 2030, reaching 45 trillion yuan ($6.73 trillion). Part of this consumption boost is driven by consumers growing disposable income, helped by lower cost of living in lower-tier cities. One interesting direction for disposable income is luxury goods. A joint report from Deloitte and luxury e-commerce platform SEECO evidences third tier cities swept their annual rankings in annual purchase frequency, the percentage of customers with repeat purchases, and the percentage of customers with three purchases.
Myth #3: Consumers in Lower Tier Cities Want Low Prices
The estimated tripling in private consumption will be driven by the same consumption upgrade that Tier 1 and Tier 2 cities experienced, where quality becomes the key purchase driver, rather than price. For instance, during Pinduoduo’s 618 e-commerce festival last year, the company observed that home appliances bought on its platform by consumers in smaller cities were getting more sophisticated – 4K and HD TVs, quiet and large-capacity washing machines, as well as double-door refrigerators. This shift will take time, and it won’t happen evenly. We expect satellite cities around major metropolitan areas to narrow their consumption gap first, with younger consumers and families leading the way.
So, there you go. Hopefully, this has gone some way to dispel some of the myths around China’s lower-tier cities. Speak with us if you’d like to know more.
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
(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:
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.
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.
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.
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
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 Zonesthat 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.
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?
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:
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.
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.
Increase content output: Douyin’s recommendation algorithm values viral hits, and brands need to balance quality with quantity.
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.