Client Case Study: Alexia Michel, Picanova Group

Please tell us a bit about yourself, your professional background and the company you represent?

My name is Alexia Michel and I am the France Country Manager for Picanova Group. Prior to this, I lived in China for 10 years working in various roles in Digital Marketing and E-Commerce, 3 of which were spent heading up Picanova’s China operations.

Picanova is the world’s leading manufacturer of personalized decorative and lifestyle products. We print on a variety of products including wall décor, cushions, mugs, and t-shirts, and do everything from printing, customizing products, selling through around 40 different e-commerce platforms and ship products worldwide.

Tell us about your company’s operations in China

Picanova entered the Chinese market in 2017 and offered products through various e-commerce platforms such as Taobao/Tmall and JD (Jingdong.com). The issue that we faced in China is that competition is extremely high and the products that we sell are widely available via the competition at a very low price. We decided to shift our focus in the market on more premium, Limited Edition products whereby we would take a product and print artwork by famous artists on them as part of a limited edition range. 

Unlike websites in the West, e-commerce platforms in China such as Taobao/Tmall and JD don’t have a customizable feature for products like ours so from a quality control and customer journey experience, the customer wasn’t able to see a rendering of their product before purchasing. We had a key partnership with JD but they didn’t really offer this feature, so it was difficult for us to deal with this kind of setup when selling through these popular Chinese e-commerce channels.

We decided to pull out of the Chinese consumer market, we are still present for procurement and supply chain services since all of our core products are made in China.

When did your company find out about INS Global and decide to use their services? What services did your company use?

The story of how Picanova came to use INS Global services is through my professional network of knowing Wei for nearly 10 years. I was running my own marketing agency at the time and established a partnership with Wei providing services to help with INS Global’s marketing activities. Fast forward a couple of years and I realized that I needed help with visa, and HR/legal matters in China I knew to contact him straight away. The  team at INS Global have extensive experience in the market so I knew I was in good hands.

I ended up working for Picanova and decided to use INS Global as our partner for the development of our WFOE (Wholly Foreign Owned Enterprise) and HR matters in China. In my role, I was  part of the team who was responsible for launching Picanova’s operations in China so we needed to start from scratch by opening an office, recruiting local hires, creating a WFOE, setting up the factory, and vendor outreach, etc. so I reached out to Wei and INS Global with our needs. As Picanova is a large company, we compared INS Global’s services to other providers in the marketplace looking at price and quality of service. In the end, we went with INS Global to meet the specific services we needed at the time.

We initially entered the Chinese market by using a PEO solution and then a Consulting WFOE and we still have a member of staff present in China through INS Global’s PEO service.

How was your experience working with INS Global?

I was the main point of contact in China for Picanova HQ and had someone on my team who would maintain communication between Picanova and INS Global. Each time we had urgent requests or things that needed to be dealt with quickly, I was able to contact the INS Global team and our Account Manager would get back to us straight away. The service was consistently smooth and fast.

On the communication side of things, a great benefit of INS Global is that they have an international and local team. Thus allowing for the Picanova teams in Germany and China  the ability to understand the complexities of the market when it came to employment or WFOE related issues. The INS Global team was really able to explain everything perfectly for our contacts both in China and Germany, which was a real benefit for us.

Moreover, INS Global delivered a professional standard of service. Every month, we would receive a summary report and the INS team would speak to our CFO about our employment and business arrangements in China. Overall, I would say that it was a very pleasant experience working with INS Global since they handled all of the back office administration and kept us up to date on everything.

What advice would you give to companies planning to expand to into China/Asia? And would you recommend INS Global?

First of all, it is essential to work with a trusted partner like INS Global when entering a unique market like China/Asia so that you are able to fully develop your business in the market. They’ve been in China/Asia for over 10 years so have a great deal of experience and their highly professional and international team that can help guide you through any sort of problem.

When it comes to finding the right partner for your expansion, the most important aspect shouldn’t be price. It’s the fact that you can find and trust a company like INS Global because if happens problem arises regarding your employment arrangements or your company’s legal position, it can be really difficult to move forward without the right guidance or help on board. Strategically speaking, it’s really important to have this kind of partnership with a professional services/market-entry consulting firm to really understand what’s going on.


INS Global’s 2020 Guide to Wine in China

As with all industries in China, the wine industry moves at a dynamic pace. It is not just the volume of consumption that changes from year to year, it’s the market trends too. The fast moving market environment presents a wealth of opportunity for some, but for others that may not be the case. Although there is nothing absolute about the wine industry in China and the current global situation remains quite uncertain, the one thing that has been seen over recent years is the growing interest in taste and variation in foreign wines. Let us explore past and current trends in the market, the major players and how foreign producers can get their wine on a shelf in China.

Historical Wine Trends in China

Only since the early 80’s have foreign companies been permitted to invest in the wine industry in China. Historically, China has been a rice wine country, as opposed to grape wine. From as far back as the Three Kingdoms Era to up to as little as 30 years ago, grape wine was considered a luxury product and as such, was reserved for only the select few that could afford it. 

China began to open its economy in 1978, opening sectors gradually in order to ease in economic reform. The next 20 years were characterized by various reforms, allowing for greater foreign investment. With an increasing demand for goods in the 90’s, the importation of certain goods became necessary. Wine was one of the goods for which there was a demand, a demand that was continually increasing. It increased at such a rapid rate, resulting in an oversupply of mostly low quality domestically produced or imported wine.

The Asian crisis in the late 90’s had played a large role on all economies in Asia, including the Chinese market in the following years. However, this period was said to bring about a sense of reason amongst consumers to become more aware of the quality of the imported products, including wine.

Fast forward a few years, with the entry of China into the World Trade Organization in 2001 a larger amount of producers were able to import their wines to China, as a result of bilateral agreements and reduced tariffs. The rising middle class in the 2000’s meant that consumers were able to afford more luxury goods. Thus foreign wines began to enter the market a rapid pace.

With the increase of western influence, Chinese consumers had taken greater interest in wine and started to become more knowledgeable on the craft. More expensive and well known wines were highly sought after.

While consumption in traditional wine consuming countries remains quite static, the consumption of wine in China is continuing to increase. Today China holds the highest wine consumption growth rate in the world.

In 2013, China had been ranked 5th in total consumption of wine, only behind the US, France, Italy and Germany (Statista). In 2014 China had surpassed France in total red wine consumption. While the USA has established itself as the leading red wine consumer in the world, it is predicted that China will take over is the world’s leading consumer before 2030 (CoFace Economics Publication).

Recent Consumer Trends

As China shifts from a manufacturing based economy to a consumer based economy, a new generation of Chinese consumers is emerging. These consumers have more disposable income and are becoming increasingly aware of high quality products. Drinking wine is now seen as a symbol of a certain desired worldliness that alludes to sophistication, status and wealth.

Wine producers around the world are becoming increasingly aware of this and as such more players are entering the market each year. In the coming years, producers in the top wine producing countries have everything to play for. With the correct taste, approach and market strategy, producers from any particular region could find themselves with a sizeable portion of the market share. 

The top 10 countries with the highest import values for 2019 are:

(Source: OeMV on behalf of the Professional Organization of Wines from Spain)

The Rise of the Bubbles

Wine in China has mainly gained popularity through still wine, however there has been steady growth in the importation of sparkling wine over the past 5 years. Figures show an increase from 384 million RMB in 2015 to 579.5 million RMB in 2019, indicating that sparkling wines are increasing in popularity (OeMV). Still wines remain the far more dominant of the two, accounting for around 90% of the value imported into China (OeMV).

What’s What: Trends Among China’s Top Wine Importers

Australian Wine

For a long time, the Chinese consumer wine market for foreign wines was dominated by French wines, with Australia lagging behind. As consumer’s taste and knowledge of wine developed, they became more open to wines from other countries like Italy, Chile and Australia. An opportunity was then created for producers to enter the market and win over the hearts of consumers, an opportunity seized by Australian wine producers.

Australian wine quickly gained momentum, with China becoming Australia’s number 1 destination for wine exports. In 2019 a new era had begun when, for the first time, Australian wines had surpassed French wine imports in terms of volume and value of wine imported.

The breakthrough that was seen by Australian wines had arisen through a combination of factors. While there were some high end brands that were recognized, such as Penfold’s, there was a great deal of effort that went into educating Chinese consumers about the diversity of Australia’s wine and the various regions. Over time, Chinese consumers became more familiar with Australian brands versus brands from other countries.

Another major factor was the China-Australia Free Trade Agreement (CHAFTA),which China and Australia had entered, and came into effect in December of 2015. This bilateral agreement afforded a large number of Australian companies’ better access to the Chinese market. The signing of this agreement was a major blow to European wine, as Australia and Chile were able to import their products with zero tariffs, reducing the prices of their products significantly. The combination of better awareness and the low import tariffs, gave way for Australia to overtake France and bring an end to the dominance of French wine imports. 

Despite a great deal of global economic uncertainty, the trend of Australian wine being the most imported by volume and value continued into 2020.

However, in the middle of 2020 Chinese authorities launched an investigation into Australia’s wine industry accusing them of violating anti-dumping rules. The accusation sent a shockwave through Australia’s wine industry, as this could cause complications with the zero tariffs trade agreement, which may lead to a hike in import prices and as such may draw a fast conclusion to Australia being the number 1 importer of wine to China.

French Wine in China

For a long period of time, in slowly maturing market, French wine was the default purchase for most Chinese consumers. For more than 2 decades the wines of Bordeaux had been the most well-known across China, illustrating just how influential and dominating French wines were. A survey by Wine Intelligence revealed that Bordeaux had an awareness rating of 52, eclipsing even the most well-known local wines.

French producers and distributors have done an outstanding job in not just selling French wine, but also selling a lifestyle. French wines had become the symbol of sophistication and prestige in China.

However, a new day has dawned and competition has become fierce. With both Australia and Chile having trade agreements with China, their import tariffs were reduced to zero, making it difficult for French producers to compete with the prices of their competitors.

All hope for the French wine industry is not lost, as they still remain the second most imported by volume and value. Furthermore, the new number 1 importer to China, is predicted to experience difficulty in the latter half of 2020 and possibly into 2021.

Although French wines are no longer the highest imported wine by volume, their value still remains high as Chinese consumers still view French wine as sophisticated. Therefore, even though the volume imported is significantly lower, the value of the imported wine still remains high, which is promising for French producers.

While the first chapter of French wines in China was heavily focused on the prominence of Bordeaux, the second will have to be focused on the variations and differences each region has to offer. Greater efforts have to be made in the education and promotion of the wines lesser known than Bordeaux. For instance, Champagne had seen a 9.1% increase in exports to China from 2018 to 2019 (CNBC), and Rosé was also seen by experts as a strong area for growth (Sopexa); indicating the opportunity for variations despite the recent surge of competition.

Chilean Wine in China

Chilean wines have excelled in the Chinese market in the latter half of the 2010’s. With Chinese consumers becoming more mindful of the price and taste of wines, they are steering away from persistently buying the same product and are more willing to embrace different variations.

Chilean wines have not always experienced success in China, as they had to battle the misconception that Chile only produced cheap wines. Through great effort by producers and the Chilean government, a large amount of resources were directed to educating Chinese consumers on the complex and fruity flavors Chile has to offer.

Similar to Australia, in 2016 China became the most important export market for Chilean wines, overtaking the US and UK. With the China-Chile Free Trade Agreement in effect from 2006 and the ongoing development of consumer preferences, Chile was able to gradually increase the amount of exports and value of the exports of wine to China. In 2010 Chile had exported just above 55million liters, while in 2019 they exported 154 million liters, indicating that they had managed to almost triple their yearly export volume in the space of 10 years (OeMV). 

With Australia now experiencing trade complications with China and Chile still maintaining low tariffs, in comparison to their European counterparts, now may be the time for Chilean wine to not only catch up but perhaps surpass their competitors.

Other Wines in China

The constantly growing appetite for new varieties of wine is forcing consumers to look beyond options that were initially popular. An opportunity is emerging for wine makers from Italy, Argentina, South Africa and Spain, to occupy a larger share of the unequally balanced market.

Italy produces more than a quarter of wine in the world and has around 60,000 wineries (ChinaDaily). Among these are a large number of small wineries, with an array of complex tastes, that present the consumer with a unique cultural and personal experience. While Italian winemakers are faced with high taxes and tariffs when entering China, there is hope that it may be reduced in the future. While the volume of Italian wine imported has only increased by just under 10 million liters since 2015, the value has almost doubled, indicating that despite an increase in price, Italian wine is increasing in popularity.

Spain has for a long time had a presence in the Chinese wine market. Since the early 2000’s Spain had been importing a higher volume of wine than any other country, however over the years their imports were erratic, often increasing and decreasing from year to year. Spanish wine is still yet to see consistent growth over a sustained period. A turn of the tides could be seen, because in 2019 several leading wineries had opted for a new and unique approach, and have decided to band together and form the Chinese and Spanish Wine Association. The purpose of this association is to promote the culture and improve sales of Spanish wine in China.

The US, New Zealand, South Africa, Chile and Argentina have formed an alliance with a local Chinese partner, Shanghai’s Grapea & co., in an effort to improve the perception of ‘new world wine’ in China (Vinex). The campaign will consist of an online marketing campaign as well as sommelier competitions. The content of the campaign will be available for free on various platforms such as WeChat, Tmall and TikTok, and consists of virtual masterclasses and videos across a range of topics such as history, winemaking, news as well as food pairings for wine. The venture which kicked off in June 2020 is going to run until the end of 2020, providing a platform for these countries to improve their image and presence across China.

How to Get Your Wine to China in 2020

Producers

As a producer intending to participate in the Chinese wine market, you are tasked with finding means and channels to enter the market and ultimately create a demand for your wine. To do so successfully, it is imperative to find the right importer and distributors to ensure your wine can enter legally and be sold on the correct platforms.

For producer’s there are many options that should be taken into consideration, which could enable you to sell your wine in China. A producer first needs to find an importer, who is able to get the wine into China. Although there are thousands of importers, this number is only a fraction of the number of producers there are. As such, the importers are the prospective clients and producers need to compete for their interest.

Producers can connect to importers at wine expo’s, trade fairs or by simply sending them information and samples directly. It is recommended for producers to work with importers and distributors that have experience in their respective fields. Due to the COVID-19 pandemic, this process of finding and connecting with an importer can be done digitally and with a local partner like INS Global, your needs and interests in China will be taken care of.

Wine Importers in China                            

Importers play an extremely important role in getting your products into China. While there are numerous wine producers around the world, in comparison there are far less importers, making it a challenge for some wine makers to attract the right importers.  

Previously in China, around 20 years ago, importation and distribution of all alcoholic beverages was done exclusively by China Oil and Foodstuffs Corporation (COFCO), a Chinese state-owned food conglomerate. While COFCO still remains the largest importer, other importers were also permitted to participate in the market. Now the market is highly fragmented and market share is not exclusively controlled by a single enterprise, but rather by the numerous private importers, who possess import licenses. 

When looking for an importer a key consideration is to find someone with good distribution channels. As there is no distributor who covers the entire jurisdiction of China, a producer should seek an importer who has the right channels for regional distribution. However, as there are far less importers than producers, importers are frequently solicited.

Across China there are more than 6,000 importers, all of whom represent different brands and vary in quantity imported. Smaller importers may import as little as 2 or 3 containers a year, while medium sized import around 20 to 60 a year, with anything more being done by large importers. Some importers are also able to handle distribution as well, which make it easier for the producer, however this will depend on the region being targeted.

Here are some of the top wine importers in China (Beverage Trade Network):

  • ASC Fine Wines – they represent over 100 wineries and more than 1,200 different wines.
  • East Meets West (EMW) Fine Wines – they represent more than 600 wine brands from more than 12 different countries.
  • Torres China – Established in 1997, their portfolio extends to exclusively selected wineries from the world’s most renowned wine producing regions.
  • Globus Wine Company – they represent over 200 wines most of which are boutique producers.
  • Summer Gates – Founded in 1999, they select internationally renowned brands based on strong reputations and a commitment to high quality.

Distributors

Distributors are just as important as importers when it comes to getting your products on shelves, in bars, homes, hotels and restaurants. As stated above, there is no distributor who can provide national exclusivity.

Distributors generally have trouble importing and therefore it is necessary to find an importer before mapping out the distribution of your wine. However as previously mentioned, it is possible to find an importer who also handles distribution.

Distribution Channels

The distribution channels in China differ to the channels in other parts of the world. Finding the right distributor may be a challenging but ultimately rewarding task and there are various ways to go about it. Although success is not guaranteed, with the right distribution channels there is a large possibility your wine could prosper in the world’s second largest market. There are certain steps a producer can take in order to find a distributor.

Different methods to find a distributor:

  1. Digital Search

This is generally a point of departure for many small producers. Although searching online may prove useful, it can be a very time consuming and frustrating process. The challenging part is finding one online that will take you seriously as distributors may be selective and prefer to opt for high end or high quality products.

  • 3rd party distribution company

A number of 3rd party distribution companies are less active on online forums and can be contacted through a connection (word of mouth, through another producer, through a Chamber of Commerce etc.). Sometimes good distributors don’t have the necessary information readily available on the internet, yet locally they have well developed Channels across China.

  • Trade Fairs and Wine Shows

Trade fairs and wine shows are a good place to meet importers and distributors or make new connections. It’s possible to attend the trade fairs on your own or get a 3rd party to represent you (We’re able to help you find the representation you need).

It is important to find a distributor who is serious about doing business with you. Often they negotiate the terms of contract and price terms quite shrewdly when intending to conduct business with you. It is also important that you employ the correct means to communicate with a distributor, such as the use of WeChat and a trusted partner who is not only able to communicate in Chinese, but who also understands doing business in China.

The Importance of E-commerce for the Wine industry in China

With the largest e-commerce market in the world, it is a highly important resource that can be used by wineries to ensure their product ends up in the hands and hearts of Chinese consumers. China’s online market place has surpassed that of both the United States and countries in Europe, signifying how important e-commerce is for consumers and businesses alike.

It is estimated that that more than 20% of wine sold in China is done via e-commerce, with this number predicted to sharply increase over the next decade. E-commerce platforms offer a greater reach to more consumers in a faster period than a traditional retail platform could. Platforms such as Tmall, JingDong and Suning have the largest market share in online distribution. Additionally, there are smaller online platforms, that operate within a particular region, which could be the right channel to explore for a particular wine producer.

It is important to note, a one size fits all approach should not be used by any brand wishing to enter China (click here to check out marketing mistakes some brands have made). No matter the product, it’s branding and marketing strategies may require some adjustments, adapting your offerings to the needs and tastes of local consumers.

Notable Wine Events in China

Trade shows and wine expos allow producers, importers, distributors, retailers and other professionals in the industry to come together. These events provide the perfect platforms for professionals to network, buy, sell and promote their products.

With COVID-19 restricting travel and gathering, 2020 has been quite different for all players in the industry and trade shows have been restricted and in some cases cancelled. Organizers have however made adjustments and alternative arrangements for those attending and for those unable to attend. Booths have been set up with a wineries’ branding and products, with the sales person being able to connect with others through video or audio.

Some notable events, as listed by 10times, include:

  • ProWine China
  • China Wine & Food Fair
  • World Bulk Wine Exhibition
  • Top Wine China
  • China National Food Wine and Spirits Fair

It is also important to note that networking should not only be limited to China, as you may find many distributors and other players attending international wine events such as ProWine in Germany and Wine for Paris in France. Attending these events is not futile by any means, as many players in the Chinese markets attend these events.

The Coronavirus and Wine Industry in China

The spread of the COVID-19 pandemic has significantly shifted the landscape of the wine industry across the world. Imports into China have reduced drastically from the same time in previous years, and for many, the first few months of 2020 have been nothing short of challenging.

Producers are no longer able to freely attend national and international wine events and due to governmental restrictions on the gathering of crowds and social distancing there has even been a reduction in the production of wine.

In China, the first half of 2020 saw a major decrease in the volume and value of wine from countries all across the board. The only country that saw an increase in wine exports to China, during the first half of 2020, is Argentina which had a 590% increase. Australia, Italy and Spain all found themselves on the opposite end of the spectrum having experienced a more than 30% decrease in imported volume, while France suffered a more than 45% decrease.

Although an extreme decline was seen in the first half of the year, many experts expect a big close to the end of the year. Despite the current severity of the global pandemic, producers, importers, distributors and suppliers are now coming up with new, innovative ways to work.

China is making a fast recovery from the impact of the COVID-19 and Chinese consumers are steadily returning to their old purchasing habits.

For those companies, wineries and producers wishing to enter the market at this time, there are a number of challenges that may be faced. With travel bans being imposed, it is almost impossible to setup an entity, as tasks such as signing company incorporation documents, opening bank accounts and going through the necessary interviews, will be delayed for an indefinite period. For those wishing to enter, they may have to explore other options such as the use of a Professional Employer Organization (PEO).

Following the trends, although the wine culture is relatively new in China, it is continually growing at a dynamic pace. Despite the market remaining quite fragmented, there is growing opportunity for new players to enter the market from all parts of the globe. With the growth of the middle class and ongoing exposure to new variations, therein lies opportunity for countries like Spain, Chile, South Africa and New Zealand, to grow their presence. There is also a chance for the larger wine producing nations to introduce more variations and gain a larger share of the market. With China recovering so fast from the virus and growing interest from consumers, now may be the time to consider taking your wine to the Middle Kingdom.

Partner with INS Global

Having a partner in China could be really helpful, during these unique times. Our solutions allow you to hire a sales person or representative located in China, that can help further your business interests. Our team has expertise in array of different HR roles, that are able to take care of your administrative needs, while your representative takes care of your business needs. Get in contact with one of consultants today and let us help you grow your brand in China.


Why Do Business in Vietnam: 5 Interesting Facts

With the rise of the Asia Pacific region (APAC), many business leaders are keeping a close eye on Asia to determine which country is likely to experience massive growth, as we have seen over the past few decades. With the rapid development of China, manufacturing and supply chain costs are increasing, forcing businesses to look elsewhere. Vietnam is fast emerging as the next destination that will experience rapid growth, similar to that of China.

With China shifting away from a manufacturing based economy to a consumer based economy, many companies in China are looking to relocate due to a rise in costs. For many reasons, Vietnam is increasingly becoming an increasingly attractive prospect for investors. It’s location, large population and developing economy are among a long list of reasons for businesses to consider Vietnam.

Our latest insight explores 5 reasons why you should consider doing business in Vietnam and provides some interesting facts. Check out our infographic below:

INS Global in Vietnam

INS Global has been helping companies enter the Asian market for more than 14 years. With extensive knowledge on the region, our experts are able to provide the knowledge and skills you need to successfully enter Vietnam’s market. INS Global Vietnam provides PEO solutions, which allow your company to hire staff in Vietnam, without having to setup a costly entity. We also provide Recruitment services if you’re looking for staff in Vietnam, Invoicing solutions if you’re doing a once off deal, as well as Payroll and Tax administration. Get in touch with INS Global today and let us simplify your expansion into Vietnam.

Australian Wine in China: 5 Interesting Facts

Wine has been a dynamic and continually growing market in China, presenting numerous opportunities to foreign wineries. Wines from France have generally dominated the market and had been the preferred choice for Chinese consumers for many years. However, as the wine drinking population increased and more options became available, the tastes and preferences of consumers started to shift. Wines from Chile, Italy, Spain and especially Australia, have grown in popularity.

Chinese consumers have developed a taste for Australian wines in recent years, with China becoming the number 1 export destination for Australian wines. While domestic production of wine has decreased, importation of Australian wines has increased. Australian wines in China are doing so well that in 2019 they have surpassed French wines in the volume and value of importation.

Our latest insight takes a look at Australian wines in China and gives 5 interesting facts on how wines from down under do in the Middle Kingdom. Check out our infographic below:

With Australian wine doing so well in China, many wineries, small and large are looking to find place on Chinese shelves. INS Global has assisted many players in the F&B industry to hire staff in China to carry out commercial and promotional activities. Our team has expertise across a range of disciplines such as recruitment, employment solutions, as well as payroll and tax administration, among many others. Learn more about how we can help you in China today.

German Companies in the Asia Pacific Region: Insights on the Importance, Challenges and Expectations

German enterprises have for a long time realized the commercial potential Asia has on offer, and as such, have made their presence known in the region over the past 2 decades. The Asia Pacific (APAC) region accounts for almost 60% of the world’s population, with China and India each having populations of more than a billion. It offers a large, diverse market that is continually developing, making it an important region for German enterprises. Let us explore the importance of the APAC region to German companies, key countries in the region and the challenges companies may face when expanding.

The Importance of the Asia Pacific Region

The last two decades have seen the rise of the APAC region, characterized by fast moving, diverse economies, they have presented significant opportunities to those enterprises who are willing to assume the risk. For companies that have chosen to expand to Asia, success is far from inevitable. With as much opportunity the APAC region presents, there’s an equal amount of obstacles that arise. With tremendous cultural differences, regulatory barriers, a lack of understanding the local markets and volatility of the markets in the region, companies entering APAC have their work cut out for them.

With the shift of global economic power from more developed economies towards emerging markets, a bright light has been thrust upon APAC. German companies in particular have enjoyed considerable success in Asia, as we see companies like Schaeffler, SAP and Bosch continually expanding throughout the region. Whether it has been to sell high quality products, benefit from low-cost manufacturing or to take advantage of the incredible potential the APAC market has to offer, this region has become essential for a large amount of German firms.

Where Do German Companies Setup in Asia?

German Companies in Singapore

Singapore dominates the APAC region as the preferred location for regional headquarters and is currently home to more than 60% of German APAC headquarters. With its geographical position in the heart of Asia, this gives firms easy access to many other countries in the region. There are a number of reasons for Singapore being a prime choice for these firms, such as:

  • Singapore ranks first in the region in terms of ease of doing business, according to the World Bank.
  • Singapore offers significant protection for intellectual property, which makes it highly appealing for western firms wanting to do business in Asia.
  • Finally, Singapore has a high caliber of talent and a large talent pool, which is an important factor for German enterprises as many of them see the value in investing in local management.

Comparatively to other countries in Asia, Singapore is perceived to provide geopolitical stability amidst tensions rising with other countries in the region. Singapore is also noted to be innovative and keeping up to date with developments in digital trade. They have put in place formal legal regulations and standards aimed at regulating data management, e-commerce and Intellectual property. A 2017 Bloomberg Innovation Index ranked Singapore as 6th in terms of innovation, illustrating its commitment to progress.

German Companies in China

Even though less than 15% of German companies have their regional headquarters in mainland China, it does not mean that German companies have overlooked the importance of the middle kingdom. According to the Asia Times, there were around 5,000 German enterprises operating in China in 2019.

With a continually growing middle class and an increase in spending power, it is no wonder German firms have looked to capitalize on opportunities. An example could be seen with the German retailer chain ALDI, where they had entered the market after seeing the likes of Tesco exiting a few years earlier and Carrefour making a gradual exit in 2019. Aldi has now expanded to having 4 stores in China in under 2 years, despite the outcome of their predecessors.

In China, German companies face fierce competition from local competitors who may have significant advantages, as well as a great deal of understanding and adaption towards the Chinese consumer market and its trends. Nevertheless, German companies enjoy a stellar reputation and high demand amongst Chinese consumers and producers alike, for producing high quality, reliable goods. Now, it is no longer only German engineering and manufacturing firms that operate in China, as you find German companies entering other industries such as chemicals, consulting, F&B and computer software.  

However, in China, Germans firms are equally met with a multitude of challenges, one of the foremost is that of local managerial talent. Most German firms in China have difficulty with not only recruiting top talent but also retaining these talents (Odgers Berndston Industrial Practice). German firms deem China to be particularly difficult to recruit top talent in, as enterprises have the task of finding leaders with the correct combination of language skills, industry experience and global exposure (Odgers Berndston Industrial Practice).

German Companies in Other Parts of the APAC Region

Embracing the opportunity Asia presents, German companies have built extensive sales networks throughout the APAC region, while also investing in R&D and manufacturing. While China is still the world’s manufacturing hub, the Chinese economy is being transformed from being manufacturing based to a consumer based economy. As such firms, heavily invested in production are looking to reshuffle their supply chains, as the cost of production increases. Large manufacturing chains, like those in the automotive industries are moving down into Vietnam, Thailand and India; while the production of computers is being taken out of the mainland and into Taiwan.

The trade war between the US and China has further encouraged businesses to diversify their supply chains, and for many industries the spotlight is now shifting to Vietnam. From footwear to furniture, exports are increasing in the country. Despite Vietnam not having the infrastructure China has built up over the past few decades, and there may be limits on their current capabilities, continued investment in facilities, roads and ports may result in it being one of the most important manufacturing hubs for western enterprises.

Challenges German Companies Should Anticipate

Even though there has been a great deal of growth in the APAC region and there is continual expectation of increased profitability, there are still various roadblocks that may be encountered. Some of the challenges they face are:

  • Diversity in characteristics across the region – although geographically many of the countries located in the APAC region may be close to one another, there may be stark differences between them. Variations in infrastructure, political stability, regulatory framework and resources, among other things, require different strategies to be implemented in different locations. A one-size fits all approach cannot be applied if an enterprise wants to be successful in the region.
  • Localization of talent – despite the fact that many German enterprises are of the opinion that developing local leadership talent is vitally important, many German companies are still behind British and American companies in their management development strategies. Even though in Singapore and India, German companies are developing in their trust of local management, in the majority of countries across the region they experience a great deal of difficulty integrating local leadership. The German approach may be too formal and not agile enough for the dynamic Asian market, and therefore may require some sort of adjustment to the style and culture of the region.
  • Increase in competition – even though German companies may maintain a stellar reputation across APAC, more than 50% of them are worried about a decline in demand, according to the German Chamber of Commerce Abroad (AHKs). This is partially due to an increase in global competition. As with the automotive industry, two decades ago, the big players were either from the US, Germany or Japan; now we are seeing an emergence of strong competitors from the likes of India and China. The same can be said for an array of different industries, such as high tech and manufacturing. While German firms may still experience some sort of growth, their Asian counterparts are making strides in the catch up game.

Even with the dynamic change in the region, it is evident that German companies have and will continue to be successful in Asia. However, in order to continually being successful, it is important that they are able to adapt to the specific markets they participate in, while maintaining their own principles, high quality and attention to detail.

If you are a business considering entering the Asia Pacific region, our experts are able to assist you with your expansion. INS Global has expertise across a multitude of disciplines such as recruitment, employment solutions, company incorporation and many more. Get in touch with us today and let us simplify your global expansion.


Taiwan: A Top Destination for Tech Startups

Since the 1980s, Taiwan has continuously strengthened its position as one of Asia’s leading technological hubs. The island plays a dominant role in the international supply chain of many companies and is home to the likes of Foxconn and TSCM who manufacture components for Apple and Google, to name a few. More recently, Google, IBM and Microsoft have expressed their intentions of developing AI R&D centers or similar ventures in Taiwan. However, it’s not only big multinational corporations that are benefiting from Taiwan, it’s startups too. Thanks to its global competitive nature and ease of doing business, Taiwan is a top destination for tech startups. Here’s why:

Government support

To help SMEs and startups get their businesses up and running, the Taiwanese government provide a number of financial incentives including awards, grants and loans to those in a number of named business sectors. Eligible companies can receive initial funding of up to NT$20 million, followed by up to NT$100 million in subsequent rounds – and this is not limited to Taiwanese founders.

Support for the tech industry also comes in the form of other government-backed initiatives such as Taiwan Tech Area (TTA), a dedicated tech innovation and entrepreneurship hub located in Taipei arena. TTA aims to be Asia’s leading tech-focused ecosystem, bringing together Taiwanese and international startups to cultivate entrepreneurship and foster innovation and collaboration in the tech industry.

Funded by the Ministry of Science and Technology (MoST), TTA offers a co-working space consisting of 250 desks, 22 meeting rooms and a combination of social and event spaces, a perfect launch pad for startups in the tech industry. TTA’s immersive programs expedite the growth of over 100 startups annually and is not only a platform for startups to connect with each other but for investors too. Significantly, the Taiwanese government has partnered with multiple private investors to inject a total of US$60 million into the capital pool with investment priorities on startups in TTA.

As a government-subsidized initiative, access to TTA must be applied through resident programs and accelerators. More information about can be found on the Taiwan Tech Arena website.

Strong Tech Talent

According to the OECD, Taiwan is one of the leading countries in Asia in terms of literacy with a 98.5 percent literacy rate and ranks 4th in the world for math and science education. Moreover, as high-technology manufacturing is the main industry in Taiwan, engineering is one of the most popular degree subjects in the country with Taiwan’s universities churning out upwards of 10,000 computer science graduates every year so it’s safe to say startups won’t be short of skilled labor when entering the market.

As technological focus moves towards emerging areas such as artificial intelligence (AI), Taiwan is keen to continue attracting investment in the country to retain its reputation as Asia’s leading tech hub. AI refers to the simulation of human intelligence in machines, a critical technology required to realize areas such as autonomous driving. Investments in Taiwan by giants such as Google, Microsoft and others have prompted the government to develop plans to train talent in this emerging sector with Premier Su Tsent-chang committing to train 10,000 people every year for work in A&I research and development. Owing to the government’s commitment to developing a high-tech force and environment that fosters innovation and collaboration, we can expect Taiwan to remain a global key player as the integration of these emerging technologies continue to evolve.

Business environment in Taiwan

According to a report by the World Bank, Taiwan 15th in the world for ease of doing business, coming fourth in the Asia-Pacific region. The report focuses on a total of ten areas to assess a country’s business environment including: starting a business, registering property and trading across borders, among others. Generally speaking, company registration in Taiwan is a relatively straightforward process and foreign investors can expect an investment environment of low taxation compared to other countries in the region, eliminating obstacles to entrepreneurship.

In addition to its investor-friendly business framework, Taiwan has a healthy system to protect intellectual property (IP) rights. Due its special international status, the region does not participate in any IPR-related international organizations such as the WIPO, yet follows international practices to strengthen the protection it offers to companies. Applying for a trademark or patent is simple and involves making an online application to the Taiwan Intellectual Property Office.  Taiwan also has a court dedicated to hearing intellectual property cases and an IP rights police force that investigates counterfeiting and piracy.

With the development of emerging technologies such as AI, IoT (internet of things) and 5G, Taiwan is committed to maintaining its competitive edge and reputation as an ecosystem that is at the forefront of technological change. As such, it is able to leverage its highly-skilled workforce and continued government support to keep up with these changing demands and technological trends.

INS Global: Your partner for your expansion in Taiwan

Over the last decade, thanks to its reputation as a technological paradise, Taiwan has emerged as an attractive destination for startups looking to secure a stronghold in the Asia-Pacific region. However, navigating the complex business landscape can be difficult without the right help on board. That’s where INS Global come in. As Asia’s leading market-entry and corporate service provider, our expert team have the local knowledge to help you navigate these minefields. Whether you want to setup a company in Taiwan or just want to streamline your operations, contact us today to learn more about how we can help.

How to Hire Remote Employees: 5 Things to Consider When Looking for a Remote Worker

If we have learned anything from the first half of 2020 is that that work is not a place we go to, but rather something we do. With thousands of employees around the world forced to work from home, remote work has now become a thing. According to Forbes, social networking mammoths Twitter and Facebook have both told their employees they can work from home “forever”. While results from a recent survey by Gallup revealed that only a quarter of people working from home would like to return to the office once businesses re-open. Taking this monumental shift into consideration, going forward, employers need to find outstanding talent who are able to perform just as well out of the office, as they would in it. So how should your organization approach the process of finding new, remote-based, team members.

1. Implement Proper Assessment Measures

Pre-employment assessment is an objective way of predicting job performance and fit, for a particular role. These assessments also allow recruiters to make more informed hiring decisions. Although the term ‘assessment’ encompasses quite a wide variety of meanings, in this case focus is drawn more to cognitive assessments, aimed at determining an individual’s critical thinking skills, personality traits, numerical and cognitive ability. The assessment measures should give the recruiter an idea of how the candidate will perform in their job. If the correct measures are not chosen and the incorrect person is hired, it could end up being quite costly for an enterprise, in both time and resources.

2. Provide Attractive Benefits

A generous benefits package has now become essential for companies looking to attract top talent. A survey of more than 1,000 workers by Glassdoor in 2018, revealed that nearly 50% of the workers surveyed were motivated to apply for a role based on the benefits and perks on offer. While working from home can be considered a perk, it is not reason enough to undercut or forego other perks that would come with a remote position. Perks like healthcare, vacation days, loan assistance, gym memberships and free meals, need to be given adequate consideration.

3. Ensure Your Internal Procedures Work Efficiently

It is of paramount importance that internal processes of an enterprise work efficiently when employees are working remotely. Employers need to ensure that there are clear channels of communication as many employees have difficulty with reduced access to managerial support. Lines of communication, access to information and troubleshoot procedures, should be established before a remote worker occupies their role as some workers may be surprised at the time and effort necessary to get information from coworkers or external sources. In some ways, this can be achieved is by establishing daily or weekly calls, using multiple channels of communication, providing opportunities for social engagement (albeit remote) and by offering support and encouragement.

4. Look For the Proper Fit

Finding the right fit for your company is a combination of both art and science. When looking for a remote worker, it is important for managers and recruiters to look for skills that not only fit the company, but also that remote employees should possess. It would serve little purpose for a talented worker, who works extremely efficiently under strict instruction but who is not a self-starter, to work remotely. Recruiters and managers should look for employees who have:

  • Good communication skills;
  • Great organizational skills;
  • Excellent time management; and
  • A high level of accountability.

It is important for recruiters to evaluate candidates for these skills, as they are extremely difficult to cultivate.

5. Set Realistic Requirements

Clearly outlining the requirements of the job allows recruiters to be able to identify the corresponding attributes potential employees must have for the role. This, has presented quite a challenge, as the amount of recruitment officers in companies has significantly decreased. Many managers have taken on the responsibility of hiring and set unrealistic expectations, which often leads to various challenges and which may ultimately damage the recruitment process.

Recruiters generally possess the skill of balancing the interests of the employer and the expectations of candidates. A great deal of detail and effort needs to be put in when employing a remote worker. As recruiters are generally able to balance interests, they also have the expertise and tools to form an idea of the interpersonal skills a candidate should possess.

Whether a recruiter or a manager is hiring, it is critical that they set realistic requirements for a candidate, especially for one who will be working remotely. Setting unrealistic requirements, being too selective and being too subjective could jeopardize the recruitment process.

With talent being one of the most important drivers of success, it is crucial for managers and recruiters to make the right hiring decisions. Although there is an endless list of factors that influence who and what the ‘right fit’ is, these 5 points should be given a great deal of consideration when looking to employ a remote worker.

INS Global’s recruitment experts have extensive experience in recruiting across an array of industries such as E-commerce, Food & Beverage, FMCG, Education, Manufacturing, Logistics, Pharmaceutical and Automotive and Staff in Consular Offices. If you are looking to recruit candidates anywhere in Asia, contact us today and let our experts help you find the right talent to take your company to the next level.

Marketing in China: 3 Lessons from Western Brands that Got it Wrong

As the world’s second-largest consumer market with an emerging middle class that’s ready to spend, it’s no surprise that an increasing number of Western brands are eyeing China as their chosen market for global expansion. Everyone wants a slice of the pie and expanding into the Chinese market can boost your business’ growth immensely. Or, at least, it can if you get your marketing strategy right. Successful entry into the Chinese market is dependent on understanding the uniqueness of the Middle Kingdom and adapting your brand to its cultural norms. Here are 3 lessons to take away from Western brands that simply did not take into consideration the behavior patterns of the Chinese consumer.

Lesson 1: Take time to understand the Chinese consumer and adapt your products accordingly

Marks & Spencer

Just over a year after opening its 10th store in mainland China, British retailer Marks & Spencer ended its 8 year-long relationship with China, making a complete exit in 2016. In a country with a large, continually growing middle-class, the Chinese market seems to be a good opportunity for the retailer’s growth plans. So, what could have gone wrong for M&S China?

Marks & Spencer offered the same clothing range found in its European and US market, without adapting it to fit the Chinese body shape. Research also shows that Chinese women have much narrower variances in bust, waist and hip than their western counterparts, meaning that Chinese body shapes are generally smaller than in Europe and the US.

Furthermore, M&S’ failure to win the hearts of the Chinese consumer also came down to its inability to invest in necessary translation and localization. For example, the company’s clothing range used British and European labels without stating the size in Chinese. Marks & Spencer’s failures meant that they were not able to attract the Chinese middle class that they could have and in a market as vast and competitive as China, it’s important for brands to show that they are making a genuine connection with their audience.

Lesson 2: Be aware of cultural differences

Dolce & Gabbana

The luxury goods market means big business for many Western brands in China. According to a study by McKinsey & Company, Chinese consumers are set to account for 40% of the world’s spending power in luxury goods by 2025. However, the Chinese luxury market could turn into a double-edged sword for Western brands if their marketing isn’t respectful of the cultural differences between East and West.

In November 2018, a Dolce & Gabbana digital ad campaign was labelled as racist by Chinese netizens and forced D&G to cancel their biggest runway show of the year. Released on Weibo (China’s equivalent of Twitter), the series of three 30 second ads depicted a female Chinese model struggling to eat various Italian dishes with chopsticks, apparently poking fun at the cultural differences. D&G, whose biggest market is China, suffered a sharp drop in sales in the aftermath of the incident and e-commerce giants Alibaba and JD.com removed D&G products from their online stores.

It is crucial that Western brands are aware of the cultural differences between the West and China before entering the market and proceed with caution when ad campaigns involve a cultural element.

Lesson 3: Know your Chinese geography before entering the market.

Marriott International

In January 2018, Marriott International, which owns over 120 hotels in China, committed a major geopolitical faux-pas, prompting a backlash from Chinese consumers. In a Mandarin language survey sent out to its Reward Club members, the American hotel giant listed Tibet, Hong Kong, Macau, and Taiwan as separate ‘countries’. The error triggered an uproar on Chinese social media with many would-be guests cancelling reservations in response and leading to the Chinese authorities temporarily shutting down its Chinese-language website. Marriott swiftly took to its official Weibo account to issue an apology for the mistake, affirming that it does not support separatist organizations that damage China’s sovereignty or territorial integrity. A few weeks later, the company was criticized again after an employee using the company’s corporate Twitter account ‘liked’ a tweet made by a Tibet separatist group. The employee was later let go.

Marriott isn’t the only global corporation to fall victim to China’s political sensitivities. The company joins Mercedes-Benz, Gap, and other international brands for failing to recognize the sensitivity of geopolitical topics.

Conclusion

As China transitions from an export-driven economy to a consumer-driven economy, businesses around the world are presented with an immense opportunity to tap into one of the world’s largest consumer markets. Yet, it goes without saying that Western brands must commit to planning a bespoke marketing campaign that targets China’s unique consumer landscape.

As well as making sure your marketing and branding is optimized towards the evolving needs of the Chinese consumer, it’s also wise to consider having a physical presence in the market. Having staff on the ground in China can you give your business a competitive edge and will allow you to conduct the necessary market research to launch yourself successfully in the Chinese market. Whether you’re looking to use our flexible PEO solution or are ready to incorporate a local entity, INS Global can help you enter the market with our range of professional solutions. Contact us today to learn more.

WeChat: An Essential Marketing Tool in China

What is WeChat?

WeChat is a multipurpose, social media platform, that is used primarily across mainland China and has more than 1 billion monthly active users (MAU) according to Tencent. In the Chinese digital landscape, this is the most frequently used app. WeChat, which was launched by parent company Tencent, started primarily as a messaging app, however it has expanded to a platform where users are able to shop, play games, book hotels, read news and make payments amongst a growing list of other features. With a constantly growing figure of MAU, WeChat has become an essential tool for businesses to succeed in China.

Why is WeChat necessary for businesses in China?

Tencent’s Fourth quarter results of 2019 revealed that WeChat had more than 1.16 billion users. As WeChat’s user base continues to grow, so does its abilities and features, offering various means for businesses to gain even more direct access to their consumers. With key features such as ‘official accounts’, ‘mini programs’ and ‘service accounts’, businesses in China have an easy and direct communication line with their customer base.

One of the most attractive aspects for businesses is not only the high volume of MAU, but also who is using the app. Research conducted by Statista on the distribution of WeChat users in China in 2019 revealed that only 4.3% of users in China were over the age of 46 years old. The research further revealed that the highest amount of users was occupied by 25 – 30 year olds, at 28.3%. The analysis reflected that more than 60% of the users are aged between 25 – 40 years old, which presents a large group of consumers, who not only have significant spending power, but also with whom businesses can build strong connections with.  

How can businesses use WeChat as a marketing tool

WeChat Mini Programs and Accounts

Considering the numerous facets there are to this super app, there is more than one way in which a business could benefit from WeChat. From mini-programs to service accounts to the use of key opinion leaders (KOL’s), marketers can be both strategic and creative in their approach. Here are some of the official account types WeChat offers businesses:

  • Mini programs: These are sub-applications within the WeChat ecosystem, that can simply be described as apps within an app. Although these ‘apps’ have limited capabilities, correctly utilizing this feature, consumers can have easy access to your brand, while using WeChat. Mini-programs can be used to share information, run promotions and even act as an e-commerce platform.
  • Subscription accounts: These types of accounts offer a great reach for businesses or brands to consumers. With this kind of account there is increased focus and opportunity for brand communication. Account owners can make 1 post per day and content can be re-shared by users with mention being made to the original publisher. However, there is a major drawback, which is that users don’t receive push notifications and the messages build up, like a spam folder.
  • Service accounts: These accounts offer more advanced features to businesses wanting to use the platform. Through a service account, a business is able to open a WeChat store and even create mini programs. One of the most significant features is that a service account appears as a stand-alone contact (as opposed to subscription accounts where the notifications appear in the subscription folder). Therefore, if a business sends out a notification via a service account, a user directly receives a push notification. This feature does however have a limitation, as enterprises are restricted to a maximum of 4 posts per month.

WeChat and market research

It is critical for businesses to stay up to date and informed with what consumers want and need. Market research not only provides better understanding of your customers, it also allows for businesses to identify problems and look for solutions. With WeChat’s continually growing user base and the frequency at which the app is used, it is a great platform for businesses to have as a market research tool. Many businesses now use WeChat to get information from consumers, by conducting surveys across an array of different topics. Survey tools have responded by optimizing their software for WeChat, allowing for surveys to be shared easily and data to be collected efficiently.

WeChat and ad campaigns

WeChat has been established as a useful marketing tool in China, however, the way in which it can be used may differ according to the needs and preferences of the business. An enterprise may choose a direct ad approach or they may use it in conjunction with other marketing activations.

For businesses who opt for direct ad campaigns, WeChat provides various means through which a business can advertise, such as ads on moments, banner ads, ads through accounts and ads using KOL’s. Although this direct form of advertising can be rather costly, one could predict a considerable return on investment. With the colossal amount of data Tencent has stored on users, market segmentation has been simplified to the utmost degree, allowing enterprises to target users with an increased degree of specificity. Users are segmented not only on the usual targets such as age and gender, but also on interests and behavior patterns. 

WeChat can also be used in conjunction with other forms of marketing. Calvin Klein, as an example, combined outdoor advertising with WeChat in an effort to increase sales. In August of 2016, during Chinese Valentine’s day, Calvin Klein displayed QR codes on outdoor digital billboards, with the purpose of getting pedestrians to scan the code and post a picture of themselves and their friends on WeChat. Within an hour, 808 people had scanned the code, 504 took a picture and 76 of those taken were displayed on the digital billboards. This campaign ended up increasing Calvin Klein’s sales by 50% from the same day the previous year according to an article by Luxion Media.

Connecting with customers

Considering how dynamic and competitive the market is in China, it is now more important than ever, that businesses focus on forming strong connections with consumers. WeChat provides the opportunity to increase trust, improve brand awareness and brand loyalty as well as engage with customers on a personal level.  

An example of building a connection can be seen with the British luxury leather brand, Mulberry. In 2015 Mulberry launched a campaign for Qixi festival (Chinese Valentine’s day in August), where they encouraged overseas Chinese, to send a customized Mulberry ‘digital love letter’ to their loved ones over WeChat. Some lucky participants were then invited into stores, where their specific love letter earned them a personalized, handcrafted leather bracelet.

The Qixi festival is characterized of a story between two lovers, who had been banished to either side of a river, who were able to be reunited with the help of magpies, who formed a bridge for them to cross over the water. By embracing the legend, Mulberry had formed a deep connection with Chinese people around the world. Businesses considering entering China, need to consider the ways in which they can build this connection, as close engagement with consumers could determine the success of their brand in China.    

Conclusion

WeChat is one of the most important and useful tools for any enterprise entering the Chinese market. It is important for businesses of all sizes, to unlock the potential WeChat has to offer, by strategically utilizing the marketing tools in line with their respective needs and priorities. Being strategic and creative with the use of WeChat could be a key factor in determining the success of your brand in China.


Four Consumer Market Trends in China after the Coronavirus

COVID-19 continues to have a huge impact on the world, however with many lock downs gradually being relaxed, many businesses are now looking forward towards recovery. Undoubtedly an organizational shift has occurred, and there is a ‘new normal’ for the way business will be conducted. In China, the coronavirus has fast-tracked key consumer trends, which may serve as an indication for businesses across the world.

Increase in use of digital platforms

China, in recent history, has been a leader in the application of digital business-to-consumer channels. Amid the Coronavirus, employers mandated employees to work from home, schools transitioned to online teaching, and brick and mortar stores were rendered needless. Online channels were the only way brands and retailers could maintain a connection with consumers, as such there was a sharp increase in e-commerce transactions.

Post coronavirus, a recent study by Mckinsey shows that around 55% of consumers in China are likely to continue purchasing their groceries online, which reflects that buying behaviors have significantly changed. Due to risk of exposure and convenience, many businesses have found ways through which they can establish and maintain a connection with their customer base. For this reason, a greater level of trust and reliability has been developed between customers and digital transactions.

Decrease in spending on ‘unnecessary goods’

Chinese consumers are a powerful force, not only in China, but across the world. According to the Mckinsey China consumer report, on single’s day (China’s equivalent to black Friday) in 2019, total sales on all platforms reached a record breaking $58 billion, eclipsing the $7.2 billion generated on black Friday.

Tofugear’s Digital Consumer in Asia report 2020, which was conducted on consumers across more than 12 countries in Asia, during the time of the outbreak, revealed that mainland China’s consumer confidence remains among the highest in Asia. This study reflected that around 47% of consumers in China were feeling secure about their personal finances and more than 59% having a positive outlook on the Chinese economy over the next 12 months. This reflects a huge contrast with neighboring South Korea where only 22% of consumers have a positive outlook and 14 % of consumers in Japan.

This serves as a strong indication that although consumer spending on ‘trivial goods’ had inevitably slowed during the peak of the outbreak; consumer confidence still remains quite strong as China leads the road to recovery.

Luxury goods in China

While many experts predicted a decline in the luxury goods sector, an analysis of past recessions reflects that the luxury sector is likely to rebound faster than most other industries. Of course, not all brands are immune to the harsh effects caused by the coronavirus, but those who are able to weather the storm are indicated to prosper, as China still remains one of the most important markets for luxury brands. 

With many brands struggling in Europe and many other parts of the world, they now turn to China, as China spearheads the post-coronavirus recovery. Brands such as Prada, Armani and Cartier have all turned to the Chinese digital platform T-mall, in an effort to increase customer engagement during this period.

Within its opening week, the French luxury giant Hermès’ Guangzhou store sold $2.7 million worth of goods. This sizeable figure serves as a positive indication that Chinese customers are ready and willing to spend on the right products.   

Larger focus on health and well-being in China

Over recent years one of the biggest trends of consumer behavior in China has been the growing awareness of the link between nutrition and health. Considering the severity of the outbreak of the Coronavirus, many Chinese consumers have shifted their spending priorities and are now adopting an even greater health-related outlook. According to Mckinsey, around 60% of consumers in China’s larger cities now ensure they look at the labels on foods they buy and try to avoid products which do not seem healthy. More than 50% of consumers indicated that natural and healthy ingredients are one of their primary buying factors.

Businesses have reacted to this, as stores on digital platforms such as Taobao and Tmall are selling nutritional supplement products at discounted prices; Starbucks and KFC have introduced plant-based meat alternatives; and Nestle launches its customizable superfood drink.

While COVID-19 has inevitably had an effect on markets across the world, it is evident that the Chinese consumers are hungry to spend and the Chinese market is on the path to recovery. It is important for businesses to carefully consider and monitor the trends in the Chinese market, especially for those looking to do business in China, as we now enter the ‘new normal’.