If there’s one example of an Australian company that has really got a handle on the Chinese consumer market, it’s Swisse. After just four years, 40 per cent of the company’s sales were coming from China – a situation that was virtually unheard of. In December 2016, Hong Kong-listed company Biostime International completed its takeover of Swisse, purchasing the remaining 17 per cent of shares from its remaining shareholders for $311 million. Today, Swisse is the number one vitamin, herbal and mineral supplement (VHMS) brand both in Australia and on online shopping platforms in China, such as Alibaba.
So just how did they do it? At this year’s inaugural Access China Summit, former Swisse CEO Radek Sali spoke about doing business in China and how Swisse achieved such astounding success in the market.
Here are 4 useful tips on doing business in China:
1. Create an “elite” company culture
“If you think things change rapidly in your industry, wait till you get a hold of China,” said Sali. According to him, Swisse’s culture was a big factor in the company’s ability to keep up with this rapid change. “We needed to move fast. We needed to be organised. We needed to be prepared for change.”
People, therefore, were Sali’s top priority when he was at the helm. To keep his team motivated and performing at peak levels, Sali placed a large emphasis on health and wellbeing, with free yoga and personal trainer classes and daily meditation sessions for employees. They were also rewarded with “health and happiness” days once a month if they delivered on set benchmarks.
According to Sali, having a culture plan is just as important as having a business plan. When people are engaged and happy, they are motivated to work hard and drive long-term plans that would otherwise be unsustainable if the company has a high attrition rate. It is this elite culture that Sali credits with Swisse’s ability to move faster than its competitors and achieve such stunning success in China.
2. Invest in your brand
“The other thing we did was we invested massively in our brand,” said Sali. “Not in our plant and equipment, not in other things that were unnecessary – we invested in our brand to differentiate.”
To that end, Swisse have invested heavily in marketing and celebrity endorsements. Some of their campaigns have included signing on actress Nicole Kidman and well-known athletes as ambassadors, bringing talk show host Ellen DeGeneres to Australia, and sponsoring the Olympics.
All this has contributed to Swisse becoming an aspirational brand. Swisse was the only VHMS company to appear in the top 100 brands in Australia in the 2013 Brand Desire Report, outranking Louis Vuitton, Moët, Penfolds, American Express and L’Oréal.
These high-profile campaigns led indirectly to brand recognition in China; because of these, Chinese celebrities started to use the products themselves, and promote them to their many followers.
3. Balance global with local
By successfully positioning themselves as a premium, proven and aspirational brand, Swisse could appeal not just to a local market, but also a global one.
Eventually, Swisse became the biggest natural health brand in China – with a campaign that originated in Australia.
It began when they noticed that, in certain stores around Australia, Chinese students were buying large supplies of Swisse products to take home with them to sell (this became known as the “suitcase trade”). Once Swisse were aware of this phenomenon, they began to target these stores with marketing campaigns aimed at Chinese consumers, in an initiative they dubbed “Project Gold”. This created a massive momentum for their products, which they capitalised on with digital campaigns, international press releases and sponsorship deals within China.
But Sali stresses the importance of building upon a strong local foundation, before attempting to approach international markets. “You have to be successful in your own backyard,” he says. “Otherwise you will be seen as a fraudster in China.”
4. Understand the logistics of supply
Doing business in China comes with myriad challenges, one of which is the regulatory changes that frequently occur. In 2016, China made regulatory changes to imported goods, heavily impacting the vitamin trade and causing Blackmore’s shares to fall from over $200 down to below $120. Swisse, however, was not hit as hard, which Sali credits to having a local partner. “We didn't have an issue getting stock through the borders because we were filling out our paperwork correctly,” he says. “And that's because our local partner was doing that … And that's absolutely essential – we all know so many big Western companies that have failed or are struggling in China.”
The other issue that companies face in China is that of counterfeit products. It’s important, therefore, that there is some way for Chinese consumers to know that the product they’re purchasing is authentic. Swisse, for example, have a logo icon on their label that can’t be replicated, as well as an app that can scan the label and verify whether it’s genuine.
As Sali said at the beginning of his talk, Swisse’s success in China did not simply boil down to one initiative – it was a combination of several factors, not the least of which was having excellent, scientifically backed products that cultivated brand loyalty. Without high-quality products, none of these tactics would have worked. In the end, that is really where Australian products are competing – on quality.
Hopefully these tips on doing business in China have helped you to start considering the China e-commerce market opportunity.