Ecommerce Opportunities China: Nutriment manufacturing Brands

Ecommerce opportunity in China for Imported Nutriment and pet food manufacturing brands has developed, since more and more Chinese citizens are owning a pet now as compare to previous years.

Hereunder is brief market analysis of Pet Craze in China and Ecommerce opportunity it provides for Imported Nutrient and Pet Food Manufacturing Brands.

Demographical factors supporting Ecommerce Opportunities China: Nutriment manufacturing Brands and pet food manufacturing brands

Affluent Chinese citizens love to own pets

Pet ownership has become increasingly popular among modern middle class population in China. China’s pet industry is flourishing. Now, pet ownership has become a symbol of wealth and financial success. This is primarily true in case of the affluent, middle- and upper-classes, many of which were affected by China’s strict one-child policy. They are now happy to own pets. Not only millennials show excessive love for their animals, in fact approximately 61 percent of urban residents over 65 live with a pet, compared to the national average of 44 percent. Many elderly people in urban areas, who don’t live with their children prefers to own a pet.

Economical factors supporting Ecommerce Opportunities China: Nutriment manufacturing Brandsand pet food manufacturing brands

According to Market Research firm Euromonitor, China’s pet care is swiftly overtaking the world’s biggest market – the United States – that developed by just over 4 percent in 2015 (to an estimated USD60.6 billion). China now has the third-highest figure for dog ownership in the world. The National Bureau of Statistics reports that the country is home to 27.4 million pet dogs, behind only the US (55.3 million) and Brazil (35.7 million). China’s cat ownership is even higher – second in the world with 58.1 million (versus 80.6 million in the US).

Social/Cultural factors supporting Ecommerce Opportunities China: Nutriment manufacturing Brandsand pet food manufacturing brands

Mrs. Chen, A 60 year old pet owner mentioned at International pet expo (SIPE) 2016, that she spends a few hundred kuai on her beloved pet every month and her usual pet related expenditure entails her poodle’s dresses, and imported pet food. At another instance, pet beauty therapist Huang Yuwen, a 26-year-old, owner of two dogs attending SIPE’s competitions and beauty contests, also mentioned that she spends a big slice of her monthly income on imported food for her pets, this way she makes sure that she is feeding the best quality food to her pets.

Pet Fairs are becoming increasingly popular in China

“Pets have become part of the family, and owners are willing to spend a lot on them,” says senior manager of Pet Fair Asia’s organising committee, Grace Wu. “We want them to look good and be healthy, but we are also more attentive towards their needs, just like parents would be with their children.”

Food Safety concern

Food safety in China is no hidden topic and many thinks that one fifth of the country’s soil is contaminated. Chinese who can afford to buy imported food they prefer buying imported products whenever possible and those who can’t just hope that they’re lucky. Chinese contaminated pet food may get the headlines in the U.S., but food safety is far worse—for animals and people—in China itself.

Ecological factors supporting Ecommerce Opportunities China: Nutriment manufacturing Brands and pet food manufacturing brands

Lately, China has become a key market for companies to launch new pet food, and due to food safety concern pet owners import all-natural, nutriment according to Laurel Gu, manager at market research firm Mintel.

Chinese pet owners are highly concern about quality of pet food and its nutriment factor

“A number of pet food manufacturer companies are introducing products specifically targeting China,” Gu says. They count it as strong growth potential. Targeting pet owners, that are profoundly drawn towards products’ health benefits and labeled as ‘no additives’ and specialized foods.”

Technological factors supporting Ecommerce Opportunities China: Nutriment manufacturing Brands and pet food manufacturing brands

Pet food has become one of the most lucrative areas of the industry. Multinationals such as Mars, Nestlé, Procter & Gamble and Colgate-Palmolive have all rushed to the Chinese market, to take advantage of this upcoming market. In a blog by Euromonitor, it was also reported that dog food sales in China are expected to triple, over USD 760 million by 2019. Internet retailing has witnessed extraordinary growth in China over recent years. E-commerce giant Alibaba Group claimed that internet retailing was accounted for 3.2% of value sales of dog and cat food, but by 2016, this figure had reached to 31.7%. Most of this growth came at the expense of hypermarkets and pet shops”

Online retail was reported to be the most suited channel for all types of consumers to obtain products within China, and all other retailing methods are considered either difficult or expensive. Chinese consumers prefer imported goods in specific categories, such as milk powder, diapers and pet food, identifying them to be of higher quality and more trustworthy.”

Solutions for Nutriment Manufacturing Companies to avail Chinese Ecommerce Opportunities China: Nutriment manufacturing Brands

China has the window of opportunity for nutriment manufacturing companies in Chinese cross-border, e-commerce market. Increased pet ownership, and pet food safety concerns among affluent Chinese and disposable income families has developed a substantial market that can be accessed through e-commerce platform of China. Although it is still challenging for international brands to unlock this enormous market due to several e-commerce barriers. However, there are effective solutions to win over nutriment market of China. Among which two are extremely vital to penetrate and sustain Chinese e-commerce platforms. Firstly, Branding and Company presence on well-known e-commerce platforms of China.

  Branding of Imported Nutriment Manufacturing Companies and pet food manufacturing brands on Social Ecommerce platform in China 

Nutriment manufacturer companies can create brand awareness on Chinese social media platform. This way Nutriment manufacturer companies can educate Chinese netizens about pet food safety and its benefits. Reaching Chinese cybernetic population on social media can give nutriment manufacturer companies access to significant portion of China’s population. As the Chinese social media provides the consumers opportunity of getting educated about the product, share their opinion and experiences, and purchasing the product in all in one app. Social e-commerce apps like Weibo and WeChat have achieved mass-market penetration.

Presence of Imported Nutriment and pet food manufacturing brands on Chinese E-commerce Platforms to avail Ecommerce Opportunity in China

To enter e-commerce market of China International brands must learn policies of digital platforms.

This includes TMALL, JD.com, Haitao, Taobao and WeChat (social e-commerce)

Entering Chinese E-commerce market via TMALL

Ecommerce opportunities in China on TMALL

TMALL holds the biggest market share in e-commerce market of China at 57%. It mainly focuses on premium brands. This characteristic makes TMALL most expensive e-commerce marketplace in China. For Chinese consumers, high price indicates high quality therefore many customers prefer buying their products from TMALL.com TMALL is owned by Alibaba Group. It provides an opportunity to International brands to open exclusive online stores and directly sell products to Chinese consumers without being physically present in China.

To protect the exclusivity of the online marketplace, TMALL has invitation-only policy where only qualified international brands can either be invited to join or can apply through a certified third party agency (TP). To sell products through TMALL, foreign brands needs to follow some strict guidelines, list is hereunder:

 Requirements for an International brand to operate an online TMALL store

  • To penetrate Chinese e-commerce market, international brand must be an authorised distributor and have corporate identity outside China.
  • The company must be independent, and hold retail and trade rights
  • The company must be the brand owner or authorized agency having the authority to sell products under its name
  • The company must hold relevant inventory certification for the stock

 Cost breakdown for International brands to operate TMALL store

  • Security Deposit – RMB 150,000 (Around US$23000)
  • Technical Fee – RMB30,000 (Around US$4600) or RMB 60,000 (Around US$92,000), per annum
  • Commission – 0.5 percent-5 percent plus 1 percent Alipay charges

Apart from aforementioned formalities the brand needs to have strong digital marketing strategy catered towards Chinese online customers. The foreign brand needs to gain visibility and build E-reputation in order to have success on TMALL platform.

Entering Chinese E-commerce via JD.com

Ecommerce opportunities in China on JD.com

JD is China’s largest online direct sales company. It relatively has less market share than TMALL.com. It operates seven fulfillment centers and 166 warehouses in 44 cities. JD.com has 4,142 delivery stations across several districts of China.  International companies can open individual online stores on JD.com and brands are permitted to import food, beverages, apparel and shoes from overseas. JD’s cross-border service, JD Worldwide, enables suppliers to sell directly to Chinese consumers without a local presence.

JD.com is less expensive than TMALL.com. It provides active global promotion of JD Worldwide (mainly in the U.S. and Australia) and supports in-house logistics service.  JD.com has a zero tolerance policy for counterfeit products.

Requirements for an International company to operate an online JD store

  • To penetrate Chinese e-commerce market, international brand must be an authorised distributor and have corporate identity outside China along with registration capital of over RMB500,000(Around US$76,660.00)
  • The company must be independent, and hold retail and trade rights
  • The company must be the brand owner or authorized agency having the authority to sell products under its name
  • The company must hold relevant inventory certification for the stock

JD allows operating an online store in 3 different ways

  • Franchising Business Partner –International brands can set up store on JD.com and avail the facility of JD warehouse to stock their products. JD provides warehousing, delivery of goods and customer service.
  • Licensing Business Partner – International brands can set up their online store and can ship the order. JD will supervise customer service and process invoice.
  • Self – Operation Partner – International brands can sell on the JD platform, however warehousing and delivery of good must be supervised by the international brands.

Cost breakdown for international brands to operate online JD store

  • Security Deposit – RMB10,000(Around US$1,500) – RMB15,000 (Around US$2300), depending on product category
  • Technical Fee – RMB1,000(Around US$150) per annum.
  • Commission – 3-10 percent, plus 0.85 percent if the JD shipping service is used.

Apart from aforementioned formalities the international brands are expected to have Chinese consumer oriented digital marketing strategy to attract targeted customers.

Entering Chinese E-commerce via Haitao Web Interface

Ecommerce opportunities in China on Haitao websites

In Chinese language, the term Haitao means; buying goods online from overseas. Along with Amazon.cn there are couple of websites that offer foreign nutriment pet food brands to Chinese market.

  • World68.com is the most complete foreign website Daquan, contains more than 100 countries and regions of the well-known sites, including China, the United States, Japan, Korea, Hong Kong, Taiwan, Britain, France, Germany, Russia, India, Arabia and so on.
  • Haitao.com is another well-known website for China’s cross border e-commerce platform. It’s mainly committed to global exchange of products.

Expert local marketing agency can provide further information on how to promote international products using Haitao websites.

Entering Chinese E-commerce via Taobao

Taobao is owned by Alibaba Group. It offers largest C2C e-commerce marketplace in China. Taobao allows registered or non-registered businesses to sell directly to consumers. It has more than a million sellers, along with countless product categories. Establishing a store on Taobao is virtually free but the online marketplace is ruled by small sole sellers who compete fiercely on price and honesty and authenticity is an unwritten rule of their trade ethics. Mostly, Chinese web celebrities are the most prolific sellers. They take advantage of their popularity and drive traffic to their Taobao online store from blogs, online videos and social media. Chinese web celebrities are mostly known for selling cosmetics, baby and clothing products on Taobao. Sellers with low budget and low quality products opt for this platform. However, just like all other online platforms in China, Taobao also needs strong digital marketing skills to be visible to online customers.

 Cost Structure for having International Brand online store on Taobao

Alibaba charges a small fee per transaction made via Alipay. Creating an online store is free, and retailers need to show their Chinese ID card.

Logistics: Individual stores manage logistics (including warehousing, customs clearance, customer delivery) and use their own third party or a recommended Taobao nominated third party.

Customer Payments: Online transactions paid by customers are managed through Alipay.

 Entering Chinese E-commerce via WeChat Official Account

Ecommerce opportunities in China on WeChat Official Accounts

WeChat is Swiss knife of digital ecosystem of China. It is all in one app which integrates social e-commerce seamlessly. There are three types of service accounts available for promoting business on WeChat; WeChat Subscription Account, WeChat Service Account and WeChat Enterprise Account. Businesses present on WeChat via aforementioned accounts can broadcast information to their followers. The information post can be shared, reposted or generate comments by the followers.

 WeChat Subscription Account:

Subscription account is the most basic version of all official WeChat accounts. It can be used to push information to the followers. The messages sent to followers are grouped in one folder containing all other subscription account that the user is following. It is generally used for the daily news and information broadcast. However, upon received a message the user is not notified, in fact the user needs to go into the desired subscription folder to retrieve delivered content. Secondly, subscription accounts have much less integration ability and advance functionality that can be integrated into service account.

 WeChat Service Account:

WeChat Service Account is considered the most suitable for business and organisation that aspire to access advanced WeChat Official Account. Service accounts allows more APIs (Minisite) than Subscription Account and companies are enable to build its own application, get inquires and broadcast promotional content to its followers. With the help of Service Account, one message per week and 4 messages per month can be sent to the followers. Users are able to receive push notification when the message is delivered. WeChat Service Account provides higher degree of functionality to users, with the help of customized menu along with integrated e-commerce facility within the app.

WeChat Enterprise Account:

Enterprise Accounts are also called Corporate Accounts, these are mainly used for internal company use, for example; sharing memos, private group chat or a simple project and task management system. These accounts are being increasingly used within Chinese organizations. These accounts are secure and followers have to go through an authentication process unlike other WeChat account where gaining followers is the primary goal.

WeChat Official Account Guidelines

The WeChat accounts formed to target Chinese users must be registered inside China or else it will not be visible to Chinese users. Possessing an Official WeChat accounts requires a legal Chinese entity, a Chinese Residence ID and A China mobile phone number. International companies are advised to partner with expert Digital Marketing Agency, which is willing to apply for an official WeChat account on behalf of the international company. Together with opening an official WeChat Account, it requires sound and expert knowledge of the market and digital strategy to target right customer group and successfully penetrate WeChat landscape.

Chinese economic development has established investment opportunities for International brands by providing in-house state of the art social e-commerce platforms that are engrained in Chinese consumer’s lifestyle. Digital Marketing agencies provide International Brands with tools that are optimal to unlock this enormous market to earn their full potential and multiply sales with millions of users. If you are interested in exploring Chinese Digital E-Commerce platforms, reach out to us for customised advice.