Should my Beauty brand enter the China market?

in GENERAL
Cross roads China

This is a question I get in my inbox several times a week. There is no doubt China is a huge opportunity with 1.3BN people and a growing economy. With 200M more people expected to be lifted into the middle class by end of 2020 there is certainly demand for quality beauty brands from around the world.

So why do we hear about so many high-profile failures….? SpaceNK, Macys and many more…

China is complex and competitive. So how do you decide if the time is right for you?

Firstly – do a brand audit

This is something that many brands tend to skip over but something I consider crucial.

Find out what people are saying about you in the market, are they saying anything? Are there any resellers of your products? Are the reviews positive?

Culturally the Chinese place a huge importance on peer reviews and social credit so even if the sample size is small you should always look at what the early adopters are saying.

For brands I work with we always do a digital audit. This includes 3 key areas:

  1. Are people selling your products?
  2. How many Taobao resellers are there for your brand?
  3. How good are their sales?

Taobao allows you to see the last 30 days of data. We can also use tools for example Kanda-data.com to see a longer time frame for you and your competitors.

Are people talking about your products on these key platforms?

  • Little Red Book Xiaohongshu
  • Weibo
  • Wechat
  • Baidu
  • Taobao reviews
  • Others – Bilibili, Zhihu, Douyin, Kuaishou

What are people saying? Are there any common themes?

Are people talking about a particular product – which ones? They may not necessarily be your star product in other markets. Is there a commonality to the positives and negative comments? What brands are they comparing you to? Are these your normal competitors?

The brand audit is not a huge undertaking, it should be a small project just to let you get a feel for the sentiment. Of course, this is likely to be a small group of people if you haven’t done any market activation but it is a crucial starting point. And these people could become powerful brand advocates.

Secondly – what is the optimal way to make it work?

Business structure

You can set up your own China entity or like most Cross-border brands you can rely on partners – a distributor or trade partner are the two main types.

  • Trade Partner – you maintain control of your brand and can swap easily if it is not working
  • Distributor – you lose some control and visibility of your brand but they have more skin in the game, and may be able open up different sales channels

Sales structure

Which platforms do you want to target? How broad do you want to cast the net?

  • Tmall global is the main channel for international beauty brands entering China
  • Taobao is the biggest feeder of traffic to Tmall and where Chinese people search for brands – would you consider having resellers on Taobao? How to manage cannibalisation with Tmall store if you have one and pricing?
  • Little Red Book – is it worth setting up a store there? Sales are low as it is not somewhere consumers are used to transacting
  • We chat mini programme shop – many brands start with wechat before they go onto Tmall. You have full control over your data but it is difficult to drive traffic and consumer’s no1 purpose is to connect with family and friends not to purchase.

Any other channels you might want to consider, at what stage and what type of sales uplift.

Content & Marketing structure

  • Assets: China market requires many more assets and much more copy than most markets. The majority of brands have to produce extra content with lots of detail. For example, you want at least 9 products shot images for one SKU – consumers want to see details!
  • Social media management: A copy paste of your home market social strategy will not work, you need something bespoke – market and platform specific.
  • KOL & marketing: who will own the relationships, brief the KOLs, continue the conversation and follow up.

My recommendation is get a good marketing agency and ideally (if you can afford it) one local hire in mainland China to manage the stakeholders and be your local cheer leader as well as eyes and ears.

Thirdly – can I afford it?

China is an expensive market to operate in and Cross Border e-commerce is no exception. So what costs are actually involved?

Before going forward with any business decision you need to put together a potential P&L. For China Cross border e-commerce here are some of the costs you should include:

  • Platform opening costs – deposits, annual fees, commission
  • Trade partners – flat fee and commission
  • E-commerce platform traffic driving marketing
  • Off platform marketing costs – KOLs etc
  • Content creation and social channel management
  • Shipping costs
  • Tax

How long will it take to hit certain sales levels? How much investment do I need to make in marketing?

Beauty is a competitive business in China, both international and domestic brands vying for consumers’ attention and money. So as you consider if your beauty brand should enter China definitely do your groundwork before diving in – it won’t cost you more or slow you down in the long run.

If you want specific info about how Cross border ecommerce actually works and the costs involved I’ve done an online course specifically on this – https://clean-beauty-asia.teachable.com/p/get-set-course

2 Comments

  • khongorzul June 15, 2020 at 10:54 am

    Hello Dear,
    My name is Khongorzul. I text you from Mongolia. I want to set up my own makeup. Is it possible? Could you answer me? also how about. cost

    • admin June 15, 2020 at 12:15 pm

      Hi, thanks for coming to my website. I’m sure setting up a makeup company is possible but I don’t usually work on that stage of a business. Thanks Allie

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