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Australia  

AUSTRALIAN BUSINESS BULLISH IN A CHINA SHOP

06/09/2016

(To read the rest of this edition, click here.)

Australian businesses are performing better than ever in the Chinese market. Driven by the world's largest e-commerce platforms and an insatiable demand for Australian product, records for Australian profits have been tumbling, and it looks like there's more to come.

Chinese online platforms are on a seemingly unending rise, and more Australian companies are looking to ride the wave and sell their wares to China's growing middle class.

China's e-commerce sector will surpass a value of more than 6.5 trillion Chinese Yuan in 2016, and recently released figures show that over half of China's 1.38 billion population is now online - more than 32 times the number of online Australians.

Australian-grown and made consumables are highly coveted in China, where food or medicines are sometimes feared to be fake or even poisonous.

Prior to the popularity of Chinese platforms such as Tmall, JD, VIP, BabyTree and Alibaba, there was a 'grey market' established globally.

The 'Daigou network' (Daigou literally translates to 'buying on behalf of') is a channel of commerce between Chinese shopping agents and overseas shoppers. Purchasing products from around the world to ship back to China through the post or couriers, this network was perhaps one of the first lines of trade for many desirable and previously unregulated products.

Sites such as WeChat and Weibo connected Daigou sellers with their customers through dark social media sharing, unable to be captured by web analytic services. The activities of the Daigou has been estimated to have a reach of almost 50 million customers.

This network was responsible for famously clearing supermarket shelves of baby formula in 2014 and 2015. Spokespeople for Coles and Woolworths have said that formula shelves were full this year thanks to better supply and changes to China's import laws.

The biggest change to the Daigou operation has been the China-Australia Free Trade Agreement. Coming into force on 20 December 2015, it has opened the floodgates for Australian businesses dealing in the 1,142 product categories that have been greenlighted in the agreement for cross-border e-commerce.

The notable product categories are wine, honey, vitamins, milk formula, butter and dairy spreads, cheese and yoghurt - all markets that have strong production bases in Australia.

Laura McBain, chief executive of leading organic infant formula maker Bellamy's Australia, said the online success of many Australian businesses has been due to a greater Chinese demand.

"We have worked closely with our bricks and mortar retailers to grow that market, but equally we have embraced the opportunity to sell through e-commerce platforms. As a result we have seen that significant growth in the last 12 months," Ms McBain said.

Alongside physical presence in Chinese stores, Bellamy's has leveraged platforms such as its flagship Tmall site, where it remains in the top 10 infant formula brands.

Bellamy's Australia has reported a more than tripling of its full-year profit to $38.3 million. The record high revenue of $244.6 million equated to 8.4 million tins of infant formula (compare that with Australia's population where only 300,000 babies are born annually).

Even though Bellamy's local sales grew a substantial 67 per cent to $178.6 million, it was far out shadowed by the growth in sales from China and Hong Kong - a considerably significant leap of 331 per cent to $62.1 million.

"We have a positive view of the regulatory changes announced and we believe they will further strengthen Bellamy's growth opportunities in China where the Bellamy's brand and our trusted, safe, organic products are highly valued by consumers," Ms McBain said.

The Chinese e-commerce opportunity for Australian businesses highlights the need to stay informed and buoyant in the market. The ability to adapt marketing and sales strategies as the sector grows will be a key asset to those looking to seek growth in our largest export market.

As seen with the China-Australia Free Trade Agreement, any reform can quickly affect established (albeit unregulated) channels such as the Daigou network and present an opportunity for companies with agile strategies who are able to adapt to law changes.

(To read the rest of this edition, click here.)

 
 
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