I am fascinated by Blackmore’s immense success, and recent hiccups, with Chinese market – the China sales jumped from a mere 4% to 40% of its entire revenue in less than 18 months by Dec 2015, and in April 2016 it lost almost 30% of its market value suddenly. I am fascinated by Blackmores’ story not only because It is an exciting story, but also because it illustrates extremely well some of the unique aspects of how to reach Chinese customers digitally.
Success
When we look further into the details, the 40% of Blackmores’ China sales is comprised of sales through two very different channels. (The exact split is extremely difficult to get even for Blackmores themselves, so the data may vary a few percent and is based on the combination of Blackmores financial report, sources like CBA report and various industry analysis)
- Almost 60% of all China sales (or 23% of total Blackmores sales) in fact takes place in Australia (meaning, Chinese buying the products through Australia retailers, and then send back to China)
- 40% of all China sales (or 17% of total Blackmore sales) are done through e-commerce channel and other traditional channels in China.
In other words, about 1/3 of domestic sales in Australia in fact ends up going into the hands of Chinese consumers in China.
Wow! How did that happen? Let’s go back to when it all started.
It all started with a TV show in China at the end of 2014 (FY15) with an A-list Chinese celebrity (Fan Bing Bing) accidentally displaying a blackmores Vitamin E facial cream in her handbag. It triggered the overnight success (sales from 3k units/month to 130k within the month, currently 600k/mth).
Seeing this, a group of business-savvy Chinese living in Australia started to promote Blackmores and some products on WeChat, the leading Chinese social media and e-commerce app, and sell the products (through WeChat too) to their network back in China after adding a premium of their purchasing price from the standard sales channels in Australia such as Chemist Warehouse. They become so successful that at one point Blackmores products were constantly out of stock in Australia.
Chinese now has a name for this group of people: ‘DaiGou’, or what I call as ‘Overseas Purchasers’ (OP).
Initially Blackmores was totally at a loss at what happened. Sales was soaring, but they couldn’t even understand why! (Isn’t it every sales director’s dream???) Then they came to realize that there was a huge appetite for their products by the Chinese customers, through those living in Australia but eventually channelled back to China. They started to strategize their China plan. They signed up Chinese tennis player super star Li Na as Blackmores brand ambassador in April 2015. They also officially established cross-border e-commerce in late 2015 (the title image of this article is a screenshot of their online shopfront on Tmall), while still saw the continuous growth of domestic sales that end up in the end consumers in China.
It all happened when their stock price increased more than 600% in the space of less than two years (their stock price hit the all-level high in December 2015)!
Blackmores also started a flagship shop in Sydney airport targeting Chinese tourists early 2016, to further capitalize Chinese consumers’ appetite for its products, and the brand awareness among Chinese.
It’s not an overstatement that Blackmores has become one of the most recognized Australian brands with Chinese consumers.
Hiccups
So what happened in April 2016 that caused a sudden dip in its stock price?
The date of ‘April 8th, 2016’ is considered as a major milestone in the cross-border e-commerce industry in China. With key changes in taxes and regulations, the impact is significant and expected to be long-lasting and multi-facade.
While I am listing the key changes below, in a nutshell, the new regulatory meant higher tax and operation cost, as well as the legality of exporting some of its products to Chinese market. Ooch!
To summarize, the real reasons that has been driving the Blackmores’ story include:
- WeChat is largely responsible for Blackmores’ initial huge success with Chinese consumers, and continues to be a driving force
- Powerful influence of Chinese community on consumers’ purchasing decision in China
- The unique role of Overseas Purchasers, as a result of unique facts in Cross-border e-commerce to export to China
- Cross-border e-commerce: Chinese government’s continuous efforts to regulate this booming sector will continue to have huge impact on brands like Blackmores, either in positive or negative way.
Interested in reading more what these reasons mean for other Australian brands? Read ‘Four Secrets to Tackle Top Challenges with Chinese Market’
ReadySetGo China is a Sydney-based company dedicated to empower Australian businesses to reach Chinese customers (in Australia and in China). To read more, click http://readysetgochina.com.au/. Looking at reaching Chinese customers more efficiently through Chinese social media and social commerce? Get in touch with us!