Succeeding in China via Australia

(Originally posted by Jocelyn Honour, BDM - AusPac, NZ Trade & Enterprise on 24 November 2016)

Which country’s eCommerce retail sales have grown 37% in the last year vs 11.3% in standard retail? The same one where mobile commerce sales have grown 123% (from a low base) and 50% of the population are yet to access the internet. You guessed it – China.

Add to these statistics the population size (1.4 billion), a rapidly increasing middle class (but still only 2% of the population), and growing recognition and demand for western brands. Why then would a business choose to export to Australia when the opportunity in China appears enormous? The answer lies with the proven formula of building your brand in closer, more accessible and less complex ‘local Chinese’ markets and then leveraging into mainland China.  

Livia Wang, Director, Access CN, has highlighted that Australia has approximately one million residents of Chinese descent and welcomes more than 1 million travellers from China each year[ii]. This provides an opportunity to create product and brand advocates in Australia who support and then endorse your product back into mainland China. This is a proven strategy used by Bellamy’s, Swisse and Blackmores, with the latter only in 2016 establishing direct channels in China.  

Where to start: As with many things, preparation is the key.

1. Consider how to build your fan base in Australia. Establishing a physical presence and/or online store in Australia targeting resident of Chinese descent and Chinese tourists is a great first step. Whilst still challenging, the risks are much less than jumping straight into the mainland markets. Test your products and value proposition on these consumers and learn the strategies of the larger suppliers to build your model for China.
2. Chinese consumers typically conduct extensive research (approx 7-9 types) into new products and seek personal recommendations prior to any purchase. Holidays are planned six months in advance and feedback is shared socially with friends and family. This means that there is a longer lead time to achieve initial sales which can be better supported from Australia than placing someone in China or visiting that market.
3. Draw on the expertise of advisors. If you are a NZ company, the New Zealand Trade and Enterprise team is here to support you and your business succeed in your chosen export markets.   

Be decisive: Once you have done some of this work and testing, you may find the best decision is not to proceed. IAG Chair, Ms Elizabeth Bryan, recently announced that while IAG has been looking for a long time at the rising incomes in Asia, the fragmented insurance industries and the desire for people to protect their assets, the Board had decided not to invest further due to the risk involved.

"But the problem is always in the detail, which many Australian service companies have found out," she said.[iii]  

So take your time, consider your strategy and make informed decisions based on the potential reward as well as the risk you are prepared to take.   

[i] Mark Skinner, China Skinny, China Digital Conference presentation, April 2016.
[ii] Livia Wang, Access CN, China Digital Conference presentation, April 2016
[iii] “China expansion too risky and expensive for insurance giant IAG”, Australian Financial Review, 26 October 2016