"New Chinese Products" Overseas Gold Rush: Each Shows Its Skills

New consumption has been going global, and success has been reported frequently. What are the secrets? Let’s take a look at it together in this article.

New consumer brands have been going overseas in groups over the past decade. Around 2010, well-known private catering companies went overseas one after another. Around 2015, standardized Chinese fast food such as braised chicken rice and Shaxian snacks went abroad.

Around 2018, emerging catering brands and domestic new tea brands such as Mixue Ice City, Heytea, and Nayuki jointly set off a wave of going overseas. In September 2018, Mixue Ice City's first store in Vietnam officially opened in Hanoi. As of now, it has more than 200 stores in Vietnam.

HEYTEA and NAYUKE TEA chose the Southeast Asian market as their first choice. Although they chose different cities, they both chose Singapore. In November 2018, HEYTEA opened its first store in ION Orchard, Singapore. In December, NAYUKE TEA also opened its first overseas store in Singapore.

In 2019, Huazhixiao entered the Japanese market. After announcing the completion of its A round of financing of nearly RMB 100 million in March last year, it also intends to continue to increase its investment in the Japanese and Southeast Asian markets. It is reported that Huazhixiao has entered more than 300 offline beauty and daily chemical stores in Japan, such as Cosme.

In 2020, Hua Xizi and Perfect Diary chose to go overseas and jointly develop online e-commerce. According to incomplete statistics from Baijing Overseas, there are more than 25 cutting-edge beauty brands in China that have gone overseas, including Perfect Diary, Hua Xizi, Ju Duo, Kokila, Hua Zhixiao, remière Beauté, Half Acre Flower Field, Mary Kay, etc.

At the same time, as the first to open directly-operated stores overseas, "Pop Mart" has entered 23 countries and regions. As of now, "Pop Mart" has 12 offline stores and 79 robot stores overseas.

Let’s take a look at it together.

1. Bawang Tea Princess: "Small product, big market"

The first step for Bawangchaji to go global is “product is king”

In terms of product layout, more than 90% of the products on Bawang Chaji's overseas product menu are consistent with those in China, and most of the SKUs are retained. Therefore, the taste of Bawang Chaji in Southeast Asia is almost the same as that in China.

Bawang Cha Ji's overseas products are still mainly tea, highlighting the "quality assurance" of Bawang Cha Ji's original leaf fresh milk tea, which is equivalent to a category innovation based on tea + milk, but this category innovation is significantly different from other traditional pearl milk teas.

Because pearl milk tea is still popular in Southeast Asia, Bawangchaji's launch of original leaf milk tea without toppings or pearls is enough to arouse the curiosity of Southeast Asian consumers.

Such products are fresh in Southeast Asia, so Bawang Cha Ji is very popular in the Southeast Asian markets of Malaysia, Singapore and Thailand, continuing the Southeast Asian consumer preference for milk tea. The frequency and quantity of Southeast Asian consumers' purchases of milk tea are much higher than the popular fruit tea in China, which is one of the reasons for Bawang Cha Ji's success in overseas markets.

In addition, Bawang Cha Ji still chooses the strategy of big single products in Southeast Asia , using classic single products to increase product repurchase rate and increase Bawang Cha Ji's overall sales. Therefore, Bawang Cha Ji's original leaf fresh milk tea series still accounts for more than 70% of sales, and the top three best-selling products account for more than 50% of sales.

As for the repurchase of Bawang Cha Ji, it is not actually an active one, but more of a spontaneous choice by consumers. Consumers can taste a sense of health and quality when drinking the tea, so repurchase is a natural result. This is also why Bawang Cha Ji believes that a key move for tea products exported overseas will increase repurchases, rather than set meals or discounts.

At the same time, we are creating and improving the underlying flavor of products overseas, integrating them into healthy products, and improving the overall product quality. This is the core foundation for big single products and high repurchase rates.

The second step of Bawangchaji’s overseas expansion is still “top-level design”

Bawang Cha Ji started exploring overseas expansion in 2018 and opened its first store in Malaysia in August 2019, but ultimately adopted a joint venture model for its top-level design.

In the view of the Bawang Cha Ji team, to develop overseas markets, it is necessary to find partners who can operate locally and jointly promote the development of the brand. This model can ensure the speed of store opening and the overall scale of the store, as well as the quality, and is a more balanced path.

The third step is to achieve universality

On the demand side, Southeast Asian consumers still prefer milk tea, which is due to their higher demand for milk protein. The popularity of fruit tea in China is due to the further upgrading of consumption and the pursuit of fruit vitamin C nutrition by young people. In fact, the demand side has determined the development stage and direction of the entire market.

On the other hand, on the supply side, the domestic tea market has gone through multiple categories such as pearl milk tea, cheese milk tea, fruit tea, and plant-based tea, and the speed of product iteration is very fast. However, the tea and coffee markets in Southeast Asia do not have such a fast iteration speed, so the Southeast Asian beverage market still has obvious uniqueness.

Bawang Chaji has adopted an adaptive overseas expansion approach, choosing to be subtle and silent, focusing on the product and cultural sense of oriental tea. From the initial "big single product" route, simplifying the product SKU and supply chain, to choosing to integrate the local approach in top-level design. In short, Bawang Chaji did not go "dominant", but chose the path of "harmony but difference" with Chinese thinking.

2. Pop Mart: Can it be the next Disney?

Compared with the low-key Bawangchaji, Pop Mart, as the spokesperson of the new generation, is advancing rapidly. However, Pop Mart's year-on-year revenue growth rate in the first half of 2022 fell to 30%, and its net profit fell by nearly 35% year-on-year. Under the influence of the epidemic, Pop Mart, which once advanced rapidly, will also usher in its first negative growth. The great change in performance this time made the market sigh. For a time, there were rumors that the bubble of Pop Mart had burst and blind boxes were no longer popular.

Currently, Pop Mart has entered the three major platforms of Shopee, Lazada, AliExpress, and Amazon, and has laid out multiple DTC channels. This year, Pop Mart has opened its first stores in Singapore, Canada, the United Kingdom, New Zealand and other places.

Founder Wang Ning expressed the hope that overseas revenue could reach 50% of total revenue in the future . According to the 2021 annual report, Pop Mart's overseas sales revenue was 137 million yuan, a year-on-year increase of 85.2%, accounting for 3% of total revenue. This proportion was 2.94% last year, which is not a significant increase. In this way, there is still a long way to go to reach a 50% share.

After the release of the profit warning for the first half of the year, Pop Mart immediately started a large-scale repurchase to show that the management is firmly optimistic about the long-term development of the company. On July 22, Pop Mart issued an announcement to repurchase 1.7672 million shares, spending about HK$39.9652 million. This is the fifth share repurchase since the release of its first half profit forecast. From July 18 to 22, Pop Mart repurchased a total of 16.5312 million shares, with a cumulative repurchase amount of about HK$360 million.

In the past four years, especially since 2019, Pop Mart has made small steps and fast progress, from a revenue of 160 million yuan in 2017 to 4.5 billion yuan in 2021, a 28-fold increase.

In the past few years, the background of Pop Mart's rapid growth is that the domestic blind box market has a large space, capital injection, and consumer power has been tapped. With the gradual improvement of the industrial chain, China's blind box economy has set off a boom since 2019, and the market has achieved rapid development. Data shows that the scale of China's trendy toy market in 2019 was 20.47 billion yuan, an increase of 71.3% over 2018.

However, Pop Mart still lacks such opportunities in overseas markets. Trendy toys, especially collectible toys, are a relatively mature market overseas. When Chinese trendy toy brands go overseas, they are more likely to be tested by mature markets.

A research report by Guosheng Securities pointed out that Pop Mart's valuation has continued to decline since its listing. In addition to the bubble factors in the early stage of listing, the downward valuation implies investors' concerns about the uncertainty of the blind box model and the space for user penetration. The impact of the epidemic on the marginal slowdown in performance growth and changes in the overall investment environment of Hong Kong stocks have amplified panic sentiment and exacerbated the downward trend of stock prices.

Pop Mart’s first step in going global: top-level design

A year ago, Wen Deyi, Vice President of Pop Mart and President of Overseas Business, mentioned in an interview with the media that in order to quickly and effectively enter the market in the early stage, they would first cooperate with local powerful channel dealers to help Pop Mart quickly distribute its products. When the market is familiar with its products and brands, they will open direct offline stores, pop-up stores, robot stores, etc.

In terms of store opening, Pop Mart follows the "light first, heavy later" model, first testing the waters with pop-up stores and robot stores to determine whether the city has potential and whether it is worth continuing to invest resources, and then decide whether to invest in directly-operated stores.

In terms of overseas layout, Pop Mart initially focused on Asian countries, but this year it began to increase its development plans in the United States and Europe.

The second step of Pop Mart’s overseas expansion: localization

The road to overseas expansion of Chinese blind boxes is full of challenges. The biggest challenge is localization. How to combine with foreign IP, whether to obtain authorization, cost, etc. are all factors that must be considered. Localization is a very difficult process. In Southeast Asia, Pop Mart’s management system and marketing model cannot be the same as in China. To adapt to different markets, it needs to be operated by a team that understands the local situation.

At the same time, the epidemic also appeared in overseas markets. The epidemic will affect the stability of some channel dealers, the timeliness of logistics, and the rhythm and efficiency of store opening.

As for localization, on the one hand, Chinese trendy toy companies still need to do a lot of consumer education on the gameplay of blind boxes. Although the trendy toy collection market is relatively mature overseas, the gameplay of blind boxes has not really opened up the market. This may be mainly due to the differences in purchasing habits between domestic and foreign users. As far as blind boxes are concerned, Orientals are more accustomed to enjoying the fun of "drawing", but Western consumers value "certainty" more.

The third step of Pop Mart’s overseas expansion: IP combination

Although Pop Mart will release limited models for some regions, its own IP is not well-known in overseas markets compared to other classic well-known IPs. In some overseas stores, customers are more likely to choose other well-known IPs than Pop Mart's own IPs. The company's response is to learn how to attract customers. When selecting product combinations for distribution, it is necessary to combine big IPs with its own IPs in the hope of forming a traffic diversion.

In order to open up the overseas user consumer market, in addition to localizing your own IP, you also need to obtain co-branding and authorization from well-known IPs.

At present, Pop Mart's trendy toy operations are mainly based on image IP, supplemented by content IP. However, some of Pop Mart's content IPs released in China have not been authorized in other countries. In terms of going overseas, it still needs to re-obtain authorization for some classic IPs.

Compared with the timeless content IP, the image IP generally does not have content attributes, attracts consumers with design or joint names, and has low fan stickiness, which is highly uncertain. This also requires Pop Mart to continuously innovate and strengthen its designer team.

Some people believe that Pop Mart’s opportunity point will have to wait until a new IP explodes. In the first half of last year, Skullpanda exploded, bringing a large increase in store traffic, but in the first half of this year, there has been no explosive IP, so it is naturally facing great pressure.

The current decline in the popularity of blind boxes is due to management problems, but is also closely related to the current development status of my country's cultural industry. "The richness of IPs is not enough, and the richness of IP realization paths is not enough. It is still more of a formality. It is definitely unsustainable to rely solely on novelty and curiosity."

3. Perfect Diary’s “Turning Point”

Perfect Diary is in urgent need of transformation. Currently, the market value of Yatsen E-Commerce is only US$846 million, which has fallen by more than 95% from its peak market value, evaporating nearly US$100 billion. At the same time, the financial report data disclosed by Yatsen E-Commerce shows that it has been in a loss-making state for many years.

In 2020, Perfect Diary's annual revenue was 5.32 billion yuan, a year-on-year growth rate of 73%. In 2021, Perfect Diary achieved revenue of 5.84 billion yuan, an increase of 11.6% over the same period last year, and the revenue growth rate dropped significantly.

In 2020, Perfect Diary's loss reached 2.688 billion yuan, and in 2021, Perfect Diary's net profit attributable to the parent company was still a loss of 1.541 billion yuan, from 309 million yuan in 2018 to 4.006 billion yuan in 2021. The proportion of marketing expenses to revenue has also increased, from 48.2% in 2018 to 68.6% in 2021. The marketing expenses are far greater than the losses.

Perfect Diary's marketing selling point has always been "a substitute for big brands". The same traffic strategy has also brought some results when Perfect Diary entered the Southeast Asian market. In Shopee's Double 11 promotion in 2020, Perfect Diary won the first place in the makeup category of the entire site in Malaysia and the first place in the cross-border beauty brand list. According to Tmall's overseas data, Perfect Diary is the second in Tmall's overseas sales of domestic beauty products.

The latest data released by "Perfect Diary" shows that it has successfully won the first place in sales in many markets in Southeast Asia on the cross-border e-commerce platform Shopee, showing strong potential for going overseas. Here are the details of Perfect Diary's overseas strategies:

Perfect Diary’s first step in going global: high-quality products and clever marketing methods

In April 2020, Perfect Diary attempted to enter the Southeast Asian market with the help of the Shopee platform and look for new blue ocean markets.

At the same time, Perfect Diary, based on data and research, uses celebrity effects and evaluation-based social media advertising marketing to seize every traffic outlet and continuously launch its own brand using Shopee and Lazada platforms. However, in the face of complex overseas markets, if Perfect Diary wants to continue its mature domestic e-commerce operation experience, the first thing to do is to upgrade its online store management model and improve its supply chain, warehousing, after-sales, data and other management to cope with more and more specialized needs overseas.

In September 2020, Perfect Diary finally chose to cooperate with Mabang, mainly for two reasons. First, the Mabang platform has a complete product supply chain, a sound technical platform and logistics system; second, Mabang can provide unified management of multiple platforms and multiple online stores, and at the same time cover orders, products, procurement, inventory, customer service and other comprehensive functional services.

Perfect Diary’s second step in going global: ERP+cloud warehouse to improve efficiency

The logistics timeliness of cross-border e-commerce is related to consumers' shopping experience. This is because Perfect Diary makes good warehousing arrangements in the early stages of each major promotion. When operating the shopping mall, based on the sales forecast provided by Mabang ERP, it ships goods to Mabang Global Cloud Warehouse's Southeast Asian cloud warehouse several months in advance to ensure sufficient supply and avoid out-of-stock situations during major promotional festivals.

Perfect Diary said that this year, due to the sharp rise in the price of raw materials for overall commodities and the continuous increase in transportation costs, they have already replenished their inventory as early as possible, improved their supply chain control capabilities, and reduced a lot of risks. At the same time, the professionals of the cloud warehouse will allocate the orders of the mall to the overseas warehouse closest to the receiving point, arrange the sorting, packaging, and logistics distribution of the goods, and greatly shorten the logistics transportation time.

4. Huaxizi: The Ultimate Chinese Style, Cultural Output

Hua Xizi has broken out of its circle with a set of designs that fully embody oriental elements from appearance design, product style to packaging design. The traffic strategy of "live streaming + KOL recommendation + celebrity endorsement" has made Hua Xizi a popular brand of Chinese beauty products.

However, Hua Xizi's overseas expansion is inevitable. Abroad, there is now a wave of "Oriental aesthetics", which is also due to my country's cultural confidence and cultural output in recent years. The unique oriental cultural characteristics are attractive to Westerners and easier to spread.

In 2020, Huaxizi’s sales exceeded 3 billion, ranking first on Tmall’s Double Eleven domestic beauty overseas list.

On November 26, 2021, the day of the Black Friday sale in the United States, the overall sales volume of Huaxizi's overseas official website doubled compared to usual days, and the Dai Impression Limited Edition Heart-Lock Lipstick was sold out. At present, Huaxizi's overseas official website supports sales in 43 countries and regions, with the European and American markets as the main markets. Many European and American people position Huaxizi's beauty products as gifts, which is also the second breakthrough for whether it can quickly enter the European and American markets where the threshold for beauty is quite high.

Huaxizi’s overseas expansion also has its own “routine”.

Huaxizi’s first step to go global: bring your own traffic

As early as 2019, Huaxizi established an official overseas social account and launched the "West Lake Imprint Customized Gift Box" with the theme of "Ten Scenic Spots of West Lake", which became a hot topic on Japanese social media and was featured in the fashion magazine "VOGUE".

Around that year, the concept of "Chinese makeup" gradually became popular in Japan. After Korean makeup, Japanese makeup, and European and American makeup, "Chinese makeup" began to have a name overseas. High-end makeup, fair base, three-dimensional contours, prominent lip makeup, mature beauty... these are the definitions of "Chinese makeup" by Japanese girls.

This concept has gradually become popular on YouTube, and many Japanese beauty bloggers have begun to share "Chinese makeup" content. In the titles of these "Chinese style makeup", they are accompanied by words such as "super A and super popular" and "comparable to plastic surgery", and the number of clicks is over 100,000.

The relevant person in charge of Huaxizi's overseas business said that based on the rising popularity of Chinese cosmetics at the time and the high awareness and acceptance of Chinese cultural elements by Japanese consumers, Huaxizi chose Japan as its first stop for its overseas expansion.

Huaxizi Step 2: Social Layout

After gradually gaining some popularity on Japanese social media, Huaxizi took the opportunity to set up its own official social media accounts and began to comprehensively deploy Japanese social media. At present, Huaxizi's official TikTok account has exceeded 960,000 followers, and its Instagram account has exceeded 360,000 followers.

Taking into account consumer habits, in addition to English, Huaxizi also operates Japanese Twitter and Instagram accounts.

The layout of social media not only helps Huaxizi build a bridge for interactive communication with local consumers, but also becomes a window for it to obtain user feedback. After some preparation and market research through social media in the early stage, Huaxizi entered Amazon in March 2021 and officially launched its products into the Japanese market.

The third step of Huaxizi: cultural output

Data from Huaxizi shows that Huaxizi's products have been sold to many countries and regions including Japan, the United States, and Europe. Among them, there are more than 100 countries and regions covered by e-commerce platforms, and 46 countries and regions with overseas independent stations.

The "2022 China Brand Overseas Service Market Research Report" released not long ago mentioned that the development of Chinese brands will gradually enter the era of "globalization" development, and the concept of "going overseas" will continue to weaken, replaced by "globalization". Only by becoming a global company as soon as possible can Chinese brands establish a real "moat".

In overseas markets, Huaxizi still insists on its mid-to-high-end positioning. For example, Huaxizi's star product "Love Lock Lipstick" was once sold for 6,129 yen on Amazon Japan, close to the price of Chanel lipstick. Even so, the Love Lock Lipstick still ranked among the top three lipsticks on Amazon on its first day of entry, and was once out of stock.

According to the overseas director, "All Chinese brands need to be recognized overseas. How to better understand Chinese brands among overseas users and better adapt to localization will be a long-term challenge."

The fourth step of Huaxizi’s overseas expansion: new matching of product matrix

In overseas markets, Huaxizi found that consumers are more concerned about makeup palettes, lipsticks, highlighters, etc. In this context, Huaxizi reclassified its products into: skin care beauty products, oriental culture products, oriental aesthetics products, and international lines.

For its overseas product portfolio, Huaxizi hopes to provide overseas consumers with products that have oriental aesthetic characteristics as well as healthy and practical functional products, thus covering the needs of the population in all aspects. This year, Huaxizi will also focus on recommending two new gift boxes to overseas markets, including the auspicious animal gift box that will be launched on Black Friday.

The fifth step of Huaxizi’s overseas expansion: localization of publicity

How to tell the Chinese brand story to overseas consumers? This is also a challenge for overseas brands. To this end, Huaxizi has made a lot of localization efforts in terms of overseas content creation, visual style, operation and marketing methods.

The person in charge of overseas business said: "For example, the Xingxiu contouring palette we launched this year was inspired by the four mythical beasts: Azure Dragon, White Tiger, Vermillion Bird and Black Tortoise. Domestic users have cultural knowledge of these four mythical beasts, but overseas users do not. Therefore, we created some anime illustrations and martial arts-style TVCs specifically for overseas users that are in line with their cultural characteristics, so that overseas users can have a better understanding and cognition of these mythical beasts and our products."

In the operation of social media, Huaxizi also takes localization into consideration. In terms of content materials, it does not directly copy domestic content, but cooperates with foreign models of different skin colors to shoot, so that overseas consumers can intuitively see the presentation of products on different models.

The head of Huaxizi Overseas said: "Consumers in different markets have different preferences and different understandings of Chinese culture. For example, the convenience of going overseas due to cultural proximity in the Japanese market cannot be replicated in the European and American markets. Products also involve different category preferences and product localization issues. Therefore, each layout in a different country or region is a new challenge for us."

V. Conclusion

In the view of Li Feng of Frees Capital, after three or four decades of development, China's local industrial chain structure has gradually improved by taking over industrial transfer from developed countries - from the original energy structure to the processing of basic raw materials, and then from the processing of industrial products and consumer goods to the processing of high value-added products and services.

Therefore, some experts predict that the trend and opportunities of going overseas are inevitable, but whether the brand can continue to expand is related to its previous domestic foundation. However, it is also a new starting point for acceleration, which will start a differentiated growth journey for the brand with mutual influence at home and abroad.

In the next few decades, we firmly believe that China's national strength will rise rapidly, and its international influence will grow, so the revival of Chinese culture will gradually overflow. People all over the world will be very curious about, explore and expect a lot from China, so we believe that the time has come for China's global brand.

Author: Li Jiaman

WeChat public account: New Consumption Think Tank