Case Study – Cross Border e-commerce set up China

China-map

I have worked with many Indie Beauty brands & retailers who are looking at setting up in China. Each time the work is of course bespoke but similar questions arise. Off the back of this work I have created a comprehensive masterclass fully dedicated to setting up a succesful cross border e-commerce strucutre for your beauty brand in the China market. 

In this post I will breakdown some of the common areas brands need to consider when entering China

Are you a Cruelty free brand?

All the brands I have worked with are Cruelty free brands. When entering China some brands have more of a dilemma than others with retaining their cruelty free status. 

Here are some of the things to consider……

1. How quickly do you want to scale? – If your answer is very fast then realistically you may need to sacrifice your Cruelty free status. A very high profile example of this was NARS who had previously resisted entering the China market but in 2018 went in fully, to much uproar in the west but their sales growth was phenomenonally huge. A commerical rather than a principled decision.

Creating a profitable, sustainable business without physical retail is tough and requires patience. 


2. Do you want to sell in physical retail in China but retain cruelty free status? – If yes, then there is signficiant set up costs and restrictions but it is possible. See the recent pilot project by Bulldog skincare with Knudsen working with leaping bunny – they manufacture in China in special facilities under specific supervision and sell in certain provinces.


3. Are you happy to go online only appreciating your customers will not easily have an outlet to try your products? This is the compromise most brands and retailers I work with go for. It is expensive and not ideal but it does mean you can stand by your principles whilst accessing soon to be the biggest beauty market on earth. 

Cross border e-commerce – Structuring your set up

Once you have decided to go with option 3 above – online only through cross border e-commerce then there are many other things to consider. I often get calls from brands who have been approached by a platform – normally Tmall global but from here they don’t know where to start. Tmall global does not do everything for you nor give you all the information you need to make a success of your brand in the market.

So what do you need to consider……

1. Your Business structure

  • Are you going to set up a China WOFE? This will give you more freedom in terms of platform and shipping options but it is also opens you up to risk.
  • Are you planning on having a team on the ground in China or relying on partners? How hands on or hands off are you expecting to be?
  • Do you want one partner to do everything or do you want specialised partners?

I have worked with brands who are already established in the market but did not think carefully about these key questions in advance and in one case they ended up with 6 agencies all working on different parts of their marketing plan – looking after different platforms. Not only is this costly but it lacks strategy and consistency and as a consequence the results from all the agencies were pretty poor. In order to cut through in China you need a consistent, clear message.


2. Your Sales structure

Where do you want to sell your products online in China. Tmall global is now the biggest cross border ecommerce site but it is definitely not the only one. And there are significant advantages and disadvantages.

  • DDP: Tmall, JD worldwide, Xiaohongshu (RED) etc…..: this is the main route used but you need to have a Chinese WOFE or work with a partner who does.
  • Postal route: Wechat shop, website: this is the more autonomous route where you are able to keep closer control of your brand management. 

These structures are explained in detail in my online masterclass. 

3. Your Margin structure

Cross border e-commerce can be deceptively expensive as it is multi layered and shipping costs can easily get out of hand. 

So with my clients I always carefully work through all the layers of costs associated with a cross border e-commerce transation.

Just some of the costs to consider are:

Platform fees: Commission, flat fees, deposits and marketing

Trade partner fees: flat fee monthly regardless of sales and a commission plus extra for media buying, events etc

Shipping and logistics costs: Normally certainly to start with you will be shipping from a Hong Kong warehouse and your order volumes will be small and bitty.  Some of the costs here that will add up:

  • Warehouse/logistics company flat fees that are only waived once 
  • Shipping from home market to HK warehouse
  • HK warehouse to border with China
  • Shipping within China
  • Customs agent for tax clearance

This is simplified if you are shipping with Tmall or JD and are going through their logisitics providers however costs can add up. 

4. Marketing and content structure

This to me is crucial and I have worked with several brands who have neglected to focus on this. A platform, logistics partner and in most cases a trade partner are essential but what about content and marketing. 

**Spoiler alert** – if you do not invest in your brand marketing in China you will not sell. 

You need to have content that is suitable and adapted to the China market and it’s consumer. 

Who is going to create this content for you? Is your trade partner capable of creating quality content? Or do you need a marketing partner?

Who is setting up and running marketing inititaives? Can one agency or partner do it across all platforms?

Conclusion

These are my top 4 consideration areas for all brands looking at entering the China market. Cross border e-commerce is a wonderful loophole that many brand use to acess this huge and important market without compromising their Cruelty free principles. 

If you want to know more about animal testing regulations and potential changes here is the latest information  – ADD LINK TO POST 

If you are seriously considering cross border e-commerce as the first route to market I would highly recommend my online course which will take you through the above in much more detail and give you a comprehensive, step by step guide of what you need to do to set up sucessfully. 

See more information here: Get set course – cross border e-commence into China

Why do people come to me for advice, I am unbiased and can act as an invaluable sounding board to your Cross border e-commerce plans. I have worked with multiple partners in the ecommerce space and can advise on the advantages and disadavantages of different partners and I can give impatial advice on your plans. 

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