How China has rebounded from coronavirus and is ready for business - Victorian eCommerce Network
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How China has rebounded from coronavirus and is ready for business. Victorian eCommerce Network 13 May 2020
George Di Scala
Deputy Director
International Market Development
Global Victoria
Nick Henderson
Director, China Practice
Asialink Business
Tim Dillon
Commissioner to Greater China
State Government of Victoria
Video
Michael Norris
Research and Strategy Manager
Agency China
Victorian Brands in China May 2020
Context
Online Retail in Post-Pandemic China
China’s online retail sector has held firm through the pandemic.
Exhibit 1: Sample of January-March Economic Indicators
YoY Growth, Percentage
6.00%
3.0%
Jan-Feb
Feb-March
-1.10%
-13.5%
-15.80% -16.00%
-20.5%
-24.5%
OnlineSales Industrial Output Retail Sales Fixed Asset Investent
Source: National Bureau of Statistics.
Contents
Contents
We’ll go over China’s e-commerce landscape before looking at nascent opportunities.
RECAP PANDEMIC IMPACT OPPORTUNITIES
Online’s place in China’s Why COVID-19 has increased Where Victorian brands
retail landscape online penetration can make their markRecap
Varied Category Penetration
e-Commerce’s category penetration is increasing.
Exhibit 2: Online Penetration Exhibit 3: Online Penetration By Category
Percentage of Total Retail Sales Percentage of Total Retail Sales
Online Offline Electronic Appliances Clothing & Shoes
Beauty FMCG
Luxury 60%
55%
73% 40%
81% 84% 38%
91% 92% 93% 97% 31%
21%
15%
6%
23% 13%
19% 16% 5%
9% 8% 7%
China UK South US Germany Japan Italy 2016 2017 2018 2019 2020* 2021*
Korea
Note: Asterisk (*) refers to projected figures
Source: Goldman Sachs, Euromonitor and PwC AnalysisSmall Category Gains Mean Big Shifts
e-Commerce’s category penetration is increasing, albeit at different rates.
Exhibit 4: FMCG Value By Channel
Percentage of Total Retail Sales Value
CAGR 2014-18
20.8% 21.3% 21.0% 20.7% 20.1% Other 3.7%
6.0% 7.9%
3.5% 11.1% 13.4% 16.7%
3.3% Online 35.1%
6.7% 6.1% 3.5% 3.3%
5.3% 4.7% 3.2%
4.4%
23.6% 22.4% Convenience 2.0%
21.9% 21.5% 20.2%
Grocery -5.7%
Hypermarket 0.6%
39.4% 39.0% 37.3% 36.4% 35.3%
Supermarket 1.7%
2014 2015 2016 2017 2018
Notes: Hypermarket refers to stores larger than 6,000 square meters and includes key accounts representing 83% of sales for the channel (based on 2018 revenues); super/mini refers to stores between 100 and 6,000 square meters in size; grocery
refers to stores smaller than 100 square meters; convenience refers to chain and individual convenience stores operating more than 16 hours per day; other includes department stores, wholesale, work unit (items people receive from work), direct sales,
specialty stores, overseas shopping, family shopping, drugstores, beauty salons, milk stores and New Retail stores (starting to report in 2018); columns may not add up to 100% due to rounding.
Source: Kantar, Bain & Company analysis.Easy To See Who’s Driving Sales
Alibaba’s platforms have the most sales, by a country mile.
Exhibit 5: General e-Commerce GMV By Platform Exhibit 6: Cross-Border e-Commerce GMV By Platform
Percentage of Total GMV Percentage of Total GMV
58%
28%
25%
19%
16%
13%
9%
7%
5%
2% 2%
Alibaba JD Pinduoduo Suning VIP Kaola Tmall Global Other JD Global VIP Little Red
Book
Source: Source: eMarketer; Quarterly e-Commerce Report; a16z..Pandemic Impact
Initial Impact on Social Discretionary
Lockdown affected cosmetics and alcohol.
Exhibit 7: Lockdown’s Impact on Spend in Different Categories (February)
Percentage
Less Consumption More Consumption
Does Not Use A Lot Less Slightly Less Remain Same Slightly More A Lot More
Skincare 4% 10% 19% 42% 20% 5%
Cosmetics 8% 27% 31% 22% 8% 4%
Alcohol 19% 25% 19% 16% 8%
13%
Personal Care 5% 22% 41% 21% 10%
Home Cleaning 4% 4% 10% 18% 34% 30%
Packaged Food 3% 18% 21% 16% 27% 15%
Note: Respondents asked to compare spend to previous month (January)
Source: AgencyChina Mobile Survey (n = 1,397 Tier 1-3 Consumers)Less Spend ≠ Reduced Category Involvement
More time at home is occupied with more skincare tutorials, reviews and livestreams.
Exhibit 8: Lockdown’s Impact on Female Consumers’ Video Content Consumption (February)
Percentage
Less Viewing More Viewing
Does Not Watch A Lot Less Slightly Less Remain Same Slightly More A Lot More
Skincare 5% 8% 12% 19% 33% 23%
Cosmetics 5% 11% 19% 17% 29% 19%
Alcohol 12% 11% 15% 33% 15% 14%
Personal Care 3% 10% 15% 31% 26% 15%
Home Cleaning 18% 4% 7% 15% 18% 38%
Packaged Food 8% 8% 18% 11% 25% 30%
Note: Respondents received following prompts: ‘A Lot Less’ is a decrease of >2 hours/week; ‘Slightlyy Less’ is a decrease of >1 hour/week; ‘Slightly More’ is an increase of >1 hour per week; ‘A Lot More is an increase of 2 hours/week.
Source: AgencyChina Mobile Survey (n = 1,180 Tier 1-3 Female Consumers)Spend on Self & Home Return
Spending primacy on looking good, feeling good and protecting oneself.
Exhibit 9: Post-Lockdown Spend in Different Categories (March)
Percentage
Less Consumption More Consumption
Does Not Use A Lot Less Slightly Less Remain Same Slightly More A Lot More
Skincare 3% 8% 6% 40% 23% 20%
Cosmetics 6% 8% 4% 11% 54% 17%
Alcohol 14% 10% 19% 40% 10% 7%
Personal Care 3% 8% 32% 34% 20%
Home Cleaning 8% 10% 17% 27% 21% 17%
Packaged Food 4% 16% 13% 25% 35% 7%
Note: Respondents asked to compare spend to previous month (February)
Source: AgencyChina Mobile Survey (n = 1,395 Tier 1-3 Consumers)Opportunities
Eye Skincare Takes On New Importance
Widespread use of surgical masks elevate the eyes’ role in beauty.
Drivers Opportunities Examples
Face masks widely worn amid New opportunities for eye-skincare
ongoing uncertainty about with consumers between 20 and 25
asymptomatic carriers and – key focus on hydration,
‘second wave’ outbreaks. brightening and de-puffing.
Wearing a face mask for prolonged Increased preferences for serums
periods can put undue pressure on and ampoules, especially collagen
the skin, lead into fine lines and boosters and retinol formulations. Correcting Tools Context-Specific Eye Masks
wrinkles.
Eye skin care is the first line of
Niche opportunities for ‘first-aid’
defence for anti-aging. China’s anti-
solutions for immediate impact,
aging shoppers have an average
offered alongside products for long-
age of 24.3, down from 26.1 two
term maintenance.
years ago.
Serums & Ampoules Specific Ingredient Profiles
for JTBD
What can you do for young adults concerned about dullness, fine lines or visible signs of stress?
Source: Tmall; AgencyChina Analysis.Fending Off Mask-Related Irritation
Surgical masks in summer are likely to cause a few headaches.
Drivers Opportunities Examples
Face masks widely worn amid
New breakout treatments to deal
ongoing uncertainty about
with breakouts that are humidity-
asymptomatic carriers and
related, not hormone-related.
‘second wave’ outbreaks.
Wearing a face mask in a warm New exfoliation needs, which
climate has an adverse impact on involve exfoliating more regularly to
skin, making it a breeding ground remove dead skin cells which can
accumulate under masks. Convenient Spray Formats Skin Barrier Recovery Creams
for blemishes, clogged pores and
breakouts.
Stronger preferences for
formulations that contain
antibacterial ingredients such as
tea tree oil, lavender and zinc.
Expansion of skin barrier protection
category, and formulations which
are more suited to humidity (i.e.: Tea Tree Spot Treatments Comforting Gels & Masks
gels).
How could you make yourself part of new hygiene or grooming habits?Night Recovery Concept Expands
Young urbanites want to unlock sleep’s regenerative and restorative powers.
Drivers Opportunities Examples
Economic shocks and headwinds Increasing desire for formulations to
uncertainty mean China’s urbanites get the most out of sleep’s
are working harder – one in five will ’strategic’ place in skincare
put in more than 10 hours of regimens.
overtime a week.
Growing uncertainty and anxiety, New repair or recovery kits targeted
with over half of China’s white- at specific sleep-deprived groups or
collar workers admitting to occasions (all-nighters, long-haul
travel, etc). Pillow MIsts
workplace-related anxiety.
Night repair skincare products gain New occasions as health and
impressive traction in the last two beauty-related categories
years – growing almost twice as increasingly look like ‘round the
fast as the category average. clock’ regimens.
Products ‘Owning’ Specific Times
Increased acceptance of sprays, During The Day
candles, pads and nutraceuticals
Leave-In Hair Treatments
that optimize sleep.
How could you work with night-time recovery and rapid rescue concepts to occupy a niche or occasion?
Source: Zhaopin; Kantar; AgencyChina Analysis.Weight Management Nuance
Post-lockdown weight management goals and changing beauty standards create more
space in wellness and nutrition markets.
Drivers Opportunities Examples
Post-lockdown weight Need for flavour breakthroughs for
management. meal replacements, diet shakes,
detoxes and protein shakes.
Changing beauty standards mean Increased expectations for wider
‘getting in shape for summer’ SKU profile to allow consumers to
means getting toned, not just losing choose sugar and protein level. Supplements for Localized Flavour Profiles
weight. Different Body Profiles
Increased appetite for warm-up and
Underlying fitness tailwind, with
recovery products, including
increased spend, participation and
gummies, shakes and
category penetration.
supplements.
Critical mass of fitness enthusiasts Emerging customized ‘supplement
creating more nuanced category packs’ to suit lifestyle and fitness Gummies & Chews Personalized Pill Packs
opportunities. needs. to Support JTBD
What emerging weight management need state may be the right jumping off point for you?About Us
Insight to Action
AgencyChina, and its parent company WebPower, bring vision and visibility across where to
play and how to win with China’s consumers.
Research Strategy Social e-Commerce
CRM Loyalty AutomationFor Brands With Winning Aspirations We focus on beauty, nutrition, pets, fitness and luxury.
CONTACT Michael Norris Research & Strategy Manager Shanghai, China michael@agencychina.com
Nick Henderson
Director, China Practice
Asialink BusinessCathy Lu
Senior Business Development Manager
AustradeTim Brown
Chief Business Officer
Health MoreHealth More 2020
About Health More Health More was founded in 2013 and has grown to be the leading CBEC distributor from Australia of Health and Wellness products from Australia to customers in China, Hong Kong, Singapore and Malaysia. We are 300+ dedicated team members in Australia, New Zealand, Hong Kong and China. Health More is a hub for all CBEC services required for brands to seed, launch, sell and grow within the Chinese community in ANZ and into China. Health More works with brands to understand, execute and continually improve their CBEC strategy from ANZ into China. Why is Health More required? This industry is a combination of multiple industries, channels, and layers of complexity, brands require Health More to navigate alongside brands, protecting brands and caring for the market.
Health “More” = “More” than Distribution
The distribution of our offices and people ensures:
• best level servicing for brand partners in every area for CBEC.
• a 360-degree view of the channel.
• we are ahead of the curve.
Put simply, these factors position us uniquely to develop the connections for brands to thrive in CBEC.
Coverage Logistics – Warehousing Local Market HM Extra Mile
• Melbourne • Melbourne: (5,000 sqm) 45,000 pallets/year • Direct distribution • XPanda GO /
• Sydney • Sydney: (3,000 sqm) up to 50 mixed pallets and merchandising Channel alignment
• Hong Kong daily and 1M parcels/year • Trials and sampling • Last Mile delivery in
• Shenzhen • Guangzhou: 8,000 sqm – Platform and • Linking online and China
• Hangzhou XPanda Go fulfillment offline via We Chat • Monitoring on CBEC
• Zhengzhou • Zhengzhou: 8,000 sqm - Platform and platforms to protect
• Kaifeng XPanda Go fulfillment margins at all levels
• Hangzhou: 4,000 sqm – Coming Soon! • OTC capacity
• Hong Kong: 2,000 sqm – Taobao and We
Chat merchantsXPanda GO Grand Launch 27 June On 27th June 2019, Health More launched XPanda GO, our social e-commerce APP specifically designed to drive demand and sales from ANZ local market to Consumers in China. XPanda Go unlocks the power of Daigou and aligns the channel, giving HM unprecedented ability to seed, incubate and drive demand and sales in the local market: • Brands connected with the end consumers via Daigou networks • Daigou to continue their role promoting Australian brands in a protected environment • End Consumers have a simple shopping APP • Influencers/KOLs rewarded for promotional work
2020 - Covid 19
From THEN to NOW What did we think when it hit?: • What we feared… • What we had confidence in… What has happened (for HM and our Brand partners): • Generally about 20% up on last year • 30%-35% from VIC brands • Jan v Feb v Mar New considerations: • Logistics - You can't send stock to China • Daigou – they can't operate as parcel costs are too high • The Noise – so many guides, opinions, trends, information
2020 CBEC – instead of ending, it grew… Strong Foundations set: • Aus and NZ already strong in Healthy Lifestyle – and we have MORE to offer • Supply Chains are well established • Our CBEC market and channel management is sophisticated A bit of luck and a lot of planning… have we done anything particularly different? • We always have a lot of stock in China • Consider both ends • Early days = protection and prevention • New stuff • We have seen renewed confidence
Impacts and Challenges Demand – has there been a shift in categories? • Protection and Prevention - early • UP - Infant formula, Immunity/health supps / Fresh foods - sustainable • Health, fitness, and nutrition - 80% of Chinese consumers paying more attention to eating healthier • Flat or DOWN - Beauty and skin care brands – will return / is returning Demand - Is there increased Demand for Australia in particular? • Very strong demand for particular categories and flat for others • Reinforced position brands have invested in for a decade • Remember too – other markets are shut… Challenges we now face (We have commitments to our brand partners – we also face the challenges) • Logistics • Brand partner supply chain = stock • Brands acting with uncertainty • Forecasts
Categories and Impacts
Category Pre 2020 Outlook Current Projection
VMS Big Challenges ahead Still challenges, but a Healthy Lifestyle
(BMs, Lifespace) focus gives some base to leverage
Mother, Father and Baby – inc IF Strong Strong
(A2)
Beauty, Skincare and Cosmetics Strong movement towards premium – Highly competitive – feels flat
(Natio, Aesop, Jurlique) difficult to focus
Personal Care Awesome opportunities here The brands that invest in the marketing
(Veet, FemFresh) and education will win in this category –
the consumer is demanding this
Potential New Categories
Home and Hygiene Strong but Flat Supply cant meet demand
(Morning Fresh, Dettol) • Travel and Adventure
Pet Growth category Accelerated growth category
• Home
(Petstock, Petvet) • Alcohol
Apparel We saw the opportunity, but requires a Proven the seeding channel can work for
(Defender, PureBaby) different level of focus and attention certain fashion categoriesHere we are now… Actions we have taken: • Consumers, KOLs, Customers • Deepened brand partnerships – look for opportunities to help each other • Increased internal communications • Expanded Approach we recommend to brands: • Get creative Specific Issues related to COVID and CBEC: • Everything is slow (except the purchasing…) • The usual smaller, more regular orders – tough due to logistics • Supply Chain – where could you improve
What should we be doing now? What should we be doing?: • We should be talking + Investigating partnerships • Recognizing the Eco-System and key players If I’m a new brand and I want to get into China CBEC… If I’m a growing brand… If I’m an established brand… Any standouts from this period? 2020 • Brands must not chase targets set based on YoY measures • If we don’t protect Daigou, then what? How “popular” are our brands? Opportunities: • Opportunities exist – conversations and partnerships • Lessons learned to ensure foundations are protected
Thank you
Q&A
Nick Henderson
Director, China Practice
Asialink BusinessPanelist contact details
Tim Dillon: tim.dillon@global.vic.gov.au
Michael Norris: michael.norris@agencychina.com
Cathy Lu: Cathy.Lu@austrade.gov.au
Tim Brown: tim@health-more.com.auThank you for your feedback
How China has rebounded from coronavirus and is ready for business. Victorian eCommerce Network 13 May 2020
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