China is one of the fast growing markets for sport nutrition and functional food products. With Chinese consumers’ increased awareness of health and fitness products, and the advent of many cross-border eCommerce platforms, there are great opportunities for brands to find success in China. However, popular brand names in the United States, Canada or Europe don’t automatically find success in China. Without sales and marketing strategies, some brands might see sales in the short term but fail to establish long-term partnerships and consistent market presence. Below are five mistakes to avoid which may hinder your brand’s long term success in China.
1. Lack of Price Control
Pricing issues are not unique to the Chinese market. When a brand has multiple distributors in the same region, without the right pricing strategies in place, distributors usually compete on price which can have a negative impact on brand integrity. Though Chinese consumers love shopping for deals, they also associate price consistency with quality consistency. When they see different channels offer different prices, with some being too low, they suspect counterfeit products or believe distributors are trying to rip them off by overcharging a low quality product.
It is also imperative for brands to understand their distributors’ business model. For example, many brands thought they were working with a wholesaler and offered them aggressive wholesale pricing. The distributor turned out to be eCommerce store. They will retain a “healthy margin “ and sell the products at a discounted retail price directly to end consumers. Even if the volume is significant for the time being, this will end up discouraging other wholesalers from working with the brand, because there is simply not enough margin for sub-distribution In this case, brands are limited with a single channel and it will be challenging to reinstate a new pricing structure as the low price is already established among consumers.
Brands should take a holistic business approach when creating pricing strategies. Prices on Amazon, BB.com, and Walmart should also be taken into consideration as savvy Chinese consumers will search online before making their purchase. Huge price discrepancies will cause problems for the distributors, as distribution networks are usually built upon expected and consistent margin for each party to work with. Pricing disruptions can threaten the stability of the distribution networks. It is critical for brands to have a well thought out pricing strategy so eCommerce channels, brick and mortar stores and other channels are working together to grow your brand, not working against each other.
2. Working With the Wrong Distributor
China’s sport nutrition industry didn’t start until mid-2000’s. Many of the key market players, distributors and eCommerce store owners are entrepreneurs, who mostly launched their business with their own money. Those who speak fluent English definitely have a competitive advantage. Not only can they communicate effectively with brand owners, but also access information on the most updated industry trends and innovations published in English. They are hustlers and risk-takers who help to shape the outlook of today’s sport nutrition industry. They are in the industry for the long haul.
In the mid-2010’s, more capital investment was poured into the sport nutrition industry. Companies hired CEOs from other industries to manage sport nutrition startups. Some tried to apply sport apparel distribution strategy to sport nutrition, which didn’t work. Some came from a baby formula background and struggled to identify the target consumers’ demographics. Some came from eCommerce background with strong analytical experience but only focused on everyday low prices to drive online sales. Last but not least, some took money from their investors’ funds for personal use. They held back many brands from growing, and for some, they caused damaged beyond repair.
Many distributors will tell brands what they want to hear: they have large capital investment, good government relations, legitimate importation process, and of course, provide an impressive sales projection number. Brands need to do their own due diligence and investigate the track record of the companies, as well as the owners. Those who speak fluent English are easy to understand, but might not tell the truth. Do your homework and check their references.
Trademark theft and squatters are not unique to the health and wellness industry in China. In the last five years, we have seen several major U.S. sport nutrition brands fight the trademark legal battles. Though some won their cases, they turned out to be very costly battles due to loss of business during the litigation period. ( You can read more about trademark protection at https://www.tigersocialchina.com/blog/sport-nutrition-china-trademark-protection-and-registration
Failing to register your Chinese trademark early on will create issues for long term growth. If you wait until after you’ve built momentum for your brand, the cost associated with recovering your trademark will be significantly higher. Trademark squatters take advantage of well known brands’ popularity and brand equality that are already established in China.
Brands also need to be cautious that some distributors you are working with might have already registered your trademark. Even if your sales are good and your relationship with the distributor is positive, as long as your brand doesn’t own your trademark in China, it still entails headaches down the road.
If you are in the middle of a legal dispute with a trademark squatter in China, make sure to seek legal advice, ideally from a firm based in China. You shouldn’t rely on either this blog article ( and the author ), nor any “helpful “distributors to help you resolve the trademark issues. Hire an attorney. They are paid to work on your side.
Where and How to Check Your Trademark Status
Check to see if your trademark is already registered in China. The website from the Trademark Office of the State Administration is the official source for you to find the information: http://wsjs.saic.gov.cn/ It has an English translation, but one might find it hard to navigate. Here is a great PDF guide created by Australian Government. https://www.austrade.gov.au/.../guide_to_searching_chinese_trade_marks.pdf.aspx
4. Only Investing In Platforms But Not Marketing
Alibaba, Tmall and cross-border eCommerce have become the buzzwords every sport nutrition brands’ owners and international sales managers have tried to figure out and talk about in the past two years. As more brands find success online, eCommerce seems to be the golden key to unlock the Chinese market’s potential. However, it is just one piece of the puzzle. What brands might not realize is the time and investment required to build brand awareness, provide product education, attract and engage with consumers before driving them to eCommerce sites and converting the sale.
Just like in the United States, consumers don’t exclusively make their purchasing decision on Amazon. They might have already read your product information on your website, been entertained by a workout video posted on YouTube, or looked up reviews and comments on Facebook. While the same process occurs in China, it can’t occur on these platforms because they are blocked in China. Chinese consumers are active on local social media platforms such as WeChat and Weibo. As brands and marketers, you need to have a digital marketing strategy on these platforms to generate interest, awareness, consideration and finally trigger purchasing behavior.
If Tmall or JD.com is your only strategy, your sales will be limited to consumers who have already heard about your brand. Your distributors will only focus on the well known SKUs and sell to existing customers, where they will see the quickest return on their investment. Your distributors, whether using online or offline channels are your sales solutions but not your marketing solutions. If you are happy about the results one Tmall or JD store deliveries, it likely means your brand has untapped potential.
5. Disregard the Importance of the Mainland China Market
The Chinese market is very different from Hong Kong and Taiwan markets in in terms of regulations, languages and fitness culture. Before the advent of the cross-border eCommerce model, Hong Kong was the “gateway” to mainland China. Chinese consumers used to join tour groups and travel to Hong Kong for a shopping spree of luxury goods, which were unavailable or very expensive in mainland China at the time. About 4-5 years ago, many distributors in mainland China would buy from distributors in Hong Kong and resell the products to gyms and nutrition stores in China. This grey channel still exists but has started being replaced by more regulated cross border platforms, especially after the new eCommerce law effective this year. Nowadays, retail is still a viable business in Hong Kong, while in China, the majority of sport nutrition sales are done online.
With that being said, it’s very important to treat mainland China as an individual market and allocate resources and personnel dedicated to it. Companies who believe their distributor in Hong Kong or Taiwan can manage and grow their business in China are holding themselves back. Chances are, your Hong Kong or Taiwan distributors will need to find a business partner or distributor in mainland China who are willing to commit to the brand. Even if it is a reliable business partner with a proven track record, there will be a lack of transparency for the brand to access information and have a clear view of business activities in China. This added layer will hinder your brand’s growth in China, especially as your competitors are taking a more direct and involved approach.
It’s also important to know that Facebook, Instagram and Google are NOT blocked in Hong Kong and Taiwan. Your brand’s investment on digital marketing on these regions won’t be translated to sales in Mainland China.
Some of these mistakes can be prevented and are even reversible, while some can cause severe damage pushing your brands out of the market. Make sure you work with professionals to create a sales and marketing strategy for China. Otherwise, you might be moving full-speed ahead in the wrong direction.