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How Retailers Can Access the Chinese Market
With China’s one-child policy ending, Chinese consumer demand is set to boom. E-commerce solution provider Azoya takes us through one of the opportunities that comes with tapping the massive Chinese market.
In late October, China announced the end of the “one-child” policy, effectively ending the largest population control experiment in history. The announcement came amid growing concerns about China’s rapidly ageing population and the associated aged-care costs and labour shortages.
The end of the one-child policy is expected to lead to a spike in birthrates, with one to two million babies born per year on top of the regular birthrate. By 2018, the number of babies born in China is expected to increase to 20 million. This increase is expected to generate RMB120 to RMB160 billion consumption demand per year, with demand being driven by such products as infant food supplements (especially powdered milk), toys and medicines.
Opportunities for retailers
Growth in China’s consumption demand will provide opportunities for forward-thinking retailers. Analysts forecast that the growing birthrate will lead to 20 percent growth in China’s milk market. Since the 2008 Chinese milk scandal—which resulted in the death of six children and more than 300,000 victims in total—Chinese parents have been more willing to buy milk products from overseas. This alone is expected to provide a golden opportunity for Australian manufacturers and retailers of milk products.
Online shopping for baby products has taken off in China over the past few years. In 2013, the total value of baby products purchased online in China reached RMB65 billion. In 2014, that figures soared to RMB200 billion, with the majority of these products coming from outside China. As the birthrate increases, the value of baby products purchased online is only set to increase.
Policy and regulation
The Chinese Government has introduced policies that support cross-border online shopping. In June, China announced that it was lifting restrictions on foreign businesses participating in e-commerce. In a further development, the Chinese General Administration of Customs started trailing a range of different import models, including bonded imports and direct purchases.
Under the direct purchase model, customer orders are shipped to them in personal parcels, which are not subject to general trade regulations and therefore do not require China Inspection and Quarantine certification or Chinese labelling.
The recent conclusion of the China-Australia Free Trade Agreement (ChAFTA) should also provide opportunities to Australian online retailers looking to sell into China. The ChAFTA will reportedly provide Australian retailers with the best market access any country has to China.
As a result of the demand for milk products, black markets have reportedly emerged facilitating the bulk purchase of milk through “buying agents” in Australia. These questionable activities should serve as a reminder that Australian merchants need to find legal and sustainable ways to sell into China.
As China’s birthrate and increasingly affluent middle class continue to grow, and trade becomes easier, Australian retailers can’t afford to ignore one of the world’s largest consumer markets.
The opportunities offered by the cessation of the one-child policy are not just limited to baby products. Chinese demand for general healthcare products (besides baby-care and pregnancy health products) is also growing. Australia’s reputation for high-quality products has made these particularly popular in China.
To fully take advantage of the massive opportunities offered by the Chinese market, retailers should look to find a local fulfilment partner. The best way to do this is through an expert cross-border e-commerce solutions provider.