Making China e-commerce more accessible for Beauty SMEs

in GENERAL

Hello everyone, Today I’ve got Jack Porteous from Samarkand Global. He’s their client services director Samarkand have offices in the UK and China and their mission is to make China e-commerce as easy as selling on your own dot.com.

I thought it would be great to have Jack here today to give us some more information about how they work and some of their services. Thank you very much for having me Allie.

You’ve got a long background and history of working with China and with brands going into China. From China British business council to the department of international trade and now Samarkand Global.

What are some of the key issues that you see beauty brand specifically face when they’re entering China?

For those of you who don’t know me, I was the head of retail and e-commerce for the China Britain Business Council just over three years and I moved over to Samarkand Global in April.

We are a technology company and distributor, TP who help Beauty and health clients primarily but also people from other sectors access the China Market in a simple, accessible and profitable way.

For Beauty Brands specifically, I think there’s three big challenges. I mean, there’s a million other challenges right?

You can never keep it to a short list. The first I think is particularly pertinent at the moment with global travel restrictions and the way that the world is – finding the right partner is really tough.

Covid has made this even harder because you can’t travel to China  and there are fewer Chinese traveling to the UK. It’s much harder to meet people in person and get an idea of who they are and what they do.

It’s kind of a challenge of finding the right type of relationship because there are various different business models available to enter China some of which are quite unfamiliar to brands in Europe.

You could you could enter with a traditional distributor, but with that you’re sacrificing a lot of visibility a lot of control. You don’t know how your brand is going to be presented. You don’t know where it’s going to go and and we’ve spoken a lot of brands that have been in that kind of relationship with a distributor for a few years.

Sometimes it works amazingly. It’s a perfect fit. But then other times, there’s a big communication barrier. The transfer of information in both directions is difficult and doesn’t work and  problems start to arise. So that is one route.

Another route appointing a service provider for e-commerce a TP company, which is one of the things that we do.

But that is high cost it adds, choosing the right partner is difficult because they’re the kind of companies that will just put massive numbers in front of you and expect you to sign because China is 1.4billion people and if you can just sell one of your creams or one of your shampoos to half of the Chinese population then you’re going to have made a huge amount of money. Right?

If only! I think that finding that right partner is really really tough. Secondly it’s a super competitive market. This is linked to that last one as well it people get really wowed by the numbers. Every presentation about China that I’ve ever done and I’ve ever been to has some of those stats just to make people go.

Oh, wow. China is a massive opportunity. It’s so impressive. It’s so big. And it is, but that doesn’t mean it is free or easy to just latch onto and be able to get a huge amount of sales, if you’re looking at it as an easy add-on or a way to fill a shortfall that you’re experiencing from your European retailers in the short term.

It’s just not going to work. It’s super competitive. If you’ve got no budget to spend on marketing. If you’ve got no budget to spend on product localization development whatever, all the little things that add up and you might need then you’re going to struggle to crack it unless you find a distributor who’s going to fund all of that all of that for you, but then that’s the loss of control. All kind of balance right?

The last challenge is something that I’m asked about every day at the moment, which is animal testing. If you’d asked me five years ago, whether I’d be such an expert on Chinese Cosmetics regulation landscape. I probably wouldn’t have expected it.

But it’s an interesting challenge at the moment and China is in a period of transformation It has quite sensibly taken an approach that it wants to do it on its own terms and it wants to change regulations in a way that makes sense for the specific circumstances of China, which I think is a good thing. 

As somebody who is a vegetarian mostly vegan. I don’t want animal testing to carry on. But I also want any changes that China makes to be long-lasting and to be done right.

For it to be part of a long-term shift towards, the correct treatment of animals and safe testing of Cosmetics as well, which is fundamentally what it’s about. Right?

There’s a lot of Buzz at the moment that the laws are going to be changing in January. I’m trying to keep everybody quite calm about that because UK I think we’re still struggling for a bit of clarity on the process that we’re at the brands are going to have to go through.

In order to get the correct certificates to go through the registration process for entry. You know, there’s something called a GMP a good manufacturing process certification that the in the early drafts of CSAR the regulations that China has put out has to be awarded by Government body or a quasi government body, the UK government doesn’t do things like that and most European governments don’t.

So there’s this kind of working around to be done there. The other thing is that China has historically been very slow at adding new agree ingredients to it’s approved list. I think it’s only 30 ingredients in the last 12 years have been added to that the approved list, which is absolutely nothing.

For a lot of Brands that’s going to rule out that the whole process to start off with and it’s going to even if that accelerates which I anticipate it probably will accelerate now. It’s going to take a little while for that to come through.

Then of course special use Cosmetics this change only applies to non-special use Cosmetics. Anything that’s got SPF, anything that has got claims about hair growth or hair removal or anything like that.

We’ll still would still have to go through animal testing for General import. Yeah, so that they’re the three big challenges. To cycle around to back to Samarkand Global, I’ve slipped back into CBBC giving out loads of free information.

We are a specialist in cross-border e-commerce. So cross-border e-commerce is the route that Beauty Brands take to go into the market without out testing on animals at the moment. Everything we do is cross border eCommerce, and I don’t see that shifting in the short term.

But of course kind of the medium term opportunity is General import for as many beauty products.

I think you know finding the right partner part of it We’re based in the UK we have got a team of about 50 in the UK and about 45 in Shanghai plus a couple of people in Hong Kong. We’re looking at opening offices next year in one in Mainland Europe and one in another Asian City as well.

We’re expanding quite rapidly at the moment. We are where the brands are as well and part of the difference that we offer is that our brand management happens where the brand is so I head up a team of Managers based in the UK.

We’re looking after the relationships of our brand partners making sure they know what’s going on, communicating with them about upcoming promotions getting their support for gift with purchase on specific channels.

Or whatever it might be and helping them to understand and navigate the market with us because we want it to be a journey that we go on together with ones that we work with because if the brand understands then they’re more invested and we can work together longer.

Absolutely. I mean, I think I would definitely echo your three key challenges. I agree with you. I don’t think that these two new changes with the regulation are going to dramatically change cross-border e-commerce in the near future.

For brands that I’m working with we’re still very much looking at cross-border e-commerce and the biggest challenge we always have is finding the right partner and there’s a fit thing there as well but having a team that is on the ground in the UK or in Europe to be able to work directly with the brand but has also their own in-house team in China.

I think that’s a huge advantage and I think that’s something that Brands, maybe if they haven’t been in China, they might not appreciate how helpful that will be but if brands already been in and are changing partners, they will know that is a massive advantage because of the communication it’s more than just language that there’s a lot of things that need help.

I think a transparency is something that you guys will provide which is really key.

Yeah, I guess the way the way we look at it. Is that our team in the UK my team the brand management team. We are kind of there as the people who are internalizing all of those communication issues that you would normally have between a Chinese distributor and the brand in the west.

It’s a big headache for me and my team because we’re the ones trying to bridge those gaps and resolve those kind of points of conflict or the areas where things aren’t clear, but I think that function is really really important because we are so used to talking to Brands about China about the market and about the way things work that we just buy them understanding it reduces the amount of confusion and the number of problems from Day 1.

Let’s talk about the different types of services that Samarkand Global has because you’ve got a few different things and they can work for different size brand and I think it’d be interesting to go through.

Yeah, definitely. we’re a distributor and TP. That’s kind of one side of our business and that is very heavily focused in the health and beauty space.

What I mean by that is we buy and sell products from Beauty Brands and we distribute them through various social commerce channels.

Whether that resellers on taobao who were running skincare or Cosmetics specialist stores or whether that’s a KOL led channel on the wechat ecosystem or Little Red Book ecosystem where the KOL also has an e-commerce function within their kind of official account so that we can leverage their audience to be able to promote products to the to their customer base and that you know, we try and encourage customers to think about those channels as retailers and we are a distributor selling to retailers or e-tailers.

As you know, some of them are as prestigious as being in Harrods or Gallerie Lafayette or Bergdorf.

This is what you’re aspiring to be in. We work with some really big Beauty influences who’ve got platforms that turnover in excess of 150 million dollars(USD) a year.

It’s not a little eBay seller or it’s not no disrespect to mums on Facebook groups because I’m sure they do good business, but it’s all it’s a much more serious operation than that.

That’s one side of what we do and obviously because we’re buying the products we are fairly selective about about the kind of brands that we work with because they have to fit in with the channels that we have.

We also from the TP point of view can run stores for people. If perhaps you’re a slightly bigger brand or you’ve been through a bit of distribution and think that your product works have a market and you want to make more of an investment in to having a direct-to-consumer storefront.

We can operate as a trade partner a TP running stores on Tmall Global or Little Red Book, WeChat mini programs or whatever the relevant platform is. We’ve got a good relationship with them so that we can run those for you.

The newest offering that we’ve got which is one we’ve invested a lot of time and a lot of money, in a lot of effort into developing it is called “Nomad Check Out”and the idea behind it is that is there are a group of Chinese consumers out there who want to experience Western brands in its in their fullest form.

They want to shop on their global.com websites. Typically China has historically been a Marketplace driven market. Tmall global, JD worldwide and all of the market places.

This is still true 90% sales are still going through those marketplaces.

But 10% is still a really nice piece of the market in China. And if you’ve already got traffic coming to your website, or you can do some activation with some Partners in China that can help you drive traffic.

You can do some influencer campaigns or whatever it might be then giving Chinese consumers on your website the right kind of experience is really important if you want them to ever come back and shop with you again.

So Nomad Check out solves a few problems for the consumer. It enables Chinese payment methods so Alipay and WeChat pay, Chinese consumers don’t use Visa, Mastercard, American Express type solutions.

They use Chinese payment methods, so we accept them and the checkout flow itself is fully in Chinese and it collects all the information for Customs clearance.

So ID number and all of these things that perhaps your standard shop if I check out wouldn’t collect that. He is so our specific checkout flow that they go through is hosted in China.

It’s in Chinese. It loads seamlessly, works quickly, collect all the relevant information and doesn’t glitch while they’re trying to check out and cause them a load of headaches about whether they have just paid for something that they are not going to get.

That’s one part and then the other part is the logistics that are really really improves for them.

It’s cleared through customs through the cross border eCommerce route, which is a specific sales channel into China.

Normally if you’re sending something via a big International carrier, it will go through what’s called CC consumes consumer channels. About 75% of the time parcels just fly through that and don’t get inspected but 25% of the time they get stopped.

The customer will have to go down the post office pay an additional duty tax fees and have to pick up that parcel. It’s a really bitty consumer experience to have one in four parcels checked and that portion is increasing every year.

But one in one in four parcels stopped is already high. We are cleared by cross-border e-commerce, tax is prepaid on all products. And it means it gets into their chosen delivery place in their hands and there’s no problems at all.

They’re given a tracking link as well for the entire process. It’s a fully tracked delivery with SF Express. SF Express is China’s most trusted courier company that’s one of the biggest.

So it gets from it gets from you to them and they know where it is long a whole process.

From the Brand’s point of view you just have to ship to us in the UK or if you’re located in another country, we do have Solutions with SF Express as well where you can ship to one of their hubs, it’s an easy process from you and it’s not a big integration for your website. It’s a couple of lines of code. 

That provides a separate check out for Chinese consumers. It only displays to Consumers who are from China when they land on your website and it doesn’t dynamically alter or take over your website in any way like some of the other check out solutions that are available for Global markets do so.

It’s from the brand. It’s really easy lightweight solution that provides an amazing customer experience, the same that you would be giving the customers in the west and we think that is a great solution for small brands because it’s lightweight low cost your budget can flex.

If you’re doing some KOL marketing and they can drive traffic to your website, then it’s all coming through to you. You’re fully in charge of your stock levels. Yes, I think it’s a great.

I really think it’s a great solution. If you are a small brand who is wanting to start to build their awareness. Maybe they’re building their awareness with Chinese in their own market, or maybe they’re starting to do some activation in China.

But you want to have a place where they can buy your product. It is so frustrating for a Chinese person to see this great product, be interested and not be able to transact.

I think being able to transact on your own website rather than through a third party where they have to search for you have to find you on a WeChat store or whatever, I think it’s a really good solution.

I’m sure that you will have lots of Brands  taking it up. It’s just launched hasn’t it? Yeah we’ve gone live on a few websites this month who are kind of our test group.

They’re all Shopify websites were also launching with Magento and woocommerce Integrations in january-february. The three major ones will be completed in the next month or two, and then we’re moving to Bigcommerce and Salesforce as well later next year.

It’s great for those small bands. You’ve got a little bit of budget. It’s also great for slightly bigger Brands who’ve got a bit of awareness. Maybe you’re a fashion brand.

You’ve got 15 stockists across five cities in China or something. You’ve sold to a load of litte boutiques or your a beauty brand with a couple of Taobao resellers who are buying from you and it means you’re already getting traffic from China to your website but it’s just not converting. 

We think that this could be a really easy fix to turn that conversion from 0% to 5% or whatever your average conversion is to get those transactions flowing and then the kind of other group that it’s that it’s suitable for just so that I’m being clear it suitable for everyone is is bigger companies who will have a lot of traffic to China.

Some of those companies might have decided that the major Market places aren’t for them.

Often multi-brand retailers in particular have struggled to make it work on Tmall Global, you know in Beauty you can look at someone like SpaceNK who found it really difficult to make Tmall Global work for them and and for those kind of brands where the margins just don’t really work out to be selling Tmall Global but you’ve already got the amazing level of awareness and visibility and trust.

Because of your position as a retailer in the UK or an online retailer with a huge reach, then this solution gives kind of direct-to-consumer route to China that removes one the hands that’s kind of taking from the money pot in the middle.

It’s just shortening the route to Market so that the margins work out. I think obviously it’s a great solution and as you said for all different levels. Brands who are starting out especially if they’re in the UK, obviously, they want to start building some awareness with the Chinese, they might be small Brands or medium sized brands, but they need to start building that awareness in the UK.

Obviously, you’ve got Daigous so people buying on behalf of their friends and family and other people in China and then you’ve also got   personal product hunters.

What do you think that a brand could do in the UK to really kicks that start that?

Again 2020 has changed everything right? Like, you know, it’s been it’s been such an odd year, my advice when I was at CBBC to small brands or medium Brands who are just starting on the China Journey was that you need to do whatever you’re doing well in your home market before you even think about China.

If you are a luxury skincare brand and you’re not in Harrods Selfridges, Liberty, Fenwick, Harvey Nichols, you’re not in any of them.

Then you need to probably concentrate on getting a couple of those key stockists in first before you even think about China because that is the quickest way to get Chinese eyes on your products is to be in an established retailer where  Chinese are already going.

It’s really really expensive to build an audience from nothing in China. You need to do as much as you can as part of your general business development in the UK, Europe, U.S wherever it is to grow.

The Chinese consumer in the days of travel, which I hopefully coming back in the next six months, Would spend 40 /50% of their spend on Oxford Street in London, or Galleries Lafayette in Paris.

The Chinese is the number one consumers there. If you’re in those kind of stores, then you’re getting Chinese eyes.

There are Chinese people buying your products for sure you need to do that. In terms of talking to Daigou and these personal product hunters again they all look at those stores.

They look at whether you’re listed on Feelunique and Look fantastic and Cult Beauty and all of these places as well because something that Daigous aren’t interested in is investing time in building pages and buying products for things that are just going to sell nothing.

You need to convince people that it is going to sell through by selling through in your home market. I think that’s kind of my biggest piece of advice. We manage a network we’ve got a team who manage our Daigou sales.

Both from a relationship management and keeping customers happy point of view because some of these its doors on Taobao who are run by Daigou have got a hundreds of thousands of followers.

Turnover huge amounts and some are much smaller. But also from a price management point of view as well we kind of set maximum and minimum pricing, obviously it’s not enforceable, but we can stop selling to people if they’re not respecting the price suggested.

I think people always thought if I can just find five Daigou who be able to sell my products in China then it’ll give me a kick start.

I think it still needs to be a managed process. It’s better done by partner than it is by you or it’s better happening organically because they found you in places where they were already looking.

My number one advice is talk to Samarkand Global. My number two advice is probably attend some China Britain Business Council stuff as well.

Check out my previous employer. Beauty trends for Beauty Brands in China that they should be aware of, in order to make their launch more successful.

What is one thing that you think that they should really know about?

Slightly backwards way of answering this question. I would say that it’s and it’s usually not the same as whatever you’re selling it in in Europe.

The number of brands that will come to me and say that they’re organic and vegan and low water and low emissions and all these things which are kind of nice add-on so points in China, but very rarely the main thing.

Product efficacy is really important. Something that is I think is really difficult and I don’t have an answer to at the moment is packaging as well because we’ve got a big Trend in Europe of brands doing minimal packaging trying to reduce everything from an environmental impact Chinese consumers want impressive packaging.

They want something to be branded. They want the experience of unboxing something, something to be beautiful when they buy it so finding a way that doesn’t impact on your commitment as a company to reduce your carbon footprint and your pack plastics use and all the rest of it.

Plus then also still being an attractive solution for Chinese consumers. I think that that’s one of the big challenges that brands face. I think it is something that’s changing. I’m seeing a lot of things – Reports coming out.

We’re seeing much more conversation about sustainability in China and obviously with a lot of government initiatives to do with recycling and the environment, the government is pushing it  as well, which always helps accelerate things in China.

So I think that’s definitely something that will change but I agree at the moment it’s still not a high priority. Something that I often work with brands with is looking at their messages, you know, they’ll have a hierarchy of messaging for the UK or for their home Market but in China, we just might change that around a bit and may not lead with Organic for example

Especially because there’s issues with using the word organic in China as a claim. But otherwise for what will resonate with the consumer and I’ve done that with quite a few Brands I think brands have to be open to that.

They have to be receptive to that. You know, it’s not changing who you are. It’s just putting a message forward first and then having the other messages after that. I think that’s a piece of work that Brands need to do as they decide to enter the market.

Yeah, absolutely and you know  working with you would be a brilliant way for any brand to sort out that positioning for the China market as well because I think Chinese consumers want to have to access the reason they’re buying imported products is because they want they believe in the quality.

They believe that there is some kind of cool associated with it. There’s a you know, there’s a lot of positive things about it. You don’t want to change the essence of who you are. It’s just about drawing out the right things from what you’re already doing and having somebody who’s an expert in the China Market, but also with such a keen eye on beauty trends as as you, I think is really important.

It obviously I’m sure anybody who’s watching this video is already well sold on your abilities.Thanks Jack so much for that I think there’ll be lots of takeaways that brands can gain from that discussion.

If they want to get in touch with Samakand Global or you what’s the best way to do that ?

You can email me jack@samarkand.global.com or you can go to our website  samarkand.global.

Great. I’ll put all the details on the notes below. Alright. Well thank you so much, that was really interesting.

And yeah thank you so much Allie.

For more information and my top market entry tips see this post.

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