Thursday, August 24 2017 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
WHEN THE MOUSE ROARS . . .
ONLINE sales in China have almost overnight made some companies very rich — but if today’s social media fancy suddenly becomes tomorrow’s lemon, the corporate dangers are obvious . . .
Unleashing the purchasing power of ordinary Chinese (as opposed to the super rich) is proving to be a potent weapon that can propel a company into the realms of super profits.
Such is the experience of the Australian company Blackmores, as detailed in our cover report in this issue.
A few years ago, Blackmores was just another mid-cap company listed on the Australian Stock Exchange, jostling for the attention of analysts and investors.
Not any more. Today it is a darling of the Australian stock market.
Analysts from the largest broking houses want time with executives of the company as they try to dissect the magic that has transformed Blackmores into Australia’s
single more valuable company in terms of its share price.
We hear of the success of Blackmores because it is a publicly-listed company, its results pored over by investors and analysts alike. Few could have failed to noticed how its share price has skyrocketed to more than AUD220 — apparently the highest price yet reached by an Australian company on the ASX.
The reason for Blackmores’ unprecedented success is quite simple: Chinese consumers have discovered Blackmores’ products — its vitamins and a wide range of dietary supplements.
But these products could still have been out of the reach of many Chinese if not for the Internet. Chinese consumers have emerged as the world’s most avid users of online shopping.
Blackmores is riding on the crest of a combined wave of China’s rising affluence and the inexorable growth of e-commerce. This has created for Blackmores a wave of unsolicited marketing for its products.
As Blackmores’ Managing Director, Asia Peter Osborne, told ATI, direct sales to China account for just one-sixth of what he calls “China-influenced” sales.
Previously, it would have been inconceivable to imagine that consumers from any one country could have such a dramatic impact on a company.
Just try to picture an untold number of Chinese tourists and students buying Blackmores’ products and taking them back to China in suitcases. Or thousands of entrepreneurs ordering the products from their laptops or smartphones in China.
This invisible army of Chinese then onsells the products in China. In effect, they have become a de-facto sales force for Blackmores.
Blackmores is not alone in being besieged by Chinese consumers.
A competitor, Swisse (which boasts a similar range of products), is obviously also enjoying explosive sales into China. But because it is a private company, the public will not get to hear how well it is doing.
Around Australia – and most likely New Zealand too — there are probably many private companies which are fortuitously making products that appeal to changing Chinese consumer tastes.
Health supplements in particular touch a special part of the Chinese psyche. From time immemorial, this is a society that has embraced powder made from rhinoceros horn, bear and snake bile, the seahorse, and anything else that is said to have therapeutic qualities. China has a long history of natural medicine.
Then there is the pursuit of safe foods.
Weary of repeated scandals, the Chinese middle-class masses are importing baby formula. And because they have more money, they also look for feel-good products and new taste sensations.
The most popular products, it seems, are royal jelly, beauty products, red wines, cherries, avocado, meat, cereals, Tim Tams, and almonds and other nuts.
The list is lengthening, aided by Chinese e-commerce platforms like Tmall, JD.com and others, which are constantly sourcing new products for their customers.
Unlike luxury products, which are affordable only to the rich, and where sales are now falling because of the anti-corruption drive, Chinese authorities are not likely to disrupt imports of run-of-the-mill products.
Of course, they will throw up new laws on food safety and the like. But that should not be a major issue for Australasian producers.
Because the very reason the Chinese are buying Australian and New Zealand products is because they are perceived to be manufactured to high international quality standards.
Many of those selling to China will say that the single, most important factor in sales is the green and clean image of Australia abroad. It is about Brand Australia.
Australia may in fact never be able to shake off the China factor. For better or worse, it seems, in the medium term Australian business, big and small, will increasingly live by the fads and fancies of the Chinese.
China made Australia rich buying its coal and iron ore, along with other resources as it developed its economy.
Now, with growing affluence in China, Australia has become one of the many overseas countries to which an upper middle class turns to buy investment property, education for their children and holidays abroad.
China’s reach is drilling ever deeper — into small to medium sized Australian companies. Those producing items that appeal to the Chinese will see their sales boom, and some are already struggling to meet
This phase of China’s purchasing power will be long-lasting and, dare one say, probably
irreversible. It does seem that Australia will always have a place on the Chinese shopping list.
But it is not unreasonable to pose one question: If the Chinese can make a company, theoretically can they also break that company — if they decide they no longer like its products and go to a competitor.
For this reason, there is danger in becoming totally reliant on the Chinese market.
Diversification is the name of the game.
*Florence Chong is Editor of ATI Magazie