Emerging trends in the Chinese consumer market usher in new opportunities for overseas brands
Hong Kong, 6 July 2023 – In the face of a persistently challenging and complex global economic situation, many overseas brands view entering the China market and establishing an online presence as a crucial outlet for growth. However, the evolving consumer trends in the post-epidemic era make it vital for foreign brands to plan a sustainable path for growth. In PwC’s recent report - Emerging trends in the Chinese consumer market usher in new opportunities for overseas brands, it explored the development opportunities and localisation pathways for foreign brands in China, considering the current retail consumer market environment, new market opportunities in the post-pandemic era, and ways for overseas brands to enter the China market.
In 2022, China’s actual utilisation of foreign investment reached 1.23 trillion yuan, with a 6.3% year-on-year growth according to comparable figures. Additionally, the proportion of imported consumer goods has been gradually increasing. Customs statistics indicate that in the first quarter, the total value of imported consumer goods reached 478.74 billion yuan, a year-on-year increase of 6.9%. Cross-border e-commerce import transactions grew from 1.8 trillion yuan to 3.4 trillion yuan from 2017 to 2022, with a compound growth rate of approximately 14%. Overseas brands are accelerating their entry into domestic e-commerce platforms, with nearly 8,500 new brands joining Tmall Global in the past year as of November 2022. From 2017 to 2022, the average compound annual growth rate of overseas brands entering China was about 52%, pointing to a rapid development phase for the online import consumption market in China.
Nicole Sun, PwC China M&A Advisory Partner, said: “The retail market is undergoing a new wave of transformation, driven by industrial changes following the resumption of work. Emerging business models are creating new opportunities for certain industries and categories to explore new avenues of growth in the post-pandemic era. As consumer lifestyles continue to evolve, there has been an increase in demand. The easing of restrictions on social and short-distance travel demands has fueled growth in categories such as alcoholic beverages, camping, cycling, outdoor activities, and pet-related consumption. In addition, as the demand for high-quality health care continues to grow, food and beverages targeted towards health and beauty conscious consumers have gained popularity. Furthermore, the “self-delighting” economy continues to thrive, as consumers increasingly seek diverse and personalised consumption experiences. Distribution channels are also changing, with a shift from offline to online sales and the rise of O2O commerce, which were already apparent before the pandemic but have been further accelerated by it.”
Foreign investment policies are in place to foster openness and encourage global brands to deeply engage in the China market. The Central Economic Conference proposed, at the beginning of this year, to further stabilise foreign investment expectations, promote stability and expansion of foreign investment, and cultivate new growth engines for international economic and trade cooperation. On 1 January 2023, the “Catalogue of Encouraged Industries for Foreign Investment (2022 Edition)” officially came into effect, expanding market access and further increasing openness in the modern service industry. Meanwhile, an increasing number of cities are pursuing the construction of international consumption centre cities, with over 20 cities nationwide launching development plans and action plans to attract global brands and deepen their engagement in the China market. It is expected that as the effects of these policies become more apparent, overseas brands will find new opportunities for development in China.
Nicole Sun added: “Although the domestic market is continuously opening up, it remains challenging for overseas brands to successfully set foot in China market. Firstly, they need to evaluate the current state of the China market and their overall conditions so as to determine the most appropriate approach. Regardless of the selected mode of entry, entering the China market for overseas brands often involves a long and intricate process. Brands must conduct a thorough market assessment so as to gain a deep understanding of the market environment within their industry. They should then combine this knowledge with their brand's existing capability matrix in order to develop a strategic plan for entering the market. Suitable partners or service agencies should be identified and matched based on marketing or channel requirements, as well as business needs. Foreign brands must complete procedures such as registering overseas trademarks in China, obtaining relevant licenses for business operations, customs clearance, and import and export inspections. After completing the necessary procedures for market entry, brands should further optimise their business models to better align with the local market environment. Overseas brands seeking to enter the China market have a wide range of options available to them - authorised operation, independent operation and joint venture.”
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