Retail

The China Opportunity

Despite its complexity, China presents opportunities too big to be missed. Total retail sales of consumer goods in China increased 9.8% from 2017 Q1 to 2018 Q1, while online retail sales surged by 35.4% over the same period. The Social Plus model, which aims to link brands and target consumer groups via social media, is playing an increasing role in driving user engagement and contributes to the sales growth Chinese E-commerce companies are seeing. More than 40% of the world’s online purchases are made in China, creating new avenues for British exports to reach Chinese consumers by.

China’s offline retail market is also embracing new technology, including Artificial and Virtual Intelligence, as well as block chain technology. Second-tier cities, third-tier cities, and even rural locations, are becoming a key battleground for China’s retailers, and particularly for those that focus on online business. To further their progress, these companies are busy building national-level logistics infrastructures to deliver a consistent level of service throughout China, from the largest metropolises to the smallest villages. This development, along with the rapid adoption of smart phones and mobile commerce, is increasing the number of consumers able to access international brands online.

The three key factors that influence the consumption of imported products are changes in family structure (including the second-child policy), the desire for new experiences, and an increased awareness of the quality of purchases made. Beyond this, added customisation elements (such as those promoted by the British Embassy’s Being Yourself campaign) and growing per capita disposable income afford consumers both a level of comfort and a sense of luxury to their lives beyond what they knew in the past.

Based on these observations, CBBC’s retail team has identified four key sub-sectors is which demand is particularly high:

Fashion and Luxury Goods
The increasing number of young, wealthy Chinese shoppers from first- and second-tier cities has attracted a large proportion of global retailers to China. Although this market continues to be buoyant, luxury retail has recently become a politically sensitive topic because of a ban on government officials receiving gifts, and in response to this more conservative and risk-averse political climate there has been a shift towards the consumption of lower-profile luxury goods, of which the burgeoning fashion for streetwear is a good example. The appeal of streetwear has also been boosted by popular reality shows that make reference to urban and hip-hop culture. More luxury brands are beginning to target young adults by releasing limited edition co-branded collections in collaboration with popular street fashion brands.

Mother and Baby
The number of babies, the desire to “upgrade” what one has already bought, and product diversification have all contributed to the growth of the mother and baby market in China, with baby diet supplements and baby care products acting as the key drivers of demand. Buyers of mother and baby products show a preference for omni-channel shopping which echoes the New Retail and Smart Retail concepts of seamlessly integrating E-commerce, social media, and offline retail stores, while high quality, efficient, convenient, and stylish designs are in high demand by the new generation of mothers.

Household and Lifestyle
Following the continuous improvement of living standards in China, its consumers show an increasing willingness to spend money on household goods and international tourism. A consumer survey by the Hong Kong Trade Development Council shows the demand for children’s furniture, outdoor furniture, and eco-friendly furniture is growing, while a 2017 Outbound Tourism report, jointly released by Ctrip and the China Tourism Academy, notes that Chinese outbound travellers spent £86.8 billion during their trips in the preceding year, a high proportion of which was done via Alipay and WeChat Pay – young travellers’ favoured payment methods. UK shopping centres and shops equipped with these two mobile payment options are more likely to attract these shoppers and their wallets.

Beauty and Skincare
Beauty and personal skincare products are the second-most frequently bought products by consumers on cross-border E-commerce platforms, demonstrating the scale of the market. A study by Euromonitor shows that Chinese consumers, especially those born in the 1980s and 1990s, have a strong preference for high-end international skincare products. Although mandatory animal testing still poses a major hurdle for British beauty and skincare brands wanting to access the China market, cross-border E-commerce provides an alternative channel to reach Chinese buyers through. It is also worth noting that the UK government actively engages with the relevant China policy makers on the issue of mandatory animal testing with the aim of creating more export opportunities within the framework of the current regulations.

UK Strengths
China has become one of the world’s most important retail markets, meaning there are many opportunities for UK companies to take advantage of in the wake of the ever-increasing buying power of China’s middle class. There is currently a particularly high demand for premium quality products, ranging from high street brands to heritage goods, and for made-in-Britain craftsmanship across the food, fashion, and entertainment markets.

The UK has a large number of reputable retail brands, including those that produce both high-street fashion and luxury goods, and does especially well in:
  • High Street Retail - Some brands are already in China, but many continue to wait on the sidelines.
  • Luxury and Heritage Goods - Royal Warrant holders and contemporary luxury products are well-known and in high demand among Chinese consumers.
  • Interiors and Design - UK high-end furniture and homeware is popular in China.
  • Premium Fashion - Menswear is an especially strong performer.
  • Beauty and Personal Care - UK brands are often seen in China and are known to be of a high quality.
Other key growth sectors in China, such as mother and baby products, and sports retail, are more fragmented than in the UK, and therefore present opportunities for SMEs.

Key Dates
Recommended trade shows and events in China are listed below: Useful Resources

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