As Lunar New Year prepares to kick off on January 25, we look back at Paige Murphy's report on the booming Chinese consumer market last year.
According to the latest figures from Tourism Research Australia, spending by Chinese tourists grew 15% last year to a record $11.3 billion.
In fact, Chinese visitors to Australia spent more than three times than that of the next biggest market – the United States.
Spurred by growing brand awareness, many retailers are now using Chinese marketplaces like Alibaba’s Tmall and VIP.com to capture consumers in their homeland.
With over 300 million users in China, VIP.com has been working predominantly with Australian businesses selling nutrition, supplements and cosmetics since launching here in 2015.
The platform’s global head of buying Hillary Wang says that now it is growing its business further in Australia, including in the fashion category.
“The growth came from interest within the Australian business community wanting to pursue other channels for growth. China is a lucrative opportunity and with VIP establishing themselves in Australia, it was a very good choice for brands to explore.
“The demand for Australian brands and products have become greater since the opening up of cross-border eCommerce in China fueled by increased appetite for quality international brands and products.”
She says that aside from nutrition, infant formula and skincare beauty products, ugg boots are a hot-seller on the site, with the iconic Australian product generating over $16 million in 2018.
Opening an ANZ headquarters in February 2017 in Melbourne, Alibaba has also grown its Tmall and Alipay services here in Australia to help retailers entice Chinese consumers to shop with them.
Alibaba ANZ managing director Maggie Zhou says there are currently more than 2,000 Australian brands selling on Tmall and Tmall Global marketplaces and growing.
“The fashion category is an increasingly important category of Australian products sold via Alibaba’s channels to the China market. This includes a number of Australian brands such as Lorna Jane, 2XU, Seafolly and Review.”
PAS Group head of digital Anna Samkova says the Group launched its brand Review on Tmall after noting a strong following through its VIP program and user-generated content on social media. She says the launch was geared at testing the waters rather than expecting overnight success.
“We never expected that it’s going to start making us millions of dollars. We just wanted to test the market and gauge the interest really, so we were not attaching any sales targets to that particular store from the start just because it is so different to run the business in China.
“It keeps changing, if not every day, definitely every month. For us, surprisingly enough we actually started making sales from the day we launched.”
While Review generated sales from day one, Samkova says learning a whole new marketing calendar to stay relevant with consumers has been one of the biggest challenges in itself.
“We announced the launch in one of our stores here in Melbourne. So, we invited Chinese media and there were a couple of well-known fashion KOLs that attended and did live streaming.
“Live streaming continues to be one of the most successful channels for us in how we present the brand and generating sales as well, and drives the biggest conversions for us there, too. We realised that live streaming is the way to go for us for sure and it needs to be included in our marketing calendar. It’s a massive learning curve.
“Their marketing spend as an attribution to sales is insane. We found it has to be at least 20%. This doesn’t exist in this country.
We don’t spend that much on marketing – our promotions here are very, very different.”
She explains that the marketing calendar has to include different games, competitions, coupons, gifts with purchase and at a rapid-fire rate.
“They speed with how they operate and turn everything around - it is very different. So, you almost need to have a different set of skills, have someone in your team or have very close relationships with [a] Tmall partner which is the agency you have to use if you want to launch on any of Alibaba’s platforms.”
She says finding this partner is the most time consuming part of the process but since kicking off a year ago, Review has been seeing regular sales on Tmall despite not having a physical presence in China.
Throughout the last year, it has gleaned insights from local consumers such as the demand for size four, not previously offered by the brand. In addition to increased sizing, it has received interest from other Chinese eCommerce platforms and is now set to launch on Little Red Book Store, NetEase and Kaola.
“It put us in a very different league because now every single platform approaches me,” Samkova says. “Before, no one wanted to speak to me or to us but once we established our presence on Tmall, we became pretty well known in terms of other platforms inviting us to join them as well.”
She says the three new platforms align well with Review’s “sweet spot” – 18 to 35-year-old female shoppers at Little Red Book Store and female consumers aged 25 to 35 at Kaola.
For now, she says the Group will continue to focus on growing Review to its full potential on Tmall and consider launching on Taobao.
“My expectation is that it will take us up to three years to establish a very strong presence in China and potentially drive that store to be in the top 10 stores out of the entire store.”
While Review continues to scale in the market, Samkova says PAS Group sister brand Jets has had less success on VIP.com.
She notes cultural differences around swimwear styles, as well as the platform’s restructure, for the difference.
Seafolly CEO Paul Kotrba agrees the market is more conservative around product.
“Not surprisingly, due to the general cultural preferences the key performing categories in China offer more coverage and are generally more conservative, with a preference of solids over prints, and one-pieces over bikinis.
“However, we have also found the fashion and trend-oriented, affluent and internationally travelled 18-25-year-old customer to be attracted to Seafolly, where with our core and seasonal collections we can cover both the more traditional as well as the fashion forward customer desires and needs.”
Seafolly made the dive into China via Tmall last year, following careful analysis of market opportunities and potential entry strategies.
“With CAGR category growth in mainland China above APAC average, already having a good understanding of our Chinese customers via our Seafolly boutiques in Singapore and here in Australia who clearly have a keen appetite for international authentic brands, and then selecting Tmall as our preferred entry point due to the ease of setup, access to its massive customer base, plus the super supportive Tmall and Alibaba teams in both Australia and China.”
Launching within record time, Kotrba says the swimwear brand has seen steady sales and like Review, continues to learn a lot about the Chinese customer.
“We launched within 90 days, a record at the time, have seen a steady increase in sales since, learning more about our mainland customer swimwear category preferences along the way, support by having our GM China in Shanghai, and the access to data analytics via our Tmall partners.”