If you want evidence of the sheer pace of growth in the Chinese consumer market, just take a look at e-commerce giant Alibaba’s latest results. There were 755 million monthly mobile users across its platforms during the quarter ending June 2019. Three months before that there were 721 million - an increase of 34 million people in just three months.
"When you look for a western retail comparison, I don’t think there is one," says David Lloyd, Alibaba’s general manager for UK, Netherlands and Nordics.
He adds that since he joined the tech giant in 2016, the equivalent of four times the UK population has signed up and is spending up to 28 minutes on average a day shopping on its sites, which include the Tmall (premium brands) and Taobao (small business) marketplaces.
Much is made of the opportunities the already-vast and rapidly-growing Chinese market offers to Western companies. Efforts to exploit these opportunities are famously hit and miss, but when it hits, it really hits, as the example of SmoothSkin shows.
Founded as CyDen in 2002, the Swansea-based manufacturer specialises in home-use laser hair removal machines. It’s always been an export-led business, shipping to over 35 countries, but in 2017 the decision was made to enter the Chinese market.
After a short consultation period, working with KPMG in Shanghai to gain a better perspective of how to sell its products to China, SmoothSkin launched as a third-party vendor on Tmall in June 2017 and, after seeing a surge in sales, became an official strategic partner of the platform in July 2018.
The impact on the business has been profound. Tmall now accounts for 85 per cent of SmoothSkin’s sales in Asia (revenues on the continent were £9.5m in 2018, according to filings at Companies House).
"Our business is 25 times bigger in China than it was two years ago in sales terms," explains Simon Boyd, SmoothSkin’s sales director, over coffee at Alibaba’s London base. The company has gone from employing 35 people before the partnership to 150, and recently invested in building its own factory in Swansea in order to feed the growing demand.
So how does it work?
SmoothSkin has a distribution partner based in Nanjing, which not only purchases the products, but also manages the way they are marketed, and through what channels, to Chinese consumers.
The strategic partnership with Alibaba means that the two companies work closely at a senior management level to maximise SmoothSkin’s reach across Alibaba’s platforms.
Both Boyd and Lloyd are keen to stress the benefits of the partnership, but also to acknowledge the challenges.
"Everyone looks at China and thinks ‘wow, there are 750 million people on your site’. The ability to sell to all of those people is phenomenal," says Lloyd. "But you really have to lean into it."
It’s not just a case of placing a British brand in front of millions of spendthrift Chinese eyes, Lloyd explains that brands have to really understand what niche they fit into, how to market the product, and at what price.
Boyd adds that SmoothSkin’s marketing to Chinese consumers focuses on its being made in the UK, leveraging our reputation for clinical excellence and great design. He also says that SmoothSkin has "significantly" invested in targeting key opinion leaders on social media and has set up a Chinese-based customer service team to deal with the volume and frequency of requests.
"I think too many people from Western businesses think they can take their brand and product position from the UK and put it straight into China. From what I’ve seen that is a fairly easy way to fail."
An ability and willingness to cope with the pace of change is also essential.
"Any business that exports to China has got to be aware that if it happens, then it happens really quickly," says Boyd. "I can still remember the day of our tipping point. Our annual forecast went up two and a half times in a week."
As a result, Boyd says SmoothSkin has had to work "very hard" with its suppliers in the UK and China to make sure that the company has the stock and processes in place to cope with demand that can come in intense spikes due to big ticket retail events like Alibaba’s now famous Singles Day (or 11.11 - it takes place on November 11 every year).
There are likely to be further growing pains for any British business that does have some success in China. The country’s population recently hit 1.4 billion, it now has more people in the world’s top 10 per cent for household wealth than the USA, and it continues to lead the world in the e-commerce penetration of retail.
Find out more from British businesses about marketing to Chinese consumers here.
Image credit: VCG / Contributor