Product Innovation: Fruit Tea & Soft European Bread Pairing

Nayuki introduced the “fruit tea and soft European bread pairing” as its signature product to the market. Although product pairing has been widely used in the retail industry, it was quite an audacious move for Nayuki to make. Most of Nayuki’s competitors in the industry, including Starbucks and Hey Tea, choose to stay “focused” and stick to one category only, no matter it is coffee or tea. With unique insights into the psychology of Chinese female consumers, Nayuki’s founder Peng Xin, however, considered “Fruit tea & European bread” a great combination that meet “two kinds of needs in a single scenario” and the sales number of the soft bread take up no less than 50% of Nayuki’s total sales nowadays.

Source: Sina Weibo, Nayuki’s soft European bread and tea pairing

Behind the success of Nayuki’s product innovations are its high-quality raw materials and stable supply chain. In order to ensure the quality and distinct taste of Nayuki’s products, Peng Xin and her team have visited and signed contracts with several renowned tea plantations across China and Taiwan. Nayuki has also built its own factories to manufacture fruit in season, which further enhanced the stability of its supply chain.

Aesthetic-Centered Marketing

Although China’s new style tea market is quite a large cake to share, getting a slice of it is not easy considering relatively low barriers to enter the industry and fierce competitions from both local and foreign companies in China. According to the white paper for 2019 new style tea consumptions co-published by Nayuki and 36kr, about half the consumers of new style teas in China belong to the post-90s generation and female consumers take up 70% of the market. Targeting a young and female-dominated market, Nayuki has been taking an aesthetic-centered marketing approach.

Nayuki has been working on a branding project called “Nayuki Cupseum” since 2019, which has been quite successful so far. The concept of the project is to exhibit artworks made by world-renowned artists using Nayuki teacups. So far, Nayuki has held three series of exhibitions which include “Big hugs to you” collaborating with American artist Christopher David Ryan during May 2020, “Being A Cat” with Pepe Shimada and “Ni Hao New Year” with Cinyee Chiu. Apart from the “Nayuki Cupseum” galleries, Nayuki cooperated with the 50th Anniversary of Anderson Lifetime Achievement Award in September 2019, during which every store would exhibit paintings of “The Ugly Duckling,” “The daughter of the sea,” and “Gorrila.”

Source: Nipic, Nayuki Poster

“Marketing isn’t just about advertising. Product development, space design, developing new techniques are all marketing,” according to Peng Xin, the founder of Nayuki. The emphasis on Nayuki’s aesthetic appeal is reflected on its physical stores as well, from lighting, to color tone, to location, all tailored to the needs of young female consumers, such as taking pictures inside the store to publish on social media. The in-store experience seems to be no less important than the quality of the tea itself for consumers. Nayuki is selling more than a cup of tea, but a whole package of experiences from purchasing online, to picking up at the store, to taking a selfie with its beautifully made teacup, which at its core is a reflection of a lifestyle ideal consumers have been longing to have.

Nayuki’s Cultural Appeal: The Arts of Cultural borrowing

Nayuki might strike consumers as a Japanese brand, but it is in essence a local Chinese company that borrowed a Japanese name. This should not come as a surprise as this kind of cultural borrowing is hardly an uncommon practice, especially in the fashion industry. The rising of Nayuki implies the strong influence of the Japanese cultural exports among Chinese consumers. Although tea-drinking culture originated from China and later exported to Japan, the Japanese tea-drinking culture has evolved a system of its own and become quite different from the modern-day Chinese tea-drinking culture. Therefore, taking on a Japanese brand image has facilitated Nayuki’s success by differentiating itself from other local Chinese beverage brands.

Post-Pandemic Age: What to Expect for Nayuki and China’s New style tea Market?

Although the coronavirus has been contained very well in China, consumption patterns have largely shifted from offline to online, which might continue to be the new normal until the vaccines come out. In the meanwhile, new challenges have been raised for the China’s new style tea market and brought new opportunities for Nayuki as well. In response to consumers’ expectations for a higher security standard, Nayuki has adopted a new operating mode that requires no direct human contact. According to Baidu index search frequency data, the search volume for Nayuki peaked in middle of the pandemic on April 1^st, during which Nayuki brought 3,000 free drinks to cheer up the doctors and nurses at the Leishen Mountain hospital in Wuhan.

Data Source: Baidu Index, Search Index for Nayuki from January to August 2020

The pandemic has also rushed China’s new style tea market into digital transformation. During the period when Covid-19 was at its peak in China, Nayuki offered free delivery for all online orders. As a result, the total number of transactions completed on Nayuki’s WeChat mini program have doubled compared to the previous year. However, such transformation requires both financial and technological support, which might imply a reshuffle of the market. Although major companies such as Hey Tea and Nayuki could probably make through the pandemic with enough funding to adjust to the new normal, small beverage stores might find it very difficult and eventually exit the market.

What we can learn from Nayuki’s success

• Nayuki conducted market research to precisely identify their target consumers, then focused their marketing tactics on them. Nayuki has a clear brand positioning that targets 25 to 29 year old women. Nayuki’s marketing campaigns such as the “Nayuki Cupseum” projects and art exhibits with the Anderson Lifetime Achievement Awards are both tailored to satisfy the cultural and aesthetic needs of a young female audience.
• Nayuki differentiated itself from the myriad of other new-style tea brands on the market with its product pairing and store aesthetic. Additionally, the brand borrowed a Japanese name which is unique and stands out.
• The tea-store used an O2O marketing strategy to establish online presence, which was especially useful during the COVID-19 pandemic. Consumers are raising their standards for safety and convenience, which is particularly important for brands to establish online presence during a pandemic. Relying on third-party platforms like WeChat, Nayuki realized digital transformation and made it through the pandemic.

Author: Isabella Li

Learn more about the tea market in China

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This article The success of Nayuki, the Chinese new-style tea store going global is the first one to appear on Daxue Consulting - Market Research China.

These are some of the successful case studies of brands that creatively appealed to Chinese millennials through nostalgia marketing.

Nostalgia marketing and co-branding in China

Whether it is a cartoon, a candy, or even characters from an textbook, items from childhood and teenage years tend to leave a strong impression on the emotions. A common practice of nostalgia marketing is to partner with a brand that is was dear to the target market during these formative ages.

Wang Wang x Nayuki (旺旺 hot kid x 奈雪の茶 Nai Xue’s Tea): Nostalgia marketing and co-branding in China

Wang Wang, a food maker known for rice crackers and flavored drinks from Taiwan, collaborate with Nayuki (also called Nai Xue’s Tea, a tea drink brand from Guangdong which is rated as one of the top 10 tea drink brands in China) in 2019. The Chinese snack brand aimed to let the target customers recall their happy childhood memories. Therefore, Wang Wang launched its collaborated products on Children’s day in 2019.

Source: naixuecha.com – Children’s day, come to Nayuki and become the luckiest kid

The resulting products from collaboration combined the characteristics both from Wang Wang and Nayuki, including milk flavored drinks, three different flavor of milk custard. Moreover, customer could redeem Wang Wang logo tea cups with consumption points. This brand collaboration went viral online and was very successful given its limited edition nature, which is why we included it in the 10 most epic marketing campaigns in 2019.

Nostalgia marketing strategies in China has proven to be successful. Moreover, nostalgia marketing often resonates with millennials, who are in the sweet spot for having a relatively materialistically rich childhood while having increasing spending power in adulthood. Hence, brands can leverage optimistic feelings and encourage consumers to make a purchase.

Wahaha x Zhongxuega (哇哈哈 x Chicecream 钟薛高): You are young today

The Wahaha Group Co., Ltd. is the largest beverage producer in China. AD calcium milk (AD钙奶) is one of their products carrying many memories of the post-80s and 90s generation. ‘Zhong Xuegao (Chicecream 钟薛高)’ was the three surnames from Hundred Family Surnames, which is an authentic Chinese ice-cream brand. The brand uses an unique Chinese tile design, supplemented by the top ‘back (回)’ pattern in Chinese, meaning ‘back’ to the original taste.

In March 2020, Wahaha and Zhongxuegao jointly launched AD calcium milk flavor ice cream ‘pre-adulthood ice cream’. The main target customer of the new ice cream are adults who have grown up but “don’t want to grow up”, mainly millennials and Gen Z.

Source: Socialone.com- AD calcium milk: Wahaha x Zhong Xuegao launched “Pre-adulthood ice cream” together.

Wahaha and Zhongxuegao made the flavor of ‘Pre-adulthood ice cream’ in layers, the first taste is rich, delicate with milk flavor. After that, Brazilian orange juice and French lemon puree bring fresh fruit flavor and restore the flavor of AD milk drink.

As Generation Z has become an emerging consumer force, domestic brand Wahaha has been trying to communicate with young people. AD calcium milk, as one of the largest IP of Wahaha, has a highly recognizable taste. As a famous product in the 1990s, AD calcium milk still reaches many generations.

Wahaha uses the marketing theme of ‘don’t want to grow up’ to label young people as ‘babies’ and arouse the resonance of more young people.

The cases of nostalgic marketing in China of these two F&B brands have attracted many consumers. The co-branding nostalgia marketing campaigns in China between brands from different industries also worked.

Nostalgia marketing and co-branding in China between brands from different industries

White Rabbit x Scent Library (大白兔x气味图书馆): Be a little bit childish

White Rabbit is a brand of milk-flavored candies. Originally from Shanghai, the brand has a history of more than 70 years. It cooperated with Scent Library, a domestic fragrance brand which is regarded as ‘National fragrance cleaning and care brand’ in 2019. They launched a variety of skincare and beauty products including perfume, fragrance, lotion and shower gel. All the products from the collaboration incorporate the White Rabbit’s signature milk candy flavor.

Like Wang Wang and Nai Xue’s milk tea, the co-branded products were strategically launched during Children’s Day, which triggered the feeling of nostalgia among millennial consumers. More than 14,000 collaborated products were sold out in the first 10 seconds after the collaboration was launched on Tmall on May 23rd, 2019. In addition, in the two months after rabbit launched its online store, the campaign generated 15 times increase in visit and 1.6 times increase in sales revenue.

Source: creative.adquan.com – White Rabbit x Scent Library: Be a little childish!

Scent Library is not White Rabbit’s only partner in Chinese nostalgia marketing. The candy brand also launched a limited-edition lip balm with Maxam (美加净) and milk-candy gift box with Agnes.b which did the test for its future brand co-operations. Through the nostalgia marketing campaigns in China, White Rabbit has capitalized on taste, smell, and appearance that has already left an impression on Chinese millennials during childhood. Now that their target market is all grown up, White Rabbit successfully morphed its brand image from an old brand to a classic, fashionable brand.

Wangyi Yanxuan x Hulu brothers (Yeation 网易严选 x Calabash brothers 葫芦兄弟)

Wangyi Yanxuan (Yeation 网易严选) was officially launched in April 2016. Yeation is a NetEase (网易, a Chinese Internet technology company),  e-commerce platform focused on furniture,   and embraces the brand concept  “good life, but not so expensive”. The Chinese name of the brand ‘Wangyi Yanxuan’ also refers to the meaning ‘NetEase helps you select strictly the products in high quality’.

Calabash Brothers (Hulu Brothers) is a Chinese cartoon series produced by Shanghai Animation Film Studio, which was very popular when it was broadcast in 1986-1987.

The cartoon is about a story of seven colored calabash brothers who protect the villagers and their grandpa from a Scorpion spirit and a Snake spirit.

Source: Official Weibo account of Wangyi Yanxuan, co-branding campaign with the Hulu Brothers

NetEase selected seven different functional beauty products according to each super power of the seven brothers.

The brother with great strength corresponds to the hand cream, so no friction will be generated (smooth skin) if the customers use the hand cream. Eye shadow corresponds to the brother with clairvoyant skills, while the brother with water skills corresponds to face mask for moisturizing. The brother with Invisibility skills corresponds to the makeup cushion product for hiding skin imperfections.

NetEase chose to create Calabash Brothers collection in the beauty category. The nostalgia marketing of NetEase instantly caught attention from customers through waking up their childhood memories, generating emotional resonance. Through this co-branding, NetEase not only attracted customer to create topics and contribute to the traffic for the brand, but also attracted fans of Calabash brothers cartoon, which boosted sales conversion.

Foreign brands apply nostalgia marketing campaigns in China

Mcdonald’s x Li Lei and Han Meimei： the classic characters from English textbook in China

Li Lei and Han Meimei were the two main characters in the English textbooks of junior high school published by People’s Education Publishing House from 1990 to 2000. These two characters accompanied a total of 100 million people in their English learning journey. As a result, the classic lines (as follows) have become Chinese millennials’ first impression of English.

Source: Slideserve.com – The characters that taught millions of Chinese how to greet in English

McDonald’s used this memory for reference and leveraged Li Lei and Han Meimei these two characters in the mini comic where they taught students how to order food in English. In the advertisement, Li Lei and Han Meimei went abroad with their classmates. Li Lei struggled to order food at McDonald’s because of his poor English while Han Meimei as a top student, teaches Li Lei how to order food.

The two familiar characters combine Chinese and McDonald’s elements, refining the original memories by blending the old with the new.

Source: Shangyexinzhi.com – China’s favorite English class characters order food in a McDonald’s ad

In the collaboration with ‘Li Lei and Han Meimei’, McDonald’s chose the topic of ‘Ordering food in English’, which is very consistent with its own brand tone and also a practical and interesting topic. Indeed, as one of the largest fast-food chains in the world, McDonald’s has about 30,000 subbranches around the world and the context of ordering in English in the ads fits the reality of many Chinese consumers traveling overseas.

KFC: Back to the price in 1987

In 1987, KFC opened its first store in China. On the brand’s 30th anniversary in China in 2017, KFC launched “back to the price in 1987” campaign, which triggered a wave of collective nostalgia. During a one-week campaign, the mashed potatoes cost only 0.8 yuan and the Original Recipe chickens cost only 2.5 yuan.

Source: Sohu.com – KFC launched ‘back to the price’ in 1987 campaign

Meanwhile, KFC started the topic of ‘I have the fried chicken, do you have a story to share?’ This marketing campaign became the trendy topic and got the traffic and sales for KFC at the same time.

From consumers’ point of view, the price was obviously favorable. Hence, customers invited their friends into the store and inadvertently ordered a lot of food as a salute to their happy childhood. Consequently, the campaign aroused customers to chat about their past youth on the social platform of KFC.

过去进行食 (The Continuous Past) Restaurant- The Museum of Memory in the ’90s

Source: Dazhong Dianping – The atmosphere of the nostalgia-inspired restaurant

The Continuous Past restaurant is a nostalgia restaurant located in Shanghai, China. The restaurant’s layout recreates the classrooms and the boys’ and girls’ dormitories of the 1990s. Complete with musician posters, a blackboard, magazines and books from the 90’s,  ustomers raved about the detailed design of the restaurant. Even the tableware and are the same as in old days, with a classic tin ‘lunch box’, and a  menu in the form of an exam paper. Many customers have commented that the restaurant took them back to their school days.

The restaurant serves customers’ daily cuisine and drinks and food that were popular in the 90’s. Additionally, the background music of the restaurant is also vintage, resonating with customers’ memory of school and youth time. For a cherry on top, the restaurant even has a school bell that rings every hour.

Tips for nostalgia marketing in China

1. Appeal to the senses

Research shows that senses are closely related to memory, and one familiar scent, sound, or image can cause a myriad of memories and feelings to arise. Therefore, in nostalgia marketing, think of how to appeal to these senses. The restaurant The Continuous Past, uses a school bell sound to cause customers to remember their school days. White Rabbit converts their traditional taste to a similar scent in their new co-branded products. There is even more opportunity to uncover in terms of music and scents that appeal to Chinese consumers.

2. Discover what was popular among the target during their children and teenage years

Between the ages of 12 and 22, dopamine is activated a higher levels. This causes people to have a greater connection to the music, media, and products they were exposed to during that time. For millennials this would be the 80’s and 90’s, a time when China had significantly less cultural influence from the west. If the target market is the silver generation, this would be even truer. Hence, it takes consumer research such as in-depth interviews or focus groups to uncover what your target market truly feels nostalgic for.

3. Co-brand with brands from the past

Fresh, new brands don’t have to miss out on nostalgia marketing. While at the same time, many old, cherished brands can create new opportunity through a second-wind. Co-branding is mutually beneficial in helping both brands expand their consumer base. White Rabbit, has renewed itself through co-branding with a variety of different young and hip brands, effectively turning it into a classic brand.

Author: Qing Zheng

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This article Nostalgia marketing in China：Case studies of brands sparking cherished memories is the first one to appear on Daxue Consulting - Market Research China.

However, against the backdrop of the COVID-19 pandemic outbreak, the e-learning market in China experienced a surge in market demand. With the school summer break commencing in July 2020, various online education institutions entered the battleground of recruiting students for extracurricular tutorials. The competition is intense since the online education market in China is filled with a large number of players, and the market share gained by each player is fairly small. The bottleneck of achieving profitability has not been loosened, according to Caixin. China’s e-learning market looks for more in-depth development and more complex technology to promote the next round of development.

The e-learning market’s competitive landscape has taken its initial shape with K12 online education sector growing rapidly

After 20 years of devious development, China’s e-learning industry realized large-scale monetization with the support of “live-streaming” in 2017. In 2018, with the initial formation of the competitive landscape and the intervention of the government, the online education industry began the initial stage of maturity. Market competition in 1st tier cities is saturating, while 2nd tier cities became the new battleground. 

Data Source: Statista, Market size of online education in China is growing as more players enter the market

As of 2018, the online education market in China reached 251.76 billion yuan, and the number of paying users reached 135 million. The major players in the online education market in China are Yuanfudao, Zuoyebang, Xue’ersi, and Baicizhan. Higher education and vocational training account for 75% of the total market share.

The K12 education sector in China has grown rapidly, and its share has almost doubled in the past 6 years. K12 online education apps also occupy a far larger share in terms of the number of MAU in all fields of education. As of November 2018, the top three e-learning apps with leading MAU are all K12 online assignment-based apps. This is probably related to the “excessive assignments tactic” in many elementary and middle schools in China, wherein students are encouraged to hone their skills with an abundant amount of homework.

Data Source: iResearch, K12 e-learning is growing in market share   

It is also worth noting that in 2018, online education has also been officially included in the scope of supervision of the education industry. The Chinese government has issued national standards and evaluation schemes for online courses, in which engagement is listed as an important dimension.   

Under quarantine, the online education market in China revitalized, but the core issues remain unresolved  

Due to the COVID-19 pandemic, schools of all types were postponed following the Chinese Ministry of Education’s notices. From February 10th to 28th 2020, the Chinese Ministry of Education issued a series of notices to provide guidance and measures to prevent and control the pandemic in the field of education.

Data Source: Baidu Index, Searches for online education surged during self-isolation period (Jan.- Feb. 2020, varies by cities) in China

Searches for online education on Baidu surged from late January to early February 2020. Moreover, searches for online education applications on the Apple Store, such as Zuoyebang and Xue’ersi, also increased significantly during this period of time. Yuanfudao, a leading online education platform, had advertized heavily on CCTV channels during COVID-19, leading to an increase of searches on the app store. 

Data Source: Qimai.com, Searches for Zuoyebang, Xue’ersi, and Yuanfudao searches on the Apple Store rose significantly during the COVID-19 self-isolation period. Zuoyebang remained the most popular online education application, whereas Yuanfudao showed the most dramatic growth thanks to its massive advertisements during the self-isolation period.

Despite market growth, homogenization, rough user experience, and fuzzy results still remain the core issues that hinder in-depth expansion of the online education market in China. With the intensification of homogenized competition, injecting huge capitals to boost growth has gradually weakened, whereas promoting growth through word-of-mouth and operation have received more attention. Online science eduation in China has lagged behind English tutoring, however we look at how COVID-19 boosted this market.     

Education System for Sciences in China is exam-oriented and routine   

The education system for sciences in China is  routine-oriented. From Year 1 to Year 6, students study Maths as a compulsory subject. After students enter secondary schools, all have to study Biology in Year 7, Physics in Year 8, and Chemistry in Year 9, in this order. Basic skills of Computer Science are taught from Year 7 to 9. These subjects are also tested in the Senior High School Entrance Examination, along with Chinese, Maths, English, Moral Character, History, Geography, PE.

When students enter Year 10 study, they have not yet chosen their orientation. Hence, students have to study all the subjects until Year 11, when they choose between either arts or sciences. Subjects under the sciences stream are Physics, Chemistry, and Biology, along with Chinese, Maths, and English. Students who chose the sciences stream don’t need to study arts subjects (Politics, Geography, and History). In Year 12, students continue to study the subjects under their chosen path.

In the College Entrance Examination, science students are tested on Physics, Chemistry, and Biology, along with Chinese, Maths, and English for the written part. It’s worth noting that arts students and sciences students work on different maths exam papers in the college entrance examination. Generally speaking, science education in Chinese high schools are fairly routine and exam-oriented, wherein students practice heavily on designed questions.

Limited scope of science education in schools gives birth to China’s online science education market; online Maths education market burgeoning

Due to the limited scope of science education in China, some parents will get their children involved in extracurricular learning clubs, such as robotics and coding. The ages of children attending such extra-curriculars is getting younger. In recent years, there are increasingly more K12 online sciences education platforms for the youth, especially online Maths education platforms.

The market segment and course types provided by online Maths learning platforms are quite similar, reflecting fierce competition in a homogenous market.  

By October 2018, there were four financing activities in the K12 online programing education sub-sector and 11 in online Maths learning sub-sector. 7 out of 11 suppliers gained capital, and most of them have large amounts of capital with over 10 million RMB. Compared to the online English learning market, which was developed much earlier and has entered into saturation, online maths education and programming training have become the hotspots of capital.

Zuoyebang, Xue’ersi, and Yuanfudao are the three leading online education platforms. However, instead of specializing in sciences education, these platforms provide full-disciplinary learning guidance services for elementary and middle school students. Yangcong Xueyuan (Onion Academy) is a leading online education platform focusing on K12 sciences education in China. Chengzhangbao is focusing on the training of children’s logical thinking and mathematical logic.

An interesting phenomenon is that people tend to enroll in classes across different platforms. Although these platforms are offering similar products and services, they still have minor differentiations regarding human resources, technology, user management, and foci of study.  

The prospect of online education market: An investment opportunity?

While there still remain core issues to solve in the online education market, we have seen emerging trends these years. The majority of online education platforms in the market offer an integrated solution to students, i.e. a comprehensive range of subjects, after-class homework, tutors, and online communities. There are increasingly more platforms specializing in science education, especially Maths learning, which are attracting significant investements. Moreover, the market has witnessed emerging trends of programing learning in early ages and adults learning data analysis for vocational needs.  

Data Source: YouGov, A survey results show that code/programming training starting from primary school as well as data analytics training and STEM education are considered to be the key accelerators for education development in Shanghai, China.    

Third-party (B2B2C) online education platforms, such as CCtalk, Tencent classroom, jioayu.taobao.com, which focus on adults education, also displayed a competitive advantage over traditional platforms in the market. Such platforms generally do not provide courses directly, but assume the role of middlemen, allowing the free inflow of a diversity of course types. They partner with educational institutions or individual teachers on one side and deliver content to end-users on the other.

The courses provided by these platforms varied from e-commerce marketing, Java to interior design, to name just a few. While the traditional B2C online education players tryied to differentiate in various segmentations, such platforms, backed by their Internet parent companies, aim at covering all usage scenarios and leverage online traffic to enter the market.

It’s expected that the growth rate of the online education market in China will remain at about 20% in the short term, with higher education and vocational training continuing to lead the market. However, there were many e-learning companies undergoing a state of loss, including Liulishuo and 51Talk. Loss is common in the e-learning market in recent years. However, the rate of loss has narrowed, and profitability is not indefinite. 

 In the future, online education companies are expected to achieve profitability, but the premise is to solve the fundamental problems of rough user experience and unpredictable results in order to further realize the survival of the fittest, increase market concentration, and ensure steady growth.

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China is the second largest cosmetics market in Asia and the fifth in the world. It has been a profitable paradise for foreign cosmetics brands for a long time. Foreign cosmetics brands in China own around 70% of the market. In 2018, P&G and L’Oreal had the biggest market share in China, with 25.8% and 21.5% accordingly. The American Procter & Gamble, the French L’Oreal, The Japanese Shiseido, the Anglo-Dutch Unilever and the American Estee Lauder are the key players in China’s cosmetic market.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands)

Chinese consumers’ behavior is evolving very quickly, due to the huge economic growth. Hence, the middle-class in China are more sensitive to their life quality and health-awareness. Therefore Chinese consumers have been more interested in using overseas products which have a long history and more refined products.

Marketing strategies of foreign cosmetics brands in China

L’Oreal is a huge success among foreign cosmetics brands in China

L’Oreal shows rapid growth in Chinese e-commerce

The French brand has grown ten-fold on e-commerce since 2011. It is the leader on e-commerce in China, which is the fastest growing channel for L’Oreal. In 2020 e-commerce already makes up 50% of L’Oreal’s China sales.

Data Source: L’Oreal Group Annual Reports, Percentage of Loreal China sales from e-commerce

The next step for L’Oreal is new retail: the combination of the offline and online channels. It includes such technologies as augmented reality, virtual reality, and artificial intelligence. Today L’Oreal in China already provides skincare diagnostic supported by artificial intelligence for Vichy on Tmall.

Foreign cosmetics brands actively use KOLs in such online platforms as WeChat and Weibo. For example, many celebrities like Li Gong, Zhilei Xin (Famous Chinese actresses) promote L’Oreal cosmetics among Weibo users. 

Personalization and co-branding are the key cosmetics marketing strategy in China for L’Oreal

More and more companies focus on offering personalized experiences for their customers. To create a more customized digital experience, L’Oreal has integrated technology to let people “try on” lipsticks by pointing their smartphone camera at themselves. The L’Oreal-owned Giorgio Armani make-up brand became the first luxury line to use the technology on WeChat. WeChat users can order them from Giorgio Armani Beauty’s mini-program shopping site. Users also can screenshot, save and share images as well as view before and after images to elevate the consumer shopping experience. 

Source: Cosmetic Design Asia, Loreal Group has launched of its Augmented Reality (AR) make-up try-on application ModiFace in China

L’Oreal’s quick rebound after COVID-19

The French brand reported that its China sales have seen signs of recovery since the COVID-19 outbreak. Despite overall sales for the quarter shrinking globally, L’Oreal China achieved high growth in March 2020. The CEO of L’Oreal Group, Jean-Paul Agon highlighted that the company’s performance in China was “remarkable”.​ “China was able to close the quarter at plus 6% which is pretty amazing when you think about the difficulty that they had due to the pandemic.”​ L’Oreal China recovered quickly due the early restoration of operation and wide usage of the online-to-offline model. Additionally, during the Women’s Day Festival on March 8^th, 2020, L’Oreal group launched an online shopping event in China to trigger sales.

In March 2020 sales of L’Oreal Group in China became positive again. That proves that using of online-to-offline model and social networks promotion were successful marketing strategies for L’Oreal in China, and especially boosted their sales through the tail end of the pandemic.

Estée Lauder tops the list of 100 most prestigious cosmetics brands in China

Estée Lauder targets young Chinese millennials

The beauty brand targets young millennials to tap into China’s booming cosmetics and personal care industry. Its shift away from older consumers is part of its long-term investment strategy in the country. Estée Lauder’s cosmetics marketing strategy in China is to position itself as millennial-focused. It quickly identified that tapping into the high spending ability of young Chinese consumers with specialized luxury lines is essential for its success.

To gain a clear, competitive edge over its rivals, it redesigned its marketing campaigns. For example, Estee Lauder in China increased digital engagement, leveraged social media platforms such as WeChat and Weibo. Additionally, like many other foreign cosmetics brands, it collaborated with the local celebrities.

Estee Lauder focuses on digital strategy

E-commerce in China has developed rapidly and is a popular way to shop for most Chinese. Thus, it took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, the brand became one of the first high-end cosmetics brands to enter Tmall. They built a professional team with 50 persons to focus on the brand’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder Group in China had 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, as a part of its cosmetics marketing strategy in China, Estee Lauder opened online stores for its sub-brands. It helped to bring more consumption to the Group.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

KOLs and special products push the sales of Estee Lauder in China

Estee Lauder invests heavily in digital marketing, social media, and KOLs. For example, Yang Mi, a famous actress in China, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over 500 percent more sales. Meanwhile, some popular KOLs in China helped to increase consumption. In 2019’s double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Estee Lauder’s matrix covers almost all categories of cosmetic products and price ranges, reducing the risk that customers switch brands as their preferences evolve. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

P&G’s cosmetics marketing strategy in China highlights premium innovation and product mix

P&G launches a premium skincare brand in China

Unlike other top foreign cosmetics brands in China, Procter & Gamble (P&G) decided to put focus on the premium segment. In 2019 this American company brought a premium skincare brand called Oriental Therapy to the Chinese market. Chinese herbal medicine inspired the company to create this cosmetic line.

What makes it especially unique is that it meets skin’s different needs during the four seasons. According to Oriental Therapy’s Weibo post, the beauty line focuses especially on Chinese women.  The brand is now available via Tmall, WeChat, and Xiaohongshu shopping platforms. P&G believes that Oriental Therapy will fill the gap P&G has in its beauty offering in China. One of its key products, Springtime Hydrating Essence costs 450 RMB or 65 USD. The brand’s skin-care sets cost between 740 and 1140 RMB, or 107 to 165 USD.

Source: Weibo, Premium skin-care brand Oriental Therapy for China

However, P&G faces a lot of competition among foreign cosmetics brands. For example, companies like Estee Lauder and Shiseido are also upping the ante through launching new brands including DARPHIN and D-Program.

P&G uses Alibaba to sell in China

To expand its e-commerce P&G has turned to Alibaba Group, which operates the country’s largest online marketplaces. Alibaba also offers digital marketing solutions and access to a huge audience via its media ecosystem, including  Alibaba-related companies such as video-streaming site Youku and the Twitter-like Weibo microblogging site.

“E-commerce also plays a significant role in brand building, which is changing P&G’s century-long brand-building model.” – says Jasmine Xu, the company’s vice president for Greater China e-business and branding. Oriental Therapy has also opened a flagship store on Tmall, where it offers products in different combinations.

China is the second biggest market for Shiseido

Shiseido adopts cooperative cosmetics marketing strategy in China

In 2020 the Shiseido Group opened its first Beauty Innovation Hub outside of Japan at its flagship space in Shanghai.  Shiseido Beauty Innovation Hub represents a new way of working to drive consumer-centric solutions in China. At this space, Shiseido plans to collaborate with Chinese startups and disrupters, and create innovation which will deliver true value. Cooperation and localization, rather than head-on confrontation, is the strategy Shiseido takes. The Beauty Innovation Hub aims to work with local startups in the extended beauty space. On top of this, Shiseido in China plans to experiment and create new businesses. The hub serves as an open innovation platform for Chinese startups, opinion leaders, area experts, media and scientists.

Source: Medium.com, Shiseido Beauty Innovation Hub in Shanghai

Shiseido in China joins Tmall to promote online sales

In 2018, Shiseido revealed their New Retail strategy. A part of this strategy is a platform they developed called the “Shiseido Official Beauty Star Product Hall”.

In 2019, Shiseido signed a partnership with Tmall. It helped to develop new products based on what Chinese consumers are searching for on Tmall. The first co-developed products, a ‘mild and refreshing scalp shampoo’ and an ‘essence oil for split ends’ will launch on Tmall under Shiseido’s hair and body care brand Aquair. Shiseido said it expects e-commerce to generate 40% of its China sales by 2020.

“Without a doubt, whether it be e-commerce or digital innovation, Alibaba is the leader. Alibaba is one of the most important strategic partners for Shiseido China as well as for the entire group,” said Fujiwara, Shiseido’s CEO.

Data Source: Shiseido Annual Reports, Percentage of Shiseido China sales from e-commerce

Mary Kay uses scientific innovation in China

Mary Kay China targets young consumers

As Chinese consumers are more and more informed about beauty, Mary Kay is facing the challenge of developing interesting products. “In China​, beauty consumers demand for products and services are constantly increasing.

The current consumer trend of skin rejuvenation in China is strengthening, and the purchasing power of the 18 to 24 age group is rising,” said Katherine Weng, general manager of Mary Kay China. To cater to younger consumers, the company’s cosmetics marketing strategy in China is to create “bold and interesting” ​products. In 2019, it launched Pink Young brand in China. As company claims, “It’s the answer for today’s woman who wants to show her femininity along with her fierceness.”

In 2018, the company invested around $50 million in the Mary Kay Science and Technology Center, located in Shanghai. Additionally, the company sees the need to increase its online presence. It has launched a new channel which enables consumers to use WeChat to place orders with independent beauty consultants.

Mary Kay focuses on direct sales in China

Mary Kay is one of the world’s biggest direct selling enterprises of skin care products and cosmetics. Within a short time, Mary Kay China established its name among Chinese consumers and experienced steady growth in the country’s first-tier cities. Now, it has set up 35 branch offices across the country. When the company first began expanding beyond China’s big cities, its direct-sales model was new to consumers in China’s second- and third-tier cities.

Mary Kay has three key strategies. First, it drew up strict rules on how beauty consultants should conduct themselves and present Mary Kay products. Second, it developed advertising campaigns in a variety of regional print and broadcast media. Third, the management team established special training programs for consultants.

The sales force represents a competitive advantage. Consultants know their customers well. Such personal networks are vital because Chinese consumers tend to trust people with whom they have a good relationship. Their close relationships with relatives and friends would ease making follow-up visits to get feedback and introduce new products.

Summary of the marketing strategies of foreign cosmetics brands in China

Co-branding

Not many foreign cosmetics brands use co-branding as a key strategy. Co-branding helps brands “exchange” customers, and effectively expand their consumer base. As competition in the Chinese cosmetics market is fierce, such giants as L’Oreal or P&G have not shown interested in involving other brands for cooperation. Shiseido has another approach. It has its Innovation Center in Japan, where it also cooperates with other local brands. Thus, cooperation with the Chinese start-ups was a natural marketing strategy for this company.

KOL marketing

KOLs are popular social media users who can influence a wide audience. In China they usually post on WeChat or Weibo, but other platforms like Xiaohongshu can be considered depending on the target audience. Many foreign brands cooperate with them to expand their audience, especially among millennials. To gain new consumers and increase sales, L’Oreal and Estee Lauder chose this cosmetics marketing strategy in China.

Direct sales

Direct sales are a traditional channel for all foreign brands in China. However, as of 2020 most brands consider e-commerce as a key sphere for development. During the COVID-19 outbreak direct sales showed its vulnerability. Mary Kay is the brand which always had its special strategy of creating personal relations between beauty consultants and customers. Nevertheless, now Mary Kay in China is also considering using digital technologies to promote its products.

E-commerce

The target audience in the cosmetics industry is the post-80’s and post-90’s generations. They always keep up with the latest trends and care a lot about their appearance. One of the most effective ways to approach them is to find where they spend most of their time: online platforms and social networks. Most foreign brands widely use online methods to expand their influence in the Chinese cosmetics market.

Special products

Some foreign brands focus on a special approach to the Chinese market. They create products and sub-brands oriented on the Asian audience. It could be skincare products created specifically for Asian skin or inspired by the Chinese traditional medicine. That helps to increase customers’ loyalty and increase sales in the Chinese market.

Author: Valeriia Mikhailova

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This article Marketing strategies of foreign cosmetics brands in China is the first one to appear on Daxue Consulting - Market Research China.

The development of vitamins and health supplement market in China

The market size of healthcare products in China is growing

Large market size of healthcare products represents the high potential in China.

According to iimedia, the market size of healthcare products in China, maintained around a 10% YOY growth rate between 2013 and 2019. This  which is similar to the US growth rate in 1970’s. China’s healthcare market size reached ¥222.7 billion in 2019, which makes China the second largest market for healthcare products, just after the U.S.A.

Data source: iimedia, Market Size of Healthcare Products in China

The market segment of healthcare product was occupied most by dietary supplement with more than half of the market in 2019.

Data source: chyxx (中国产业信息院), Market Segment of Healthcare Products in China

The health supplements industry in China developed along with the improvement of Chinese people’s living standards and health awareness

Most Chinese considered a healthy lifestyle to include physical and mental health. A healthy lifestyle should be without physical illness and with positive mental health, good social life etc.

Many Chinese see health supplements as a part of a healthy life. Hence, health supplements, such as vitamins and fish oil, are an important choice for health-conscious Chinese consumers. In a survey conducted by iimedia, 48.6% of the participants choose health supplements as their first choice to improve their health condition.

Price distribution of health supplements ranges from RMB 50 to over RMB 300. Most consumers buy health supplements for under 150 RMB on Taobao and Tmall. Customers’ price preference means high-end products are popular among a small group.

Data source: Taosj (淘数据), Price Distribution of Health Supplements in Chinaby Sales Volume

China’s demand for vitamins is continuously growing

Vitamin market in China is expanding, as vitamin products are becoming widely used in China. An increase in market size can be expected under COVID-19 impact.

Data source: iimedia, ‘Size of Vitamin Market in China

Vitamin E is the most popular vitamin in China, followed by vitamin C

Vitamin E is the most popular vitamin in China, making up 36% of the market. Followed by vitamin C, which takes 30%. The popularity of vitamin E is is partly due to the fact that Chinese believe it can prevent cancer. Chinese’ vitamins preference is different from other countries, such as USA, where vitamin D is very popular.

Data source: chyxx (中国产业信息院), Market Share of Vitamin Market in China by Vitamin Types

Skin care is the #1 concern among Chinese vitamin consumers

Vitamins which target skin health have large market potential in China. From information by DXY (丁香医生), 40% of the survey participants regard skin problems as a bothering health problem.    

Data source: DXY (丁香医生), Top Health Problems Chinese Concern

Skin problems, as the biggest health problem plaguing Chinese people, have led to an increased demand for vitamins, as some vitamins are beneficial to skin health. Vitamin A, C and E can help skin maintain a youthful state, prevent pigmentation, freckles and wrinkles. Thus, they are popular in vitamin market in China. For example, Gold Partner (黄金搭档) sold over 90,000 monthly vitamin C chewing tablets, which is #1 vitamins product for skin problems on Tmall. Considering the apparent concern for skin health, it is also no surprise that China’s skincare market is booming.

Millennials are the target market

Chinese millennials are the target group in vitamin and health supplement market in China, as post-90s gradually become the main force of vitamin consumption. According to Baidu Index, age of people who searched “vitamin” on Baidu distributed mostly in aged 20-29 years old.

Data source: Baidu Index, Age Distribution of people Searching ’Vitamin’

In one survey about post-90s’ health products consumption, top three health-related health-related products purchased are health supplements and vitamins (38%), nutrients dense fruits (27%) and traditional Chinese medicine (25%).

Source: Analysys (易观), Top Health-related Products Purchased by Chinese post-90s

Consumer Analysis in vitamins and health supplements market in China

Core drivers of purchasing vitamin and health supplements

Function, product quality, brand and price are four main drivers of purchasing, according to an analysis, which aims to research what factors effect most when Chinese consider buying vitamin and health supplement.

Data source: iimedia, Main Drivers of Buying Vitamins and Health Supplements

Most customers’ positive perceptions are related to functions. On Weibo or Zhihu, Chinese consumers mentions the function of relieving fatigue and skin whitening ect., when talking about vitamins health supplement.

Data Source: Sample of Weibo & Zhihu Posts, netizens opinions in the Vitamin and Health Supplement Market in China

Core obstacles of purchasing vitamins and health supplements

There is a large gap between China and developed countries in per capita consumption of health supplements. In 2019, per capita expenditure spent on health supplement was only $18 on vitamins and health supplements, while in America, that was $148, eight times higher than in China. However, the market is now growing fast as COVID-19 stimulated the consumption in China.   

Data source: chyxx (中国产业信息院), Expenditure on Health Supplements by Country

Factors, such as Price, product effect and reputation, will stop potential customers from purchasing vitamins and health supplement. Most complaints of health supplements result from effect. Consumers gave negative comments when the high price does not match the value. In addition, the reputation of health supplement in China is damaged by media. Most Chinese customers are bombarded with negative information of health supplement, which to some extent embedded a negative image of vitamins and health supplements in Chinese.    

Data Source: Sample of Weibo & Zhihu Posts, Obstacles for Entering Vitamin and Health Supplement Market in China

Other obstacles, such as the size of tablets and taste, also potentially stop people from purchasing vitamin and health supplements. Although Centrum (善存)’s multivitamin products have high popularity online, Chinese customers complain the design of bottle and the size of tablets on RED (小红书).   

Source: Sample of Weibo & Xiaohongshu Posts,, Comment about Centrum (善存)

Market Competition in China’s vitamin and health supplement market

Vitamins and health supplements from Australia and U.S.A are the most popular in China.

2018’s customs data by CBNDATA, shows that Australia and U.S.A are top two import countries of the vitamin and health supplement market in China. Australia and U.S.A account for 22.3% and 20.4% of VDS imports to China respectively. Their brands quickly seized China’s health supplements market share by cross-border and social e-commerce.

Source: CBNDATA , Customs data, Top 5 Imported Countries in Vitamin and Health Supplement Market in China

Besides Chinese brands, Australian brands, such as products from Swisse and Cenovis, are the most popular on China’s online market. By-Health (汤臣倍健) ranked #1 in May 2020, followed by Swisse (#2) and Centrum (#7).

 Data Source: Taosj (淘数据), ‘Top health supplements brands on Taobao & Tmall

Most vitamin and health supplement brands leverage online and offline campaign to build brand image and promote

How brands build youthful image through cooperating with celebrities?

Many health supplements brands aim to build a youthful brand image by using young KOLs and actors as spokespersons. For example, By-health rebuilt its brand image by endorsing young celebrities, Xukun Cai (蔡徐坤) to attract young consumers and associate with younger personalities. In order to shape the young image, By-health cooperated with Transformers and released cross-over products on Tmall.

Source: Tmall, Youthful Image of By-health

Cenovis is trying to raise brand awareness and attract more young consumers through endorsing Chengyu Hua (华晨宇) who is a singer with high-traffic in mainland China.

Source: Cenovis’s endorsement with Chengyu Hua

Centrum changed brand’s perceptions into young, funny and approachable by cooperating with Joker Xue (薛之谦, a famous Chinese singer and actor). Centrum worked with Joker Xue to film videos ads on Tencent.

Source: Tencent, Centrum filmed videos ads on Tencent

Offline marketing activities to reach Chinese vitamin and health supplement consumers

Many brands use offline marketing activities, such as sport events and pop-up stores, to interact with consumers in vitamin market in China.

By-Health built a museum which can use AI and hologram technology to educate about nutrition science and provide health examinations. These activities help visitors understand health situation and sell By-Health’s products.

Source, By-Health, By-Health’s Science and Technology Museum

Swisse built a immersive urban oasis pop-stores in malls during 618 promotion, where Chinese customer can see its healthy and natural brand image vividly. In addition, Swisse cooperated with The Color Run (Color run: Five-kilometer paint race), the sport event attract most young generation in China.

Source: Swisse, Australia-themed pop-up shops (Left) & Swisse X The color run (Right)

In order to expand target population, Centrum launched a carnival to interact closely with children and sponsored a child-parent TV program.  

Source: centrum, Centrum carnival & TV Program

Covid-19 stimulation: How Covid-19 stimulated the sales of vitamins and health supplements

Chinese consumers are more interested in vitamin and health supplements as COVID-19 increased their health awareness

The health supplements industry in China developed along with the improvement of Chinese people’s living standards and health awareness. Chinese netizens showed more interest in improving their immunity during the coronavirus outbreak in January 2020. Demand for vitamins and health supplements that can enhance their immunity became strong during COVID-19.

Source: Baidu Index, Search Trend of ‘Strengthen the Immune System’

Chinese people showed strong demand for  vitamins and health supplements that can enhance their immunity. Accordingly, health supplements that could improve immunity got more sales.

More Chinese consumers have showed purchase intention for vitamin and health supplements since the epidemic increased their health awareness.

Data Source: BCG (Boston Consulting Group), ‘What Chinese will Buy Most in The Post-COVID-19’

Brands seize the opportunity to increase sales revenue during the most serious period of COVID-19

The biggest price drop of health supplements was in February, as many brands decreased online price to have more consumers during the most serious period of COVID-19. However, many consumers were focused more on personal protection and disinfection products.

Data source: CHUANCAI securities, SOOCHOW securities, Changes in Price of health supplements in China during COVID-19

Then, the sales revenue of health supplements greatly increased from March along with people’s health awareness further improved.

Data Source: Taosj (淘数据), E-commerce Sales of Vitamins and Health Supplements

For example, the health related products of BY-HEALTH (汤臣倍健) and Swisse had significantly increased their online sales.

Data source: Taosj (淘数据), Sales of By-Health & Swisse during COVID-19

What can we learn about the vitamin and health supplement market in China

• Physical and mental health are both important for Chinese people

Many Chinese people are eager to have both physical and mental health. Therefore, in addition to promoting physical health, how to help consumers relieve mental pressure is also an important sales point for all health-related brands in the Chinese market.

• People under 30 are the key customers for many brands

Many health supplements brands aim to build a youthful brand image to reach out more young consumers in China. They frequently used young KOLs and actors as spokespersons. At the same time, Baidu index analysis shows young Chinese consumers have the most interest in vitamins and health supplements.

• Skin health is a top concern of Chinese vitamin consumers

More and more Chinese people are bothered by skin imperfections. Because of Chinese beauty standards, skin whitening is an important driver for Chinese women to take vitamins. Therefore, some health supplements launched products targeting skin problems and received positive feedback.   

• COVID-19 stimulated consumption in the vitamin market in China

The COVID-19 outbreak brought great attention to physical health, Chinese people showed strong demands on vitamins and health supplements to enhance immunity.

See our full report on China’s vitamin and health supplement market

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This article Skin and immunity concerns drive the Vitamin market in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Welcome to China Paradigm, a show powered by Daxue Consulting, where we interview season entrepreneurs and experienced managers in China about the business and experience in the country.

Matthieu David: Good morning. I’m Matthieu David, the founder of Daxue Consulting and its China marketing podcast, China Paradigm, and today, I am very happy to be with Liang Sun. You are the founder of a company called Generate and you founded it 7 years ago, in 2013. Generate is focusing on supporting businesses, especially B2B businesses, but I feel you do more than B2B, especially focusing on B2B sales networks in China. So, supporting B2B businesses in their sales in China. You are very close to Belgium. You have an office in Belgium, an office in Shanghai and you are very involved in the Belgian community. And as for now, you are up to 100 or even actually over 100 independent sales and marketing associates. So, as far as I understand, for people who are listening to us, your company, Generate, has a B2B sales network in China of sales associates, whom you call sales associates or salespeople in China. You are in 6 cities, as far as I understand, and those people have a duty to develop the businesses of the clients you have, especially in B2B. So, thank you very much for being with us and the first question I ask is, about the size of the business and you can always correct me if you think there is additional information to add, but what is the size of your business?

Liang Sun: Thank you very much for inviting me. It’s my pleasure to share our experiences and expertise. So, as I said the core competencies of Generate is our B2B sales network in China, the network of independent salespeople. For Generate itself, we have a small team of four full time in Shanghai and a handful of part-time staff. So, in total, we have roughly seven people and capabilities internally, and half of them are managing the independent sales and the other half of them are siding sales support for our customers or project management for our customers.

Matthieu David: I’d like to understand better on how you work, and I really liked your website because when I went on your website, I saw your very organised way of working and that is matching quite well with my way of thinking. You have sales navigation, sales outsourcing and management, and sales recruiting. It looks like very thorough, very organised and very systematic. Could you tell us more about the service you provide to your clients?

Liang Sun: Sure. When a company wants to export their product or technology to China, whether they are experienced already, whether they have some projects already, we feel like they need help when it comes to sales, localizing the sales force, and therefore, our solution here is we help you, starting with the sales navigation program. We help you select the market segments. For example, the other day my clients told me they have three market segments: material handling, theme park and machineries. I said, “Let’s start with material handling.” Then we would help them understand what is the market competitive landscape. What are the key players? What are the channels to market? How do customers make their buying decisions? Who are the decision makers and influencers?

Then, instead of going on with the tech search, we start mobilizing our independent sales force. They are either networkers or experienced key account managers. We would bring the products to their portfolio, which are usually complimentary products, for them to sell the different products to the same key accounts that they have been serving for the past years or decades to monetize their B2B sales network in China. Once there are a few deals going through, the customer would want to hire their own salespeople, but then they may not have the legal entity to do it, nor do they have their offices to do it. Then we help them with recruiting the right person and then putting them in our payroll and our offices for a couple of years until the customer wants to set up their own office and their legal entity and then we would do the rollover to let them go on with it themselves.

Matthieu David: Got it. I feel you are a very systematic person. I looked at the website and the way you express yourself. I feel you are systematic in organizing your services in very clear steps. How do you charge your clients? For instance, we are talking about sales navigation, sales outsourcing, and sales recruiting; I believe you have a very clear way of charging them and a way of incentivizing on success, as well. What is your business model?

Liang Sun: Yeah, indeed we have our pricing scheme and we are structured as we believe that even small companies should have a process or structure in place. In the meantime, we are flexible, and the small companies, medium companies, and enterprise customers may have different preferences on how they want to pay for our services. So we work on hourly rates, or we work on their rates or we work on project fees, plus commissions. So, it is flexible.

Matthieu David: What is the typical way for a B2B sales network in China? I believe the first step is… sales navigation would be like a product. We look at the product, we investigate the market, we talk to the associate. What kind of channel could work? What kind of channels would not work or maybe your product is not ready for China? You need to work on a new product and come back to China. So, I believe that this is a project. It could be I don’t know, 100 000 RMB, 200 000 RMB, but I feel it is a product and then you have recruiting. Here, I feel that it’s more like a percentage, maybe of the salary of the people you recruit, like head hunters do, which is very typical of headhunting and then you have the sales outsourcing and management and I believe as far as I understand that it would be a retainer, plus performance fees (learn more about recruitment). Would you mind sharing a bit more about, if someone is listening to us and would like to project himself in working with you, what should he expect in terms of investment, and at the same time, an incentive to you?

Liang Sun: Sure, as you said, the sales navigation program is a product. It has already indicated a certain level of commitment, should the customer choose the product, and before that, usually the customers have experience in navigating the sales themselves or through us, so, often than not we would start with a day or two’s work. They would give us a clear mandate. “Liang, can you talk to three potential customers or three sales? Give us feedback on our product. Could you investigate this competitor?” What are their products? How do they sell? How do they charge? So, then for us, it is quite easy. It is a few phone calls because we have a professional network for B2B in China to get the information.

Matthieu David: This navigation is a few days. It’s nothing exceeding a week, right?

Liang Sun: No, sales navigation as I said, it is a certain level of commitment. It could take three months. Before the customer commits three months, we want them to have a feeling about how does it look to work with us. So, if a mandate is a few hours, we will take it with an hourly rate. If the mandate is two days, we will take it and then deliver a one-page report. That takes us two days to work on.

Matthieu David: I see, so sales navigation you feel that within three months is enough. Three months is a pretty sizeable amount of time for a company when they want to make decisions. It’s not short either. So, three months is good for you to go through different aspect, to explore things with different associates. So within those three months, are you dividing the different steps or you spend time and explore whatever you can? How do you organise those three months?

Liang Sun: Yeah, so the scope is to select the market segments, contacting the market competitive landscape research, and mobilizing my sales force. So, in practice or operationally we would induct my full-time project manager for up to a week and let him or her get familiar with the product mandate and then what we would do is up to 5 independent sales associates to the project manager, for her or for him to induct those sales associates. Then those sales associates would bring the product in front of their customers over tea or dinner after their own product is selling, they will say, “Hey, would you like to see something else that is cool?” for their feedback. If the Chinese customer wants to initiate their business discussions or put their customer in the shortlist. So, after three months, we would be given our European principles. The feedback from the sales associates, the feedback from the customers, the shortlist of the prospective partners or customers and a cost indication on how you want to move forward and usually, the sales navigation program would end with a proposal for a one-week commercial agenda arrangement in or near Shanghai for the European process to come over here to meet 10-15 potential partners or customers.

Matthieu David: I see. I am on your website and indeed, so you talk about the scope and then the deliverables and so it’s a few pages of feedback and prospects and so on and then you have the options and options is more of activation options, being exhibitions, commercial agenda or execution of the program and it would be more what you would do next, which is to actually sell for them; sales recruiting in China and so on. Is it correct?

Liang Sun: Yes, because sometimes the customer wants to participate in an exhibition, sometimes they need us to induct them on the Chinese business culture and so we have add-ons for them to choose from. 

Matthieu David: I see. So, that was the question I often have for people who do exhibitions. We have clients who go through exhibitions and we know companies who only organize exhibitions for them and so on. How useful is it to go to exhibitions, because every time I go to an exhibition, I see someone who wants to sell me something and I want to sell something to him. It’s a one-way talk only. So, everyone is here to sell, but nobody is here to buy. So, what is your feeling on exhibitions? Do you still feel it’s useful? What do you feel or maybe I was not at one of the good ones?

Liang Sun: I am very glad you asked me the question. We don’t believe in exhibitions to put it in a simple way, although most of our clients still want to participate. It is good for them because they can have a feeling about what the industry looks like in China just by talking to the people during the exhibition, and if we were the European company and we want to go to China, we would not have a booth; it’s an unnecessary cost. We would simply walk around. We did a test with a customer when we said, “Could you give us half of the budget for the booth and let us do something creative?” I asked my entire team of 4 people, wearing the customer’s T-shirt and then we brought cardboard with our tops and we had lollipops or mint or flower or whatever, the promotional products in our pockets, just to catch random participants or visitors for a few minutes’ conversations. “Have you heard of this product? What are you doing here? Would you be interested in our product or could you give me some feedback? We are new here. We don’t know what to do. Where should we go?” Often than not, it is so much more efficient. You have no idea how willing the visitors or participants are willing to share as long as they don’t consider you as a competitor. So, rather than sitting in our booth, waiting for the people to come and sell us something, we mobilize our team to walk around actively looking for buyers.

Matthieu David: Yeah, I feel though to add on, exhibitions could be good to understand your competitors. I have a sense of partners or people who may have additional products to sell with you, as you said with your sales associate and their B2B sales network in China, you make sure that they don’t sell them products as a conflict of interest, but they may sell a door because actually, a door system or entry system because they are in the building industry and the new mall needs an entry system, but that’s not their core business, so, it is complimentary. So here, you may find complementary partners, but indeed, trying to find clients within exhibitions, exhibitors should not sell on it, right? They shouldn’t talk about finding clients for exhibitions. That doesn’t exist, right?

Liang Sun: Actually, more often than not, our customers leave the exhibition with a few solid prospects or even purchase orders. So, it works. Whether the purchase order is solid or not is another matter. Still, they find that their return on investment is fine, but what I want to say here, is the follow-up after the exhibition is more important than the exhibition experience itself because when they are back in Europe, how are they going to follow through with the process, given the different language, the different time zone, and the different response time expectations. It is quite challenging and that’s why we provide sales outsourcing so that our project manager can be their part-time or full-time representative in China following up with the process.

Matthieu David: Going back to your sales associates and the B2B sales network in China, I have the feeling that something you emphasized, you mentioned on average that they are 42 years old and so that means they have experience and they have at least 15 years of working experience. There are several questions: How do you recruit them and how do you make sure they are good ones. And finally, how do you make sure there is not a lot of conflict of interest, because you may have one guy who may want to have a lot of things to sell, but actually within the different things he is selling, you may have a conflict of interest selling the same products as competitors.

Liang Sun: Yeah, let me answer the question in this way. First of all, it is a private network. It is a network built upon trust. I would say everyone in our team, including me, work with less than ten sales associates directly and our sales associates may have their sales associates. So, we know each other. It is not like we only have a few phone calls. We meet each other on a weekly basis and working with sales associates is a cost-effective way, meaning more variable costs than fixed costs and also, it’s easier to get started with and easier and also less commitment. Your full-time sales know a lot more about your company than the part-time external sales force. Whether you want them to avoid conflict of interest or not, you can’t control them because they are out meeting customers. So, working with part-time and external sales force it is safer.

Coming back to your questions about conflict of interest and overlaps, it doesn’t matter to us because we sign the non-compete, non-circumvent, and confidentiality agreement with our principles and then we co-sign the confidentiality and the non-compete with the sales so that they can get on with it. We gave them a questionnaire for them to pre-qualify the Chinese customers’ interest. Once there is a qualified lead, we nominate the leads at our European principles. Once the nomination is accepted, we bring the buyer directly in contact with the seller for them to initiate the business discussions and our project manager may assist in the communications and our sales associates, who are closer to the customer over dinner, over drinks or karaoke, often than not may influence the customers buying decisions. That’s how it works. So, as a result, more qualified hot leads coming and also, the deal closing rate gets increases.

Matthieu David: I see. Your clients are incentivizing you to the volume of sales you do and also the number of leads you bring, or the time you spend because it could be a very long process in B2B sales in China. They may spend a lot of time to translate, it may be technical. It may be very costly for you, and if they pay only with the volume or most of your earning comes from percentage of sales. You may have to wait for a few years before being profitable. How do your clients reward you?

Liang Sun: Yeah so, we are a consulting company and we are not a sales agent working on commission. So, we do have our overhead and expenses covered. In the meantime, we are result-oriented, and we consider ourselves pricing quite aggressive. We often describe ourselves as street fighters, helping customers find shortcuts on signing deals, and getting projects. So it is competitive and yet, we cover our overheads and expenses and make a small profit on those fees already.

Matthieu David: So, the second step is sales recruiting. When you say sales recruiting in China is it that you recruit full-time sales for your clients or is it the associate you activate?

Liang Sun: Yes, so after the three-month navigation program, often than not, there are prospects that are ready to buy or that are already buying, and then we would say you need a full-time salesperson and to follow up closely or to serve your existing customers. We can help you find one and we can put them in the office. The principal would pay us a monthly fee, which includes the offices, employment, and sales support. They can stop the project and the whole recruitment with a months’ process and then we will take care of the hassle. So, again, for them, it is less commitment, but faster setup and same results.

Matthieu David: So, you recruit for them and you hire the people for them with your structure, right?

Liang Sun: In the accounting book, yes. They are on our payroll. The customer pays us a monthly fee to cover the employment and also the cost of our sales support and payroll services.

Matthieu David: I see, but when they sell actually… the company in Belgium, where you are going to involve the client because you cannot invoice for them.

Liang Sun: No, so what I do is I invoice the customer in China. They get the project fees, they share a commission with us because we also charge a commission, so that our fixed or upfront fees are quite aggressive and we want to get rewarded by commission mainly. Then we would give part of the commission to the sales because the sales representative has a job. It is a low risk for them and it is comfortable. But we take all the risks and so we have a higher sales commission than the full-time salespeople that we employ for our customers.

Matthieu David: I see so, so what’s going on is that those clients you have don’t have to create their own company in China. If they do sales, they would invoice directly from Europe, their end-client, and then they would give you some commissions as a reward, or percentage of sales. You are consultants and so you are a consulting company, advising on how to negotiate a dealing and supporting them, but you are not invoicing for them. Am I correct?

Liang Sun: Nope, unless their customer requires it, but sometimes the Chinese customer will require RMB invoices. Typically, it is a service contract for IT serves, project management services and we will assist because we have legal entities both in Belgium and in China and so we can help in that.

Matthieu David: I see. Then, the tricky aspect of your business is that, if you are successful or if you do well in your job, you should lose your client. Your client at some point would start a company in China, have their own structure and so on and that is actually what you say, that after 12 months or until your objective that your client has a company in China and he is successful in his company, what is the next step after the recruitment of a sales advisor and sales in China, by your structure?  

Liang Sun: So, we consider ourselves successful if the client wants to leave us within 24 to 36 months because that means that we have succeeded in helping our customers enter into the China market and have a solid footprint. We usually don’t charge a rollover fee, which means after 24 months, our sales can become your sales. They are free to go and please, refer other customers to our business. This is the way that we believe, and in two years clients are already better than a market research firm’s three months clients. You will be surprised how often our customers come back to us for due diligence support or other supports because they trust us. 

Matthieu David: Is it the reason why you have now digital marketing, brand strategy, design, and social media campaigns, trading? It seems you expanded and that I think I was not very clear on. Those words, digital marketing, brand strategy, design, social media campaigns and talk about Weibo and WeChat, are B2C? (read about optimizing Wechat marketing in China)

Liang Sun: Not exactly, because B2B sales and marketing in China also need WeChat.

Matthieu David: Can you elaborate on it? I think it is a misconception with a lot of B2B businesses, thinking that WeChat is B2C.

Liang Sun: Okay so, the reason we started the digital marketing exactly, is because our clients were asking for it. We have succeeded in helping them sell and they want to market because they have a budget to spend, to create a brand, and market awareness. We tell them honestly, the path on WeChat you need to outsource the work to professional firms and more often than not, we outsource to Chinese firms because we believe they are cost-effective and their foot is on the ground, they are local. Then the customer needs our support on project management and language communications, and they believe in our model. We work on project management fees and to answer your question on the B2B marketing and sales in China, yes, WeChat is a good B2B marketing tool in China (find a guide to B2B marketing in China).

I will give an example. We are helping one of the largest Belgian companies in industrial machinery sector on managing their China marketing and the starting point is starting up a WeChat account, they have a factory in China, for their sales people in China to use as a tool. So when they are done with meetings, they can say this is our company brochure. There is our QR code, please subscribe to our WeChat account to see our project references and news and exhibitions that we are attending. With WeChat, it is so much easier to share news or project references or information to the prospects who can then share internally or externally to other people because everything in China is on WeChat these days.

Matthieu David: I see, so basically even B2B when you are at an exhibition, people follow you on WeChat and that means that it is also used for B2B sales network in China because you build a connection, not only through a dinner and lunch, but also through WeChat and people keep your contact and follow you, right?

Liang Sun: Yeah.

Matthieu David: Talking about sales recruiting in China, how do you recruit a good sales person in China? What is a good sales person in China? To give you a bit of what people think, it’s that a good sales person is someone who is good at networking and relationship building in China. So, basically you would always favour people who are 50 years old with a lot of experience, more than someone who is let’s say very inventive, more than someone who is actually a good speaker. I found that a lot of people tend to think in terms of sales people and recruitment by their guanxi, network, which is very often difficult to assess (learn about leveraging guanxi for business in China). People may say, “I know this one and a lot of people,” but how do you assess it? So, basically an open question: how do you assess a good sales person in China?

Liang Sun: Yeah, let me start by saying that we believe sales is a service, it is an art and most importantly it is a process and we divide the process into three aspects; the lead generation part, the sales follow-up part, which is usually technical and the deal closing part, which is where the network comes into play, guanxi. It depends on the principal’s needs. If they need a sales engineer to follow up on the existing leads that they have, or they need a lead generator, a door opener to get new leads, or they have leads and engineers, but they need a super networker and client relationship manager to close the lead, spend time with the customer to understand what they want. So, typically one person can be very good at one or up to two of the three parts in the process, and we think we can do the sales recruitment because over the last 7 years we have done many cases. We only recruit sales people, because we as a company or me as an individual are sales person in the core and we believe it takes a sales person to understand what a good sales person is.

Matthieu David: Maybe I should have started with this question, but I really want to understand your business first and I think the people listening to us also want to go in depth in understanding what you do and how you serve your clients. But if we go back in time, 7 years ago, what made you start this business?

Liang Sun: That’s a very good question. I started the business 7 years ago because I was lucky enough to have a mentor and he taught me one day, he said, “Liang, never hire sales people.” He came to China for the first time in 2013 to close down a factory and office because the sales people were turning the company inside out. The invoices and goods were going out, but they never saw the money and so they fired everyone. Then this general manager, my mentor, turned the payments terms from 60 days post-payment to 100% pre-payment and because of that, they lost 80% of the customers and kept 20% of the customers, and then the company started to be profitable. So, he taught me, Liang work with sales agents. Let them get on with it. Give them commission. Don’t tell them too much. Hence, I started this model because we believe in partnerships. We respect people’s privacy and we work in teams. We believe in incentives and transparency, and we share referrals.  

Matthieu David: How do you build this professional network of references in China because what you described from outside looks like a perfect world, but in fact when you have intermediaries, you have people you need to share with and so on, it is something difficult to have a contract with someone. It is somehow difficult to make everyone happy and to make sure that everyone understands what you are doing as well. How do you work with all this?

Liang Sun: Yeah so, I started business when I was 26 years old; just a fresh graduate from grad school in Belgium. So, the same mentor introduced his best sales person to my network. Now, we are talking about the sales person that was generating the best revenue, whether the revenue cancelled or not was another matter, but a great sales person in their own way; they make money for themselves and their customers. Then, I spent enough time with them to let them understand what products I have. They were in the construction industry, selling floors, selling roofs, waterproof membranes, selling walls, paintings and then I said, “Would you like to sell Belgian roof top solar panels? Do you want to sell the warehousing racks?” It is all to the manufacturing facilities or project directors, general managers. So, clients and our sales people were motivated because they are money driven and they want to be more helpful in front of the customers and at the same time, they are very careful about sharing their professional network for B2B in China. So, I have to pre-qualify the credibility of my European principle so that I will be comfortable to bring a mandate to them because we care about our relationships and our reputation. This is how I started and this is how I work.

Matthieu David: What direction of the leads you meet with when you may describe those kinds of networks? I believe some European or US companies believe it is a bit too blurry now to go through networks, or guanxi and relationship building in China. It may create a bit of anxiety and people may be a bit nervous about not understanding what’s going on and you talked about trust again, trust enough to contract. American and European businesses want to contract. They want everything clear and written, transparent. I mean transparent by the end client and everyone to be and here, you have to protect their own network, their own wealth, right for the people who introduce you, the good salespeople? So, how do articulate this?

Liang Sun: So, you mean the cultural difference, one is contract-driven and in China it is relationship-driven, right?

Matthieu David: It’s kind of culture, but it is basically a business practice. The business practice is that people own networks. They don’t want really to share it because of the wealth they have, it’s a property, and to go further I longed so that LinkedIn could not have been as successful in China as in the West because people don’t want to show who they are connected to. I studied in Beijing University and I really have this feeling that people wanted to show that they are connected and are relationship building in China, but they don’t want to tell with whom.

Liang Sun: Yeah let me give an example. We were mobilising ourselves here to sell the Belgian rooftop solar solutions and we let ourselves introduce a prospect factory in Suzhou, and all of a sudden my sales people and sales associate disconnected and disappeared for one week and after a week I called them up and said, “Hey, what happened? Are you okay?” He said, “Liang, sorry, I was busy with managing the relationship with the security guards at the door and the decision-makers. We had a lot of fun and they are ready to sign a contract.” He gave me some invoices after dinner and said, “Look, you guys had a lot of fun. Good. Let’s sign the contract then.” I am result driven. I don’t ask questions too much. I trust my sales, but they do bring results.

Matthieu David: Yeah typically, I mean fortunately you are here because a lot of European and American businesses would not be comfortable by this kind of absence of communication, having to spend so much money on entertainment, when you have so many regulations in Europe on the amount you can spend on entertainment, for instance.

Liang Sun: Yeah that’s also why we exist, because we can be localised when it comes to our operations and also, we comply with the European and American anti-bribery or anti-corruption act. So, to give our European principles and production and comfort that they need.

Matthieu David: What is the expectation in terms of timeline to get some sales? What is your experience when you entered B2B sales network in China? Should your client expect to get some momentum after 3 months, 6 months, 1 year? I know it can depend on the kind of business. It can vary from one industry to another, but could you give a sense of what expectation they can get?

Liang Sun: Yeah, B2B sales network in China and it really depends on the sales cycle. It can be as short as 3 months; It can be as long as 3 years and the customer understands it. The company that I mentioned that has 3 market segments, material handling, machinery and theme parks, for the material handling, for example, they want to sell to China Railway and they know it is after 3 years.

Matthieu David: It depends, but I think what we can remember is that minimum 3 months basically you are saying it is not serious to expect results before 3 months. It is a minimum of 3 months to get a bit of something and it can go up to 3 years when it is a very large partnership unit with like China Railway where it will take time and we understand it.

Liang Sun: Let me give another example. If the European company sells floors or furniture, then if we manage to give them the right contacts to the distributor that wants to try the container, then the deals can go through very quickly. So, it really depends.

Matthieu David: We are in April 2020 and everyone is talking about the same thing in all the media. It started first in China and now it is Europe talking about it, impacted. It is the coronavirus. How did it impact your business and your clients?

Liang Sun: Let’s talk about our clients. If they are in manufacturing settings in Europe, then they are busy with business continuity planning. Overall, they are quite busy conducting the business the best way they can and therefore so are we. We decided not to take new projects for the foreseeable future to focus on supporting our existing clients to go through the crisis. At the beginning of the year, we signed a few new projects and for the sales navigation program and after the virus outbreak, we gave the customer the option to postpone the project or even cancel the project because we told them simply, we are not comfortable with conducting the market research because it may not be valid in 6 months and the people in China have other priorities. Thankfully all of them took their money back, so our burden is off. To give you a question, it is going to be a very hard year for us which is fine, because we are financially strong. We believe in long term. We believe in value we create and the money will come, eventually, but so far, we focus on the existing projects and we don’t take new clients for the next say three to six months.

Matthieu David: The clients you were representing with your sales associates and your B2B sales network in China, those people that you hire for them, what is the situation now? Do you feel we are back to business in China? I am currently in Shanghai and I see a lot of people in the street walking. I see all the shops open, but I see a lot of shops are also closed, who didn’t get back to business. It could be restaurants; it could be coffee shops. I also see much fewer or people in malls and stores. I was checking the Apple store and it was pretty empty. Maybe it was too early. I went early to check, but I think it is not back exactly to the level we were before the crisis. What about you in B2B? Do you feel business is back?

Liang Sun: People in China are going to all places, which is a really good sign and whether the business is back, I still think it is too soon to tell because the impact on the businesses and the revenue loss, which is negative, but the government subsidies are positive. How will it impact the industry on the macro level and the individual businesses on the micro-level? It is too soon to tell. It takes a few months. So, right now we feel like the business conversations are still going forward, but whether they would make a buying or selling decision, would still take some time to go back to normal.

Matthieu David: I saw on your LinkedIn profile that you are lecturing and among the topics you are covering, there is made in China, 2025 and this topic seems very wide and a bit theoretical. So, my question is what practical do you get from this made in China, 2025. What practical conclusions do you get that you could bring to your clients and in your lecture?

Liang Sun: In a nutshell, we believe that made in China would help the Chinese manufacturers to export more and more high-value added products to the world and those products are created in China and they are made in China. This is also a business that we are starting to get involved in. We ourselves, buy and sell high-value products from China to Belgium and we also have our clients finding not sourcing and not manufacturers, but we call supply chain partners from China. Because of the incentives, it’s a trend that we believe and we ae spending more internal resources supporting the European companies buy high-value products from China.

Matthieu David: So, the next step for your business would be actually to do what you did from foreign businesses in China, to do it for Chinese companies in the west?

Liang Sun: We decided not to think of it that way. We decided to keep our clientele as the Europeans and the Chinese companies that we introduced to the European companies are our stakeholders, but now some of them are becoming our suppliers because the relationship and trust is there. We told them that there is a market opportunity in China and our European clients may become our clients again, but not for export into China, but for buying from China. It is all about relationship building in China and trust and product and the money flow and good flow from an operational level. The network is built upon trust.

Matthieu David: Very interesting. It is time for the last questions and you received them before the interview. Typical questions that we ask at the end of the interview, what books inspired you most during your entrepreneur journey?

Liang Sun: I would say it’s the Robert book, Rich Dad Poor Dad. You probably have heard of the book. I only worked for a company 6 months in my life and I will never work for a company again. Part of the reason is the book. I believe my capabilities in managing my money more than the government and I equipped myself with good lawyers, accountants and bankers and so, this book made me start and continue and made me keep my head up when I had bad times, because I will never work for someone again and I may fail, but I will never go back to another company and I believe eventually I will succeed because I need to succeed once. 

Matthieu David: Can I ask you a personal question because I understand the desire of working on your own and as an independent, but it sometimes is made at a price. The price being that you postpone some decisions like getting married, like having kids. Are you married? Do you have kids because I believe when you’re an entrepreneur that is something you think like 10 years after others?

Liang Sun: I totally agree with you. A lot of people say that they want to keep a work/life balance. I don’t believe it, or a work/family balance. I also don’t believe that. I believe that either you go fully committed to your business or career development or you connect to your family more. I don’t have kids, but when I do, I want to sell my business and be a freelancer so that I can afford to be a good father, which is the most important job of all time. Right now, my business is the most important job.

Matthieu David: Yeah so, the good side is that you are independent and you make your decisions and reach that conclusion you have in mind. The down side is that indeed, you have to postpone some things in your life. Some people don’t realise when they start a business just after studying that it will cost a lot of things. What do you read to stay up to date about China? What are your favourite newspapers or magazines, even Chinese ones? Are you reading  Caixin, Renmin, SCMP?

Liang Sun: All of them. I would say I only read the titles nowadays and I do read the Economist and CNN, BBC and then I read the titles in the Chinese media channels so I can make my own judgement, which news is true or false, in my opinion, but most of the time I keep being informed by talking to my network and the successful people in the industry.

Matthieu David: What kind of resources would you trust more or what newspapers would you trust more in China to get very accurate numbers, good information? I tend to like Caixin. How about you?

Liang Sun: I would say I remain skeptical on all news channels. Every media outlet has their own agenda and they are trying to be as objective as possible. So, all the numbers and the data and opinions I use them as a reference and combine those resources with my network and my own judgment, and then I can make my business decisions. 

Matthieu David: What book would you recommend on China? A book that you would recommend to foreigners to understand China better or a book that you liked because you understood your own country better as well?

Liang Sun: Well, I think if you ask a foreign entrepreneur living in China, they can answer the question so much better because I believe there quite a few good books in English, written by foreign entrepreneurs living in China and so I read them. What I do is, I live in the country I do business with and now I am spending a decent amount of time in Belgium, because that is what I believe is the best way to understand how business is done in Belgium and living in the country itself is like reading books. I learn so many new things everyday by talking to the people there.

Matthieu David: What productivity tool do you like best? I don’t think WeChat is that productive. We waste a lot of time on WeChat, I feel. What productivity tool do you like to use in your daily work?

Liang Sun: My team uses quite a few tools that I introduced them to: Monday.com and Pipe Drive as a CRM tool, Trello as a management tool. I still use Trello every morning or what I do is I put less than 3 things on the to-do list of the day and the other 5 forecasts I have is urgent and important, which is what I do today. Urgent and unimportant, I let my team get on with. Important, not urgent I schedule another day to do it and another thing is the unimportant and the unurgent, then I will remove them. So, the reason I make sure there is less than 3 things is that I want to be free before 10am. I start my day very early. I start my day at 5am. In China I start my day at 7am, after the workout. It is quite cool and then I a full of energy and so, the purpose is to empty my to-do list and forget about all the tools before 10 am and from 10am to 6pm I do the things that my mind tells me to do and usually I am very productive. I call the customers or suppliers I need to talk to. I call the team I need to talk to. I call my government officer contacts for tea. It is productive and it is the way I find productive.

Matthieu David: It is very interesting. I am happy we met through the nonimportant, nonurgent for the podcast. I am glad you considered it as important to schedule the call. I am very curious about the tools you are using, Monday.com, Pipe Drive, and Trello. The first thing I am surprised of is they are all western tools. Second thing I am curious about is, how do you learn about them? I knew Monday.com because it’s everywhere on YouTube. I know about Pipe Drive because I listen to a lot of podcasts and I think they were sponsoring one of the podcasts. I know about Trello because I will use it at some point. My third question, sorry, I have questions on this because I feel that you have a very organised mind, so I am sure you have a process. So, the third question is how do you choose one tool over another one? Pipe Drive is in competition with Salesforce, with Zoho, with so many other CRM and so on. I understand it is more B2B here, so how do you choose? The first question is, why only western tools? The second question, how do you find them and third one, how do you select them?

Liang Sun: Yeah so western tools is because we have both a European and China team and the China team are English speaking. The European time may not be Chinese speaking. So, we have western tools and all the tools that are mentioned, including Google Docs, Drop Box. They are high Chinese alternatives, equally as good, if not better and we don’t spend too much time on making choices because we believe how we use them is more important than choosing the tool itself. So, now we have been using Pipe Drive for a couple of years. We know there are better and cheaper ones, but we don’t change because we are used to it and it is good enough.

Matthieu David: Interesting. I always have a hard time choosing software because I would go with it for years, and if they go bankrupt, I don’t know why they don’t raise money to go on. I have to start again. I always look at the exit strategy to be able to extract all the data easily. I’d like to have your opinion on an unexpected success or an unexpected failure you witnessed in China? The reason why I am asking this question is because Peter Drucker, the thinker and consultant of business strategy, he wrote many books on business strategy. He says we can assess innovation when we look at unexpected success happening or an unexpected failure happening and this unexpected success or failure gives a sense of direction of what is changing in society or in business. What would you say over the past 3 or 5 years as an unexpected success you witnessed or failure in China which can give us an idea of the changes that are happening here in the country?

Liang Sun: Yeah, I know the book you mentioned. I know the person. I have heard of him and he is from the innovation perspective, from the entrepreneurship perspective. I consider myself more a businessman than an entrepreneur. So, the way I see it, the unexpected failures and success is more than the right time and the right place or the wrong time at the wrong place. So, I believe luck plays a large role in a business success or failure. If you ask me the recent success, I will say the medical companies or the medical supply companies are masks manufacturers. They don’t need to do anything. They need to be at the right time and at the right place, they will be successful for a year or two, at least. The failure is the same. I mean, so many good companies are not going to go through with this because it is not a good time for them, but the good ones will go back up after the crisis is over because we believe the best time to start a business is after the crisis.

Matthieu David: That is interesting. Basically, you don’t believe what Peter Drucker is saying because what you are saying is that an unexpected failure or an unexpected success is based on timing, is based on luck and not necessarily showing a change in society or business. That is an interesting way of seeing things because that’s in some way, how much timing is important in success and it is random. Facebook succeeded, but MySpace failed in a few years of difference and we can see many, many examples like them. Thanks Liang, for your time. It was very, very instructive. I really enjoyed talking to you. I really enjoyed when in the podcast I see that there is a process in mind with the person I am talking to. They have thought about what they did. They chose tools, they know about what they do and they have a process and clearly, you are this person. So, thank you very much for spending time with us on to China Paradigm, the China marketing podcast where we interview entrepreneurs in China, and I hope you enjoyed it.

Liang Sun: Thank you very much Matthieu.

Matthieu David: Thank you everyone for listening. Bye-bye.

Liang Sun: Cheers.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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This article China Paradigm transcript #100: Behind the scenes of a B2B sales network in China is the first one to appear on Daxue Consulting - Market Research China.

Data source: askCI.com- Market size of telemedicine in China from 2015-2019

Telemedicine consumer penetration

Given the COVID-19 situation in the beginning of 2020, it is no surprise that the penetration rate jumped up by 2% YOY. By April 2019, the number of users of online telemedicine services in China had reached 45 million, with industry penetration reaching 6.6%. The penetration rate continued to rise from 2018 to 2019 and will likely maintain its growth momentum in the future. It is expected to exceed 8% in 2020 and the scale of users will continue to expand.

Telemedicine apps and websites are no longer just patients from 1^st-tier cities, but people in 2^nd and 3^rd-tier cities are beginning to use telemedicine platforms. People under 35 years old are the main users, however, the middle-aged & elderly groups’ needs have not yet been explored. Telemedicine companies should pay more attention to the convenience and operability of online consultation to seize this part of consumers.

The characteristics of telemedicine industry in China

5G technology

Source: Sohu.com – Construction of 5G base stations is accelerating and 5G networks are expected to cover prefecture-level cities nationwide by the end of the year

In 2020, 5G technology helped telemedicine enter a new stage of development and explore new scenarios for application. Telemedicine in China started relatively late. In 1988, the PLA General Hospital conducted a remote case discussion of neurosurgery with a German hospital via satellite, which was the first telemedicine activity in the modern sense in China. China’s telemedicine industry has developed rapidly later on, owing to the development of computer technology, communication technology, digital medical equipment technology, hospital information management technology and a series of core technologies in telemedicine.

In early 2020, during the COVID-19 outbreak, China’s telemedicine was more widely applied and developed with the support of 5G technology. Zte and Sichuan Telecom assisted West China Hospital of Sichuan University and Chengdu Public Health Clinical Medical Center to realize 5G remote consultation of two COVID-19 cases for the first time.

5G telemedicine trolley has been launched in Wuhan Huoshenshan Hospital. In some places, China Mobile has launched the application of “5G infrared thermal imaging temperature measurement” to realize the simultaneous scanning and temperature measurement of many people.

Driven by 5G technology, the application scenarios of telemedicine have been expanded, such as remote ultrasound, remote surgery, mobile ward rounds, remote monitoring, remote consultation and remote first aid.

The uneven distribution of medical resources

In China, the distribution of superior medical resources is extremely uneven. More than 70% of the third-level grade-A hospitals are located in the eastern region, making the potential demand for telemedicine in the central and western regions huge.

Data source: chyxx.com – The proportion of third-level grade-A hospitals in the three regions in 2018

Telemedicine in China’s ageing society

China’s huge population base has already put medical resources to a severe test. On top of this, China has encountered the problems of relatively unbalanced economic development and unevenly medical resources distribution. At the same time, China’s population is aging, and immense pressure is put on the younger generations to care for the elderly.

The United Nations issued a standard: as 65 years old people account for more than 7% of the total population, the country is considered an aging society. According to data released by Chinese National Bureau of Statistics (NBS), the proportion of the population over 65 years old has reached 11.9% in 2018.

Data source: chyxx.com – The proportion of people aged 65 and over in China from 2000 to 2018

As the elderly have entered a period of decline, they are much more likely to be infected with various diseases than their younger counterparts, which greatly increases the market demand for medical resources. Telemedicine can solve the imbalance of medical services in different regions to a large extent as well as integrate and utilize medical resources through the Internet, which will be conducive to the stability of our society and the protection of people’s healthcare.

Telemedicine platforms in China under the influence of COVID-19

Accelerate the construction of telemedicine platforms in China from hospitals

Due to the COVID-19 outbreak, the urgent need for epidemic prevention and control has promoted the construction of telemedicine platforms in China from hospitals, which reached a new peak in February 2020, with 65 telemedicine platforms from hospitals built in a single month. During the epidemic, in addition to online outpatient services and pneumonia consultation services provided by existing telemedicine platforms, traditional public hospitals and other medical institutions also launched online telemedicine platforms on an emergency basis.

Previously, most of the public hospital informatization construction remained in the “digital hospital” level, such as “intelligent outpatient service”. The degree of informatization is mainly reflected in basic services such as hospital registration, consultation, settlement and medical record management. The epidemic has accelerated the construction of remote online consultation in hospitals and the real patient-oriented Internet diagnosis as well as treatment services which have begun to develop.

Data source: Xinhua.com – Number of Chinese hospitals with own telemedicine platforms from 2019-2020

Take one of the leading platforms – PingAn Good Doctor as an example

PingAn Good Doctor is the wholly-owned subsidiary of PingAn Group and leader in telemedicine services in China.

It covers four major business segments: online medical consultation, consumption medical care, health malls, health management and interaction. The number of users reached 5.67 million on February 5th, with an increase of 8.4% before the 2020 Lunar new year.

In terms of city distribution, the proportion of customers from new first-tier cities is the largest while the proportion of customers from first-tier cities is the smallest.

In terms of age distribution, consumers aged 24 to 30 account for the largest proportion.

Data source: qianfan.analysys.cn, Ping’an Good Doctor users are disproportionately in first tier-cities.

Data source: qianfan.analysys.cn, Ping’An Good Doctor users are usually young, although elderly are more likely to experience health problems

Monthly active users of PingAn Good Doctor app increased rapidly since January, 2020 (COVID-19 outbreak).

Data Source: qianfan.analysys.cn, monthly active users of Ping’an Good Doctor

Limitations and Opportunities

With the deepening of “Internet Plus”, Internet economy has become an important factor in China’s economic development. “Internet + medical treatment” has been constantly applied and developed.

The coverage rate of 4G network has reached more than 95% and 5G network has been officially commercialized. Software services, cloud computing, big data and other industries are developing rapidly, laying a good technical foundation for telemedicine. With the use of automated and intelligent technologies, telemedicine is gaining more and more recognition from patients. Therefore, it can drive the increase of huge demands and the potential space of telemedicine market will be huge.

Since 2009, a series of established policies have demonstrated the government’s strong determination to develop telemedicine. With the intensive introduction of policies, the policy environment of the telemedicine industry in China is clear and the industry will usher in rapid development.

However, the telemedicine industry in China has not yet developed a mature business mode, remaining some problems like vague pricing policies, uneven payment systems and wide variations in health care from place to place. Additionally, an obvious concern with telemedicine is that it is easy to ignore symptoms that can only be diagnosed in a “face-to-face” setting, leaving health-care providers vulnerable to negligence claims and insurance coverage. At the same time, patients are also prone to misdiagnosis or missed diagnosis.

Social habits and careful regulation hinder the application of telemedicine. For many people around the world including Chinese, the COVID-19 outbreak is already forcing a change in social habits that is likely to have a permanent positive impact on telemedicine.

Author: Qing Zheng

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This article Telemedicine in China: Healthcare reaches a new status quo during the COVID-19 pandemic is the first one to appear on Daxue Consulting - Market Research China.

In 2018-2019 the quarterly market size of consumer electronics was around 30 billion yuan. However, in the first quarter of 2020 during the COVID-19 outbreak, Chinese consumer electronics market size dropped to approximately 20.9 billion yuan.

Data Source: Statista, Chinese consumer electronics market size

The COVID-19 outbreak in China had a great impact on the Chinese consumer electronics market in China. Forecast predicts it will see a decline in revenue growth from 16.8% in 2020 to 6.1% in 2021.

Data Source: Statista, Chinese consumer electronics market revenue growth

Smart technologies drive the growth of the consumer electronics market in China

The popularity of AI in China has brought new development opportunities to the consumer electronics market in China. In the next decade, smart homes and IoTs (Internet of Things) will be a huge development opportunity for manufacturers.

For example, the domestic smart connected room air-conditioner market in China is expected to grow from 4.1 million units in 2015 to 37.6 million units in 2020. Midea Group and Haier Group are leaders in domestic smart room air-conditioner market. Both these leaders are expanding product sectors of smart room air-conditioners this year.

At the same time, the revenue of smart home appliances in China is growing. In 2017 it accounted for US$ 2 million, when in 2019 it increased twice to almost US$ 5 million.

Data Source: Statista, Smart appliances revenue in China

The growth of the consumer electronics market in China is partly due to government policies

It is quite unique that policies and regulations that the government promulgated play a critical role in the development of the consumer electronics market. As of 2011, China is the world’s largest market for personal computers. In 2013, the Chinese government issued 5G licenses, marking the beginning of a new era in China’s high-speed mobile network. China Telecom promised to create 300,000 5G base stations by the end of 2020. The operator, which is taking part in a 5G network share with China Unicom, deployed 40,000 of its own base stations by the end of 2019. That reflected a RMB 9.3 billion investment in 5G networks in 2019.

2019 was a booming year for e-commerce. China raised the limit on cross-border online purchases, as well as expanded its list of duty-free goods. The government raised the annual quota on cross-border e-commerce purchases for individual buyers from 20,000 to 26,000 yuan. The limit on a single transaction was raised from 2,000 to 5,000 yuan or $723 dollars.

Growing consumption of consumer electronics requires new technologies

 The rise of domestic manufacturers: Huawei, the leading provider of consumer electronics

When it comes to the best domestic mobile phone brand, many people will think of Huawei. Since 2017, Huawei continues to maintain leading position in China’s smartphone market, with a year-on-year increase of 23.4%.

According to GfK, as of the end of February 2020, the market share of Huawei Tablets was approximately 46%. In addition, since 2019, Huawei has surpassed the Apple iPad for the first time in the Chinese tablet market. It has continued to expand the gap with the Apple iPad. In 2020 Huawei grabbed 40.2% of the domestic market, up from 33.9% a year earlier. Its overall unit shipments rose about 1% to 30.1 million.

Data Source: Statista, Market share of tablets in China

Lenovo, Huawei and Xiaomi go global

Consumer Electronics remains by far the best performing category in the electronics market in China, dominated by brands such as Lenovo, Huawei and Xiaomi in China.

David Roth, Chairman of BAV Group commented: “The companies behind China’s brands are taking a more active role on the world stage. They are increasingly shaping the conversation at a category level, as well as helping to support economic growth in developing markets in many ways, not least by investing in infrastructure”.

Lenovo

Lenovo holds 24.4 percent of the global PC market, sustaining its position as the worldwide #1 in PCs. Growth came from premium categories, including Workstations, Thin and Light PCs, Visuals and Gaming PCs. They all had double-digit sales volume growth year-on-year. In North America Lenovo moved up two places in the industry rankings from the previous quarter to number four. In addition, revenue continues to outgrow the market with profit continuing to improve. Going forward, Lenovo will continue its investment in its mobile business to drive future growth opportunities.

Data Source: Statista, Revenue of Lenovo

Huawei

Huawei, thanks to a whopping 16-17 percent annual growth, claimed the No. 2 global smartphone vendor spot in 2019, behind Samsung and ahead of Apple. Both firms have similar global market share numbers for 2019. Samsung had around 20 percent, Huawei at 16 percent, Apple at 13 percent, and Xiaomi and Oppo around eight percent each. Q4 2019 was Huawei’s first quarterly decline—down seven percent from Q3. It blames on the export ban. But this ban doesn’t affect Huawei’s marketability in its biggest market, China, where Google doesn’t do much business. Huawei has had its own software ecosystem in China for years, with the “Huawei AppGallery” store, cloud storage, a browser. 

Data Source: Statista, Revenue of Huawei

Xiaomi

As of 2018, Xiaomi’s international business grew by 150 percent and has successfully entered 82 foreign markets. Among these 82 markets the brand ranks among the top five in about 25 markets. Xiaomi beat its rival Samsung to be the leading smartphone brand with most shipments in the Indian market in the third quarter of this year. Xiaomi’s overall market share during Q3 2018 comes at 27 percent while Samsung managed to grab 23 percent on market share.

In Indonesia, Xiaomi became the second largest brand for the first time and is leading the sub-$150 segments. It holds 22 percent market share in Indonesia while the leading brand Samsung holds 25 percent market share.

The company continues to expand globally and Xiaomi’s global shipment numbers are also growing. The company reportedly shipped 9.7 percent of all smartphones shipped worldwide during third-quarter this year.

Data Source: Statista, Xiaomi’s annual revenue

Apple and Samsung struggle against domestic competition in the consumer electronics market in China

In 2018 the U.S. and South Korean firms had fourth and fifth place in the Asian giant’s smartphone market. Ahead of them came three Chinese firms: leader Huawei with a 16% share, then two companies little known elsewhere, Oppo and Xiaomi.

Data Source: Statista, Leading Chinese global consumer electronics brands as of 2019 (in BrandZ brand power scores, BrandZ is a brand power score based on analysis from Millward Brown)

Brand loyalty is not as strong in China as in other markets. It’s a very crowded, fragmented market and fiercely competitive, with rivals undercutting each other with price and design. Low-priced Chinese competitors have been “particularly troublesome” for Samsung, which has sought to offer phones across all price ranges.

Apple still benefits from its luxury image and the strong loyalty of its long-time users in China. But the California firm sometimes has to contend with the country’s Communist authorities. In 2017 Beijing blocked Apple’s iTunes Movies and iBooks services launched in China. Besides, the Chinese media has prominently reported about alleged security vulnerabilities on Apple devices.

The revolution of distribution channels has promotes sales in all areas

Nowadays, selling-commerce contributes to the diversity of the sales channel and avoids many problems like establishing an outlet in a rural place. Despite the relatively small base, continuously rising disposable incomes in rural areas, together with increasing education and interest in consumer electronic products has stimulated demand and continued to drive volume sales in rural areas. Meanwhile, the expansion and penetration of retailers such as Suning and Gome into the rural areas has also played an important role to boost volume sales in rural areas. However, urban sales still account for the majority of volume sales of consumer electronics products thanks to the higher acceptance of innovative technologies and disposable income levels in urban areas.

Other than large e-commerce platforms like JD, Tmall, and Taobao, many electronics brands sell directly to Chinese consumers through their own websites.

Source: Statista, Top 5 online stores by net sales in the consumer electronics segment in China

China’s overall online and offline consumer electronics market consumption upgrades intensified

In the future, the retail in China’s consumer electronics market will change, and the online plus offline model will dominate.

In China’s consumer electronics market, offline channels are the main channel for consumption upgrades. Taking traditional home appliances as an example, the proportion of retail sales in offline markets reached 70% in 2018. High-end consumer groups pay attention to product experience, so the offline market has an advantage over the online market.

The consumption upgrade trend has continued in the past few years, and the proportion of retail sales of high-end products has increased from 21% in 2012 to 23% today. All-channel retailers such as Suning, high-end products accounted for 27%, which is the driving force. E-commerce promotions have also become important, and consumers are becoming accustomed to it.

Smart home innovations will change the retail format

For offline channels, there will be new value revaluation opportunities due to the innate advantage of the consumer experience. Visionary vendors and retailers have focused on rebuilding their smart home retail prospects in the future. Retailers with online and offline advantages will have more imagination space in new retail.

Brick and mortar locations allow consumers to see a product in action before purchasing and gives them the ability to take a product home the same day. Offline direct-to-consumer tactics can help sell smart home products in China.

Beyond physical brand-owned retail stores, mall kiosks and other seasonal “pop up” stores can be effective at marketing complex smart home solutions.

COVID-19 impact on the consumer electronics consumption in China

The lockdown had a great impact on the companies in the consumer electronic market in China. China’s smartphone shipments will be 5% lower than expected. In total, China’s smartphone market shipments declined by more than 30% in the first quarter of 2020.

COVID-19 has caused severe challenges for leading Chinese manufacturers such as Huawei, OPPO and Xiaomi. Forecast predicts that in 2020, they will face the risk of declining demand in the Chinese domestic market. International brands such as Apple will also suffer from insufficient production capacity and the risk of declining demand in the Chinese market. As China slowed down and then stopped, supply chains were disrupted. It affected Apple as one key consumer electronics vendor. More than 90% of Apple’s products are made in China and the Chinese marketplace accounts for 18% of its revenues.

Slow recovery

Since April 2020, consumer electronics companies have started seeing a  pickup in sales due to healthy domestic demand.

China shipped nearly 21 million smartphones in March, up 240 percent on a monthly basis. In particular, over 24 new 5G smartphone models hit the market in April. The domestic shipments of 5G smartphones exceeded 6.21 million units, representing a 160 percent growth from February.

Wu Qiang, vice-president of smartphone maker Oppo, said the company’s smartphone sales have been recovering rapidly.

Huawei Technologies Co said its sales revenue rose by 1.4 percent on a yearly basis to 182.2 billion yuan ($25.7 billion) during the first three months of 2020, despite challenges from the COVID-19 pandemic. Huawei said revenue from consumer business group (smartphones, personal computers and tablets) will see rapid growth in China this year.

Lenovo said as more people stay at home for work and study, the demand for PCs and tablets will increase. The growing demand for mobile games, remote consultations and video conferencing tools also provides tons of opportunities.

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 Source: askci research, of the 3D printing market in China

The history of 3D printing in China

As a big manufacturing country, China had embraced 3D printing with central-government-level supporting policies since 2012. In 2015, Ministry of Industry and Information Technology labeled 3D printing as one of the strategic national goals. Come 2017, the National Development and Reform Commission emphasized the industrial 3D printing, namely for large engines and space technologies. In 2018, China’s National Intellectual Property Administration listed companies in 3D printing materials as key support targets.

“The next trillion dollar industry” was the name given to 3D printing by Pascal Gobry from Business Insider. Around 2015, 3D printing in China was suggesting the creation of new opportunities in almost every industry, where with the touch of a button, actual objects can be printed out of an array of materials. Printing has now gone from spreading ink on a sheet of paper, to transforming digital files into 3D objects.

This is achieved by arranging a variety of materials including polymers, glass, metal, wax, edible food, ceramics and even human tissues into complex shapes, which would be nearly impossible to replicate by hand. Some of those objects will create the opportunity to save and extend lives or bring ease to our daily routines. 3D printing objects are achieved with successive layers of material laid down one on top of another until the desired object is accomplished. In other words, the 3D printed object is a superposition of thinly sliced horizontal cross-sections of a chosen material. The possibilities of 3D printing are breathtaking.

However, it’s not quite as easy as pressing a button. Virtual designs must be created in the form of CAD file (Computed Aided Design) supported by 3D modelling programs. Those programs offer 3D designers the opportunity to conceive objects from nothing and the imagination is free to move beyond the human handiwork. Scanners also produce CAD files, enabling existing real objects to be identically replicated in digital formats, which is often much quicker than recreating the original object.

A software must slice the digital object into horizontal layers so that the printer superposes printed slices one after the other resulting in a three dimensional object. The printing process may be performed by various technologies being improved constantly. Technologies most commonly exploited are selective laser sintering (SLS), fused deposition modelling (FDM) and stereolithography (SLA), each suggesting different advantages and responding to specific demands.

Applications & breakthroughs of 3D printing in China

The possibility of printing 3D objects will revolutionize most industries since its application is beneficial in many sectors. The application of 3D printing includes design visualization, prototyping, architecture, education, geospatial, healthcare, entertainment, retail and many more.

Food industry

Companies such as Foodini and the German Print2Taste start-up are exploiting this opportunity of creating innovating designs, shapes and decorations with printed food. The printed objects are edible by printing edible food such as icings or soft food.

Construction industry

China was noticed since 2015 by creating the “Tallest 3D-printed building” in Suzhou. The Chinese company seems to be responding to the need to build fast and efficiently. However, they’ll be facing stiff consumer hesitance as previous attempts to build quickly and efficiently had resulted in several high-profile building collapses.

Nevertheless, Ma Yihe, CEO of WinSun, is optimistic about 3D printing in China. He believes his company will build “dream factories” since the process would reduce construction materials of 30% to 60% and labor needed would be cut significantly. What’s more, It would use sand and other waste, enabling more recycling and the use of local materials. The buildings that result from 3D printing would be a lot cheaper and revolutionize the entire construction industry. Several factories were already underway in China and one is located in Dubai. However, WinSun is very controversial for patent reclamations and security concerning the stability between printed layers in the event of an earthquake.

Source: 3D printing media network, river revetment wall build in Suzhou

After years of refinement, in 2019, WinSun successfully built the world’s largest 3D-printed structure in Suzhou: a 500-meter long river revetment wall. There are many positive points about 3D-printed bricks and structures, compared to traditional material and constructions. Not only can an artificial riverbank follow the natural shapes better, it also better protects local flora and fauna. In addition, implementing and fabricating custom-designed 3D-printed bricks is way less expensive than solid walls and dams. 3D printing in China has its future, especially in construction sites where quality, precision, and speed are required.

Medical science and research

Another field that is inspiring is 3D bio printing, in the medical science world. By printing cells along a predetermined pattern, human tissues, organs, and blood vessels could be replicated. Organ printing would change the medical industry and improve life expectancy drastically. Many biotechnology firms are currently aiming at tissue-engineering applications and about to revolutionize the medical field.

In China particularly, there’s a serious shortage of organ donors. Even though the number of organ donations are on the rise since 2016, the donation per capita is only around half the world average. Anything that helps more Chinese access higher level health care would be welcomed by the medical industry. According to Yong He, professor at Zhejiang University, 3D bioprinting is valuable for pharmaceutical development and organ substitution.

However, big obstacles accompany progress, especially in the bio-medical area. Compared to natural organs, 3D-printed organs have less precision, require biological compatibility and structural strength. Those obstacles underline the multitude of bioprinting materials required to replicate a functional organ. What’s more, there’s already a strained relationship between doctors and patients. It will be difficult for surgeons to convince the population that 3D-printed alternatives are safe. Clinical trials and public education campaigns are necessary, if China wants to save more lives suffering from lack of suitable organ.

Manufacturing

Manufacturing has been improved thanks to complex 3D parts in a single build. Designing is more efficient and the experimentation phase can be completed much faster. For a long time, manufacturers have been using 3D printing to make prototypes and undertake research. If they target directly the end users, the customized products will only cost a fraction of what the traditional manufacturing does. In Hainan province of south China, a Chinese company called Sanya Suhai printed the “first 3D-printed sedan car”. The vehicle measured 3.6 meters long and 1.63 meters wide. It is powered by rechargeable batteries and reached the maximum speed of 25mph. It’s not ideal and only a work in process, but certainly a novel way to use the omnipresent lead acid batteries in China.

Education

For all those industries, art and reconstructions for education are positively impacted by 3D printing. Since 2007, 3D Print Art Shows developed to let artists express themselves in various new ways. Priceless and unique artifacts in archaeology may be reproduced for hands-on studying and research.

iDreamer 3D is another example of how China emphasizes the education of 3D technologies to teenagers. With the help of online courses, teenagers can immerse themselves with numerous 3D printing cases ranging from vehicle building to city planning. Likewise, Zhejiang Science and Technology Museum introduced China’s first 3D experience park as early as 2013.

Expand space exploration boundaries

NASA has been developing this new technology, competing to design and build a 3-D printed habitat for deep space exploration. According to Sam Ortega, Centennial Challenges program manager “The future possibilities for 3D printing are inspiring, and the technology is extremely important to deep space exploration.”

China has programs of its own too. the Chinese space program is building 3D printed space suits. 3D printing would allow astronauts to print items with a 3D printer directly in space with no freight difficulties. Those are being developed by the Shanghai Academy of Spaceflight Technology. With serious research into 3D printing in China, astronauts will be safer in their suits while spacewalking. In addition, extra suits can be constructed if they’re needed, saving time, money and resources.

New opportunities & services embraced by the Chinese government

3D printing was already getting investments from the Chinese government in the early 1990s, investments of $3.3 million were injected into in innovating institutes to promote manufacturing technologies.

As 3D printing requires mastering technologies and the capacity to create new objects relies on 3D designers, China founded the first 3D Printing College in the world, Baiyun-Winbo 3D Printing Technology College in Guangzhou in 2015. The popularisation of 3D printing means a higher demand for people producing the digital files and China is planning to respond to that need. There are also 3D printing bureaus such as Shapeways and Ponoko offering inexpensive digital designs with a relatively limited range of objects. In addition, according to Simon Shen, CEO of Kinpo Group, the Chinese government installed 3D printers in 400,000 elementary schools from 2015 to 2017. This benefits the Chinese society in the long run as teenagers are educated and skilled in 3D technology from a young age.

Source: Jiemodui, Primary school students curious about 3D printing in China.

Currently, the top-rated industrial printer is Union Tech, taking 16.4% of the 3D printer market share. Stratasys follows with 14.8%. According to Jenny Lawton, CEO of MakerBot, 3D printing will become mainstream, and certainly, 3D printing is getting implemented in China at a very fast pace. In 2014, China International 3D Printing Exhibition was held twice and recognised as one of the most valuable industry shows in the world.

Fast growth & Transformations of 3D Printing in China

The fast growth of 3D printing is partly attributed to the support of open source platforms. RepRap is a 3D printer sold for about 1,000 dollars enabling people to customize and develop open source ideas. Open-source communities such as Thingiverse and Cubify are gaining more and more interest as they provide hyper-customization and support sustainable development.

Enthusiasts for 3D printing are growing fast since 2011, thanks to its rapid development and acceptable price ($250 to $2500).  People from all backgrounds are acquiring 3D printers and large-scale utilisations will increase customer options. Fabrication may become totally personalized with simple adaptation of the digital file. Thanks to 3D printing, print-on-demand and mass customization are possible.  In May 2015, the highest rated desktop printer for personal printing was the Form 1+. It reached more than 400 reviews of fully satisfied customers and is considered by 3D Hubs as the most popular resin printer.

The democratization of the 3D printing technology and knowledge is expected to change the nature of commerce according to specialists. Indeed, end users will be able to manufacture their products on their own, meaning that products wouldn’t be bought from other people or corporations. Trade of the digital 3D object will however remain, so would the raw material. A long marge of progression still remains before reporting such transformations, but in our lifetime, new concepts are ready to revolutionize many industries and China making sure that it stays abreast of changes in advance, compared to foreign countries. As the president of VisenTOP, Xiao Guodong stated in 2015, “People in China are both passionate and perplexed by 3D printing technology.”

This article Future applications of 3D Printing in China is the first one to appear on Daxue Consulting - Market Research China.

China is a traditional fishing country that accounts for two-thirds of worldwide aquaculture. With the growing middle class and the rise of disposable income, the Chinese purchase a progressively more diverse basket of seafood products and the premium seafood market in China is expanding.

Demand for luxury seafood products has increased significantly in China over the past few years. For example, in 2015, China accounted for approximately 20% of the luxury seafood consumption globally. With polluted and overfished waters at home, China is importing a lot of premium seafood. Wealthier Chinese consumers who can afford to avoid scandal-plagued chicken and pork have in some cases switched to seafood. 

Chinese consumers are looking more and more to foreign countries for premium seafood products. For instance, according to the Norwegian Seafood Council, the value of Norwegian salmon exports to China reached $54.8 million in the first half of 2018. This was a rise of 544% year-on-year.

[Data Source: Global Times, ‘Norwegian salmon exports to China’]

Luxury seafood products on the Chinese tables are becoming more easily accessible

The list of premium seafood on the table is becoming longer with the increase of luxury seafood imports to China. According to Eva Kam, Project Manager at Daxue, all the high-end seafood was from Hong Kong before but China has now its own providers in foreign countries. Luxury seafood appreciated by Chinese consumers include lobster, crab, salmon, oysters, sea cucumbers and many others. The luxury seafood consumers are not only rich people but also the emerging middle class in China. The rising incomes and the growing middle class contribute to an attractive outlook to the premium seafood market in China.

Imported premium seafood is more welcomed in China

Most seafood advertisements use the words fresh and live (鲜活), France（法国), imported with original packaging （原装进口, Ready to eat （即食). They highlight foreign origin of seafood, as Chinese people tend to trust it more.

Source: 5tu.cn, Advertisement of seafood, both using word “fresh”

The pollution of China’s own waters create demand for imported seafood, especially for the higher-value species like crabs, lobster and salmon. Chinese consumers have also become more food safety-conscious. This underlines the importance of clear and precise information about seafood products.  For example, Canada and Denmark are famous for its caridean shrimp (pandalus borealis), Russia and Chile for king crabs, France for oysters and Norway and Australia for salmon.

Data Source: Under Current News, China’s fresh salmon imports by country

The perception of Norwegian salmon is positive in China

Norway is one of the primary countries of origin for seafood by Chinese consumers. Over the past few years, awareness about Norway as a seafood producer has grown from 7% in 2012 to 22% in 2018. In the same period, awareness of Japan as a seafood nation fell from 52% to 28%. Salmon is probably the most famous Norwegian product in China.  About 44% of Chinese consumers prefer Norway as a country of origin for salmon, an increase of 25% compared with a few years ago.

Australian seafood is gaining momentum

Australian seafood enjoys an extremely strong reputation in China. In particular, Australian rock lobster and abalone are held with a high regard.  Such perceptions express local media and WeChat discussions that promote the quality of Australian seafood. In Ningbo and Qingdao in 2017, for example, local media reported with excitement about the first direct sales of Australian rock lobster. Specific promotional events help to highlight Australian seafood, for example: an Australian lobster tasting event in Chongqing; Lobster fest in Shanghai; and the Australian Lobster Festival in Yongcheng, Henan.

Exports to China from Australia reached $658 million in 2017–18, making China the most valuable export destination that year for Australian fisheries products. The increase in export value was driven by an increase in the value of Rock Lobsters, Salmonids and Abalone species.

Data Source: Australian Bureau of Statistics, Australian seafood exports to China

Australia’s coronavirus-battered exports of premium seafood are recovering as China gradually moved out of lockdown. China’s demand for premium seafood is gradually on the rise again, though it remains sporadic and prices are much lower compared to pre COVID-19 levels.
Barry Dun, CEO of Australian Reef Fish Trading Co (ARF), told the company’s exports to China had recovered to 15 to 25 percent of the pre-outbreak volume.

Foreign oyster brands are popular in China

The perceptions of French oyster brands are very positive in China. For example, oysters of Gillardeau (吉拉多) brand have the reputation of “Rolls-Royce in oysters”, having strong salty tang of the sea. Another French brand Belon promotes their oysters as “rare”, “expensive” and “king of oysters”. Other popular French oyster brands include Fine de Claire (芬迪克莱尔), Ostra Regal (皇御) and Fleurdeseaux (水中花). All of them highlight the exclusiveness of their products.

Most restaurants selling premium seafood are western-oriented

Analyzing restaurants that sell oysters in Shanghai and Beijing, we can see that mostly they sell imported oysters, and most often as a side dish. Only some places exclusively sell oysters as a key element of the restaurant. The price varies from 30 to 150 yuan per dish. The key feature of the restaurants selling oysters is that most of them are western-oriented. For example, popular Beijing restaurant Maison FLO awarded as Michelin Plate, sells oysters as a side dish for 118 yuan.  Most restaurants sell cooked oysters rather than raw.

Source: Dianping, Western-oriented restaurants with oysters in Shanghai

Some examples of restaurants in China serving oysters:

• The Plump oyster       
  • Gillardeau: 89 RMB
  • French L’emeraude Oyster: 69RMB
  • Providing cost-effective combo of oysters
• OTTIMO
  • Gillardeau: 78RMB
  • Special oyster cooked by three ways: 78RMB
  • Famous for oysters and wine
• Oysteria
  • Fresh oyster:10RMB for each
  • Cost-effective combo of oysters

Premium seafood restaurants use VIP membership to attract customers

Seafood restaurants in China actively promote on social media with discounts and offers. For example, some restaurants offer VIP membership for those who order for more than 500 yuan. Also, customers who order for more than 300 yuan get free beer and soft drinks.

Some restaurant in Dalian came up with the advertising campaign on Valentines’ Day in 2018 offering discounts to people coming with their significant other. They could have a discount up to 65%. Through this well-planned marketing campaign, the restaurant created double the sales volume and attracted 5,000 customers.

Social media contribute to the growing premium seafood consumption

Seafood promotion in China increasingly relies on social media platforms such as Dianping (大众点评) or WeChat (微信). Thanks to the boom of e-commerce in China, consumers can buy their favorite premium seafood on electronic commerce platforms such as Tmall and JD, which are both reputable and reliable operating systems. For example, Canadian lobsters are available on Tmall.com as well as fresh Australian lobsters and oysters too. Chinese consumers can also buy raw oysters on WeChat.

[Australian fresh lobster on Chinese E-Commerce Platform Tmall]

Taobao and Tmall as e-commerce channels for the premium seafood products in China

During the severe epidemic period, the sales volume of seafood online declined by 55.8%. Once the epidemic was alleviated in March, the sales volume bounce back with a great growth of 136%. However, the sales volume of seafood dramatically dropped by 62% since the Xifadi incident. Two breakouts of coronavirus in seafood markets exerted negative impact on seafood industry, since people associate seafood as a channel of transmission, even though there was no evidence to prove it.

Data Source: Taosj.com, The sales of seafood in Taobao and Tmall Apr-June 2020

The price range of seafood is from 10-150RMB, most of price centers at 50-150 RMB, meaning online sellers mainly target middle and working-class consumers. Those online consumers prefer domestic brands to foreign brands.

Crawfish is the most popular seafood on Taobao & Tmall. In terms of oysters, mainland ones are the best sellers in Taobao. The sales volume of mainland oysters are 95 times that of French oysters. The sales of oysters on Taobao and Tmall in April 2020 was 27 million (27,588,327) RMB, the volume of sales was 465,441 items. In May there was a slight decline, the sales of oysters in Taobao and Tmall in May were 16 million (16,253,835) RMB.

Hema supports seafood farmers

Since the beginning of the year, the entire seafood and aquatic industry has been affected, and the recovery is still slow. Recently, a new round of outbreaks has caused consumers to worry about imported seafood, and it has affected the entire aquatic product category, and sales have declined significantly.

Hema app launched activities related to agricultural assistance. Oysters and crabs farmers have suffered heavy losses. During the New Year, they suffered a 70%-80% decline in sales from previous years. In June, only 40% of the previous year’s sales recovered. “Save Domestic Seafood” on the Hema app has about a dozen types of seafood sold at a reduced price. For example, the price for gentian grouper has been reduced from the original 59.9/piece to the current 39.9/piece. The price for abalone dropped from 11.9 yuan/piece to 6.9 yuan/piece. 

Food bloggers and KOLs promote premium seafood consumption in China

Many Chinese food bloggers pay attention to premium seafood in their blogs. For example, popular Chinese blogger Mi Zijun (密子君), who has 6.15 million followers on Weibo. She went to the famous Xu Ji Seafood restaurant in Changsha and ordered 60 pounds of seafood including shrimps, hairy crabs, oysters and ate it in one hour. She shared her experience with followers and advised to visit this restaurant. 

Source: Eat More, Chinese blogger Mi Zijun tries seafood

There are several food KOLs in China each with their own approach. What they all have in common is they like to take photos of food or restaurants. For example, 羽萱的妈妈 had some posts about some seafood, such as shrimps and crabs.

Source: Weibo, Dragon Social, Example of post of blogger 羽萱的妈妈 on weibo

Douyin (TikTok)

Many people use Douyin to share their seafood experience. So-called “mukbangs”, which is a Korean term to describe those who eat a large amount of food during live-streams, are especially popular.

Answering the question on Zhihu “Why are videos about seafood are so popular on TikTok?”, one user claimed that there are a lot of ways to eat seafood (raw, cooked), so bloggers can gain the attention of audience. Besides, many people eager to try it, but not many have a chance, so they watch videos about it instead.

For example, girl from a small town in Jiangsu province named Zhang Xiuling (张秀玲) became a celebrity with 440,000 followers on Douyin. Jiansu is not only a place for seafood, but also a large seafood distribution center. Over the years, wholesalers have transported the seafood to all parts of the country through trucks. In recent years, young people in the town have started selling seafood online using Douyin for promotion.

Source: Sohu, Douyin, Blogger Zhang Xiuling promotes seafood on TikTok

Weibo and WeChat offer new ways of promotion for the premium seafood market in China

Very premium seafood such as sea cucumbers sell very well on Taobao.  However, Taobao’s algorithms make it so high-selling shops can get more orders, additionally, the promotion cost of Taobao is very high. Therefore, many premium seafood producers are developing some new sales ideas, such as promotion through WeChat. In addition, WeChat can also allow old customers to attract their circle of friends.

Source: Zhuanlan.zhihu, Sea cucumber advertisement on Weibo

Besides, at present, there are many manufacturers of sea cucumbers, crabs and other seafoods promoting through Weibo. The advertisement adopts the sales method through WeChat and offers delivery. The purpose of the advertisement is to attract more users in WeChat. During the process of the advertisement, it has received a total of 718 reposts, 1,327 comments and more than 5,000 likes. 

Premium seafood is a seasonal product in China

Chinese primarily consume seafood at banquets, events and other social functions. The close associations between luxury seafood and banqueting is partly because of the increased importance of Cantonese cuisine. The strong influence of Cantonese cuisine affects the types of seafood served and the ways they are prepared. Some of the important dishes at these banquets typically include: lobster, geoduck, crabs, abalone, shark fin, sea cucumbers, and reef fish.

Imported premium seafood is increasingly taking a place at the Chinese New Year dinner table.  Not only are Chinese families spending more on seafood at Chinese New Year, but the variety of imported and premium categories such as lobster and king crab is also increasing. In the past two years, large-scale imports of shrimp, as well as high-end lobster, king crab and salmon have witnessed “explosive growth” during the Chinese New Year.  For example, prices for king crab rise by as much as 30 percent before the Chinese New Year.

Baidu index: search frequency for “lobster” peaks during Chinese New Year

Lobster market in China

China’s lobster industry is booming

A new generation of Chinese consumers attaches great importance to health, and they have higher requirements for lobsters. Therefore, the lobster market in China tries to ensure the quality of lobster and sends them to the consumers faster. New refrigeration logistics help to transport lobster to reduce damage and maintain high quality lobster during long-distance transportation. In addition, established tracking systems have created an open and transparent market environment. It helps customers follow the production process from farm to table.

From a national perspective, the main lobster producing areas are the Yangtze River Delta region as well as Hubei, Anhui, Hunan, and Jiangxi provinces.

[Data Source: Baijiahao, ‘Share of lobster production in China’]

According to statistics, yearly lobster consumption in China in 2018 reached 1.3 million tons, an increase of 22.56% from the previous year. 80% of retailers sell lobster through dine-in channels (including supper stalls). 20% of retailers sell lobster through Internet channels.

[Data Source: Aquatic Products Association, Guanyan World Data Center, ‘Lobster market in China’]

Big cities have larger lobster consumption

At present, the consumption of lobster in China has appeared all over the country. In recent years, the consumption of lobster has developed from large cities to the south and northwest China. This progression is due to the development of e-commerce in conjuncton with lobster cooked food products. Currently the lobster market in China in the northwest, south, and northeast regions continues to grow. However, cities such as Beijing, Hangzhou, Shanghai and Changsha still have the highest levels of consumption.

Baidu index: searching frequency for “lobster” in Chiense cities

China is the fastest growing market for Boston lobster

The premium seafood market in China is one of the most important for the American lobster industry. In 2016, total US lobster exports to China had reached around 8 million kilograms, valued at $136 million, accounting for 14% of total US lobster exports. In 2018 import of lobster from the US to China reached 1,232 metric tons. However, in 2019 this value was down 91% year-on-year over the period, due to Chinese tariffs.

[Data Source: UCN, ITC, Chinese customs, ‘China’s imports of American lobster’]

The Chinese New Year is the busiest season for the American lobster industry, as demand is growing. China’s monthly lobster imports peak before Chinese New Year. In January 2019, China imported 2.3 metric tons of live or fresh lobster. In February 2018, during the end of the festival, the figure was 2.4 metric tons. This is a rise from January 2017, with 1.9 metric tons.

Increasing consumption of premium seafood in China

Crab market in China

According to statistics, the output of crab reached about 800,000 tons in 2018 in the premium seafood market in China. The industrial scale was 64.8 billion yuan in 2016. It was about 77.8 billion yuan in 2017, with an annual growth rate of about 20%. In 2019 China’s crab market reached 100 billion yuan.

[Data Source: Baijiahao, ‘Market scale of crab industry in China’]

The top ten crab production areas in China are Jiangsu, Anhui, Hubei, Shanghai, Jiangxi, Henan and Taiwan. The total output of Jiangsu accounts for about 44% of the country. Hubei accounts for 22%, Anhui accounts for 13%, and other regions account for 21%. 

Due to the entry of e-commerce giants, the industry scale of crabs is increasing year by year. For example, JD.com adopts the “airline + refrigerated truck” transportation matrix. It adds air routes, airport express lanes and truck transportation routes to ensure that the delivery time of crabs is not more than 48 hours. SF Express sends them directly from multiple lake areas. It opened more than 22,000 shipping directions, ensuring the supply of crabs and safe delivery.

Data Source: Baidu Index, Search frequency for “crabs” 2017-2020, search frequency for crabs peaks during hairy crab season in the fall

Data Source: Baidu Index, Search frequency for “crabs” in 2020, Chinese new year is also a primary occasion for crab consumption.

According to Baidu index, the demand for crabs in 2020 was quite low, comparing to 2017-2019. The reason could be the coronavirus outbreak in China. In 2020 the demand was higher during Chinese New Year, as people tend to eat premium seafood during that time.

Sea cucumber in the premium seafood market in China

Sea cucumber is a premium product with large popularity in China. Asia is the largest consumer market of sea cucumber in the world, with a market share of more than 70%, followed by North America.

The Chinese sea cucumber industry shows an overall stable trend. Farm-gate prices have continued on an upward trend in the past two years. Production volumes and stocked amounts have also increased significantly. The growth in consumption of sea cucumbers increased from 3.8 million tons in 2014 to 4.1 million tons in 2018. By 2025 the consumption of sea cucumbers in China will be around 5.9 million tons.

Data Source: Baidu Index, Search frequency for “sea cucumber” 2017-2020

Data Source: Baidu Index, Search frequency for “sea cucumber” in 2020

Due to coronavirus outbreak in China, the demand for sea cucumber in 2020 was lower comparing to 2017-2019. During 2020 the demand was quite stable, except increasing during Chinese New Year period.

Caviar industry in China

With the development of China’s economy and improvement of living standards, the caviar industry has also developed rapidly. By the end of 2014, there were 63 sturgeon farming units in China, including 40 raw sturgeon farming units. From 2006 to 2012, China’s production of artificially cultured caviar increased from 0.7 tons to 28.8 tons, with a compound annual growth rate of more than 85%.

In 2018, world caviar output reached 271 tons, while China’s caviar output was around 100 tons. China plans to rely on artificially cultured sturgeon to become the main exporter of caviar in the world.

Data Source: Baidu Index, Search frequency for “caviar” 2017-2020

Data Source: Baidu Index, Search frequency for “caviar” in 2020

The demand for caviar was stable during 2017-2019, however due to COVID-19 outbreak, in 2020 it saw a decline. 

Oysters industry in China

Chinese consumers are more and more demanding about the quality of oysters they buy. Therefore, they are willing to pay a high price for high-quality oysters. Chinese consumers tend to choose imported premium seafood products. Imported oysters come from Japan, the US and Australia.

Eating raw oysters is a relatively new concept in China. Data from the China Fishery Statistical Yearbook 2019 shows that China’s oyster aquaculture production reached 5.1 million tons in 2018, a year-on-year increase of 5.3%. In 2017 it was 4.8 million tons.

[Data Source: China Fisheries Yearbook 2019, ‘China’s oyster production’]

The main producing areas of Chinese oysters are in Fujian and Guangdong provinces. Fujian has a long history of oyster farming and has so far become China’s largest oyster farming area. In 2018, Fujian oyster aquaculture production reached 1.8 million tons, ranking first in the country. Guangdong oyster production was 1.1 million tons, taking second place.

Despite the outbreak of coronavirus in 2020, demand is gradually returning to the 2019 level. During the peak of COVID-19 outbreak in China (February-March 2020), the demand for oysters decreased significantly. But since mid-March, it showed stable dynamic. Analyzing Baidu index from April-June 2020, we can see that the demand for oysters was stable during April-May. However, there was a slight decrease in June due to discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market.

Data Source: Baidu Index, Search frequency for “oysters” 2017-2020

Data Source: Baidu Index, Search frequency for “oysters” in 2020

Data Source: Baidu Index, Search frequency for “oysters” April-June 2020

COVID-19 impact on the premium seafood market in China

Fall in prices for lobsters

Lobster prices have plummeted to the lowest levels in four years after the spread of coronavirus halted charter flights to Asia. It happened at a time when sales usually boom for Chinese New Year celebrations. That is why the lobster industry was particularly affected. Prices for a whole lobster weighing 1.5 pounds have tumbled 17% since January 20, falling to $8.10. This is the lowest price since 2016. Demand for live Canadian lobster has dwindled to 5% of normal volumes in mainland China.

After the coronavirus outbreak in China restaurants started canceling reservations and people stayed home. When it comes to premium seafood exports, the most affected countries were the US, Canada and Australia, as they are the main exporters of lobsters to China. For example, the US company Lobster Co saw an inventory loss of 40% of its value as shore prices dipped from $7.45 to $4.38. They had to sell 50,000 pounds at a loss. In Australia fishers and wholesalers began trying to offload the premium product in local retail markets.

Salmon industry saw the decrease in sales from COVID-19

The discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market is set to disrupt demand for product in the Chinese market. Carrefour in China and Wumart were among the supermarkets to stop selling the product.

It may be possible for salmon to be contaminated by virus-contaminated water during processing, transportation or packaging. Despite this, the outbreak in the seafood market will inevitably impact demand, with consumers fearful of any possibility of transmission.

Chile, Norway and the Faroes are the main suppliers, with rapid growth in the market in recent years playing a key role in producers’ strategies. Norway held 45 percent market share of fresh salmon to China from January to April 2020. The Norwegian Seafood Council claimed last week of June exports fell to 240 tones – a decline of 34 percent.

“As the probe into the cause of the latest outbreak is underway, salmon business around the world will be affected,” Cui He, president of the China Aquatic Products Processing and Marketing Alliance (CAPPMA), told the Global Times Sunday.

The premium seafood market in China after COVID-19

According to the statistics, import of seafood in China in the first quarter of 2020 fell by 27% from the fourth quarter of 2019.

    
[Data source: Statista, ‘China’s import of seafood’]

By the first quarter of 2020, consumption was almost stagnant. Besides, the import and transportation of Chinese seafood was blocked. Although China’s premium seafood imports slowed in 2020, consumption has a potential to grow.  The coronavirus epidemic in China will have a serious economic impact on the Chinese and global premium seafood market and supply chain. It will also have an impact on both supply and demand of seafood in Asian countries.  However, the Chinese market has recovered earlier than other countries around the world. There is hope that once the supply chain of seafood regains balance, the industry will function normally.

After the epidemic is over, experts expect that the public will experience retaliatory consumption. Gradually the demand for seafood is returning to normal. For example, the frequency of searching “lobster” on Baidu increased after the epidemic situation got better.

Baidu index: search frequency for “lobster” increased after COVID-19 outbreak

Key takeaways for China’s luxury seafood market

• The premium seafood market in China has great potential due to rising living standards in the country.
• Although premium seafood is particularly popular during the Chinese New Year, it may soon become a regular meal in middle-class Chinese families.
• The coronavirus outbreak had a huge impact on the premium seafood market in China. It interrupted the supply chain and reduced consumption. However, the trend shows that China is returning to normal life and demand for premium seafood will soon be restored.

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This article The premium seafood market in China is the first one to appear on Daxue Consulting - Market Research China.