More Chinese companies and brands are starting to take root abroad as their sales at home lag due to the slowing Chinese economy. CNBC Books. In the first place, the United States and Southeast Asia have become a target for Chinese brands.
Guangdong-based toy and home appliance retailer Miniso opened its new store in Soho, New York, in February. The total sales revenue of the store is about $ 500,000 per month, and according to forecasts, by the end of the year, the monthly sales volume may reach one million dollars – Jack Yi, founder and CEO of the company, spoke about this . In the case of stores that are directly operated in the United States, Miniso’s gross profit margin is more than 50 percent.
If we can get a foothold and get good deals, we will have a lot of opportunities in the United States
Ye said. The first Miniso stores appeared in China ten years ago, and overseas expansion began in 2015 in Singapore. The company said in March that 37 percent of its 5,113 stores were overseas.
Business is growing faster outside of China
Like many other companies, Miniso’s sales have plummeted during the pandemic. More than two-thirds of its revenue still comes from China, but the data shows that in the past few months the rise on the international stage has been relatively faster than within China. This is probably possible due to China’s strict Covid regulations. In the nine months to the end of March, according to the company’s announcement, its revenue in China increased by 11 percent, to 5.91 billion yuan, while its revenue from its foreign stores increased by 48 percent, to 1.86 billion yuan.
Foreign expansion will be the trend among Chinese companies in the coming years
– said Charlie Chen, Head of Consumer Research at Chinese Renaissance. He added that China is currently going through a particularly rich period, as its per capita GDP is relatively high. He noted that products such as air conditioners can be found in 74 percent of households in rural areas, and this percentage is higher in urban areas. This is the 2020 data, and since then the show has probably improved even more. Because of this, Chen sees the country as running out of growth potential for companies that sell home appliances, for example.
If these companies want to grow, they should try their luck abroad
– The specialist concluded.
The first swallows are already in stock
Home appliance companies such as Midea, Hisense and Haier Smart Home have entered markets outside of China in recent years. In 2016, Haier acquired General Electric’s appliance unit for $5.4. Hisense aims to generate half of its total revenue from overseas markets by 2025. Even in their home countries, these companies can no longer grow at the same rate as the United States, for example.
According to Chen, this is a very expensive but long-term investment for these companies. They have to break in and gain a foothold as outsiders, and they also have many competitors. They have to spend a lot on brands in order to kick the ball, but they don’t seem to regret the money.
Jack Yi, president of Miniso, said their company’s US strategy is to combine Chinese supply chains with the work of New York designers. With the help of this, their products can go from the design table to store shelves in three months. He added that the design process in the USA is not fully developed yet, but they are working on it. They want to open a product development center in North America later this year and are also looking for office space in New York.
Even the epidemic could not hinder the expansion
Many Chinese companies have not stopped expanding even during the period of travel restrictions imposed due to the Covid epidemic. For example, Ant Group, a subsidiary of Alibaba Vitec, announced in June that it would launch a digital wholesale bank in Singapore after obtaining approval from the Monetary Authority of Singapore. Also this month, toy company Pop Mart began exploring opportunities in the US, opening its first store near Los Angeles.
Localization Challenges
It is not yet possible to determine whether the foreign growth of these companies will be sustainable in the long term. For commercial or geopolitical reasons, many Chinese companies have not succeeded abroad. For example, after US sanctions, ZTE was unable to expand its smartphone business in America. Another example is highly successful companies like TikTok, owned by Beijing-based ByteDance, which has come under pressure from the US government over data security concerns.
Another difficult obstacle facing Chinese companies expanding abroad is that it is simply more difficult to organize operations abroad. Chinese business culture is quite different from Western culture, and this often makes it difficult for a Chinese company to find employees, as European or American workers are intimidated by Chinese customs.
