The China Effect
Jan · 16 · 2019

The China Effect

The Chinese market has historically been very insular, making it difficult for Chinese domestic brands to break into the Western world, whilst concurrently seeing international consumer brands struggle with Chinese expansion. Recently we’ve seen a shift in the market as Chinese consumers become more open to global brands, with the West looking East for inspiration as the China Effect takes hold.

Recent growth in Chinese cross border e-commerce capabilities has seen an influx of international B2B brands become available to consumers, with Chinese e-commerce giant Jindong International welcoming more than 20,000 international brands such as Ferragamo and Shang-Xia onto their platform in the past few years alone. Cross-border e-commerce businesses have even greater potential in 2019 thanks to the country’s new cross-border policy that launched in November 2018. This policy, which came into effect on Jan 1st 2019, increased the value of e-commerce purchases by almost US$1,000 per individual, adding 63 product categories to China’s duty free list (from beer and electronics to healthcare products).

Thanks to this, Chinese e-commerce giants like Tmall International will be welcoming brands such as VANS, Ulmeken & Ultrasun and Hatley to beat their tremendous 2018 growth of +122%.

With such big brands dominating the e-commerce space, the threshold for international SMEs to enter the Chinese market is lower than ever before, creating the perfect opportunity and timing to approach the Chinese consumer as recently seen with  PIERRE HARDY and Sophie Hulme. At the same time, the influx of global brands into China has motivated local brands to develop their own global capabilities. It is no coincidence that Asian phenomena – from K-Beauty to Kombucha – have become product inspiration  for Western brands.

With these shifts the Chinese consumer is more brand savvy than ever. Which got us thinking – as e-commerce opens the market and more Chinese brands seek to ‘go West’, what consumer trends should brands be keeping an eye on in order to best take advantage of this new marketplace?

Below are the top consumer trends that we think will be significant in 2019 – watch this space.

Beauty – The Year of the Lipstick and the Eco Warrior

2018 was truly the year of the Lipstick. It became the top category for online sales in the colour cosmetics space, thanks to its popularity amongst millennial consumers. So impactful was this trend, that it crossed over into cultural spaces with The National Palace Museum of Teibo and Taiwan launching their own lipstick range inspired by the museum’s collections. Available on both Tmall and WeChat, the collection sold out in one day.

In 2019 Chinese beauty consumers began to take more responsibility for the environment, expecting brands to mirror these values. Looking long-term, sustainability and zero waste will become a movement which can’t be ignored. Smaller, natural beauty brands looking to enter China should take advantage of this development, and be more aggressive in their pursuit of the Chinese consumer, with brands such as Eve Lom and ARgENTUM providing an example of how to succeed.

Fashion – East meets West

The explosion of e-commerce in China has provided the perfect platform for Chinese fashion brands to pursue their global ambitions.

September 2018 saw the first collaboration between New York Fashion Week and Tmall. The partnership focused on women’s power and saw three Chinese brands JNBY, Particle Fever and Angel Chen, appear in high-profile, in the official New York Fashion Week schedule for the first time.

For international brands looking to enter the Chinese market, Canada Goose set the benchmark. The 62-year-old brand partnered with both Tmall and multiple KOLs from Bfaner and Buverkey to Ladymax, ahead of the opening of their Beijing store. The campaign reached 340k Chinese followers in three months and the men’s collection sold out on the store’s opening day.

Food – Eat mindfully, dine spectacularly

2018 was the year we saw a real shift in how Chinese consumers eat.

Eating has become a mindful activity. Consumers are actively choosing foods that benefit their health, as well as the environment. Ways to naturally increase energy and concentration levels are being sought out so foods rich in protein and environmentally conscious are high in demand – and restaurants such as Slow Boat Brewery in Beijing have enjoyed success by adapting to this trend, as they offer more plant-based options.

Eating out has also seen significant growth, with consumers willing to pay more for unique experiences. with waiters being replaced by robots in many restaurants such as Robot.HE by Alibaba.

Drink – Wine Time  

The Chinese Alcohol Industry is booming especially given alcohol now sits on China’s Duty Free List, suggesting this sector will continue to thrive.

Wine consumption is expected to grow by 40% in the next three years, seeing China become the world’s second largest consumer of wine. Whilst red wine continues to be the popular choice, the influx of international brands into the market, including Andimar, Moula, Trier Riesling and Cranswick Lakefield, has seen both white and rose wine enjoy success.

What next?

The gap between the Asian and Western consumer is continually closing. As the consumer dialogue between these two worlds merge, brands looking to break into the Chinese market needn’t look further than their own doorstep to understand the trends shaping purchasing habits in the East. With the new Chinese e-commerce policy making market entry far easier and quicker for brands, there’s never been a more perfect time to make the move East.