September 28, 2022

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Chinese companies look to the US and Asia as growth slows at home

Chinese companies look to the US and Asia as growth slows at home

BEIJING – Some Chinese consumer brands are looking for growth abroad, in markets such as the United States and Southeast Asia.

Takes Minnesota, a seller of toys and household products in Guangdong. Miniso, sometimes called the Chinese Muji, opened a flagship store in New York City’s SoHo in February.

Founder and CEO Jack Yee told CNBC in late June that the store’s total merchandise value — a measure of sales over time — is about $500,000 a month, and will likely reach $1 million a month by December.

More importantly, he said, for stores that operate directly in the United States, Miniso’s gross profit margin is well above 50%.

“If we can get a strong foothold here and create a good business, we won’t have a problem in the United States in general,” Yi said in Mandarin, according to a CNBC translation. His goal is to become the first “$10 and Under” retailer worldwide.

Miniso stores started popping up in mainland China nearly 10 years ago, with overseas expansion starting in 2015 in Singapore. As of March, the company said 37% of its 5,113 stores are overseas.

Faster growth outside China

“The expansion of Chinese companies into overseas markets will be a major trend going forward,” said Charlie Chen, head of consumer research at China Renaissance. “China has already entered a relatively affluent phase with a relatively high per capita GDP.”

He noted that for products such as air conditioners, the penetration of rural households was 73.8% in 2020 – and even higher at 149.6% in urban areas. The Chinese Renaissance expects these penetration rates to increase steadily in the next few years.

“There is very little increased volume or increased demand that can be created in China in a short period of time,” Chen said. “For air conditioner and home appliance companies, where they can get more revenue, it’s overseas.”

Miniso opened its first flagship store in SoHo, New York City in February 2022.

Minnesota

In Southeast Asia, air conditioners have a home The penetration rate was 15%, according to the International Energy Agency.

home appliance companies mediaAnd the Hisense And the Haier Smart Home It has squeezed markets outside of China over the past several years. Even acquired Haier General Electric Hardware unit for $5.4 billion in 2016. Hisense’s goal is that by 2025, Overseas markets will generate half of their total revenue.

These companies are seeing strong growth abroad, if not faster than in China.

“Certainly if [Chinese companies] Want to enter foreign markets, [they] “The need to build their brand, the need to fight with existing competitors. The cost will not be low. At first it will not be profitable. But they are investing,” Chen said.

If Chinese companies are able to build their brand abroad, they can compete with lower selling prices because they own or work directly with factories in China. This has helped companies like Shein become a global e-commerce giant.

Likewise, Miniso’s Ye said his US strategy combines the company’s supply chain network in China with the work of designers in New York — so that products can go from designs to store shelves in about three months.

Yi claimed that this process could take six months or even a year if the design firm needed to find its own factories.

“Outside, what we’re lacking now are design ideas suitable for the locals,” he said. He said Miniso plans to open a product development center in North America later this year and is looking for office space in New York.

June expansions

Other Chinese companies have lobbied to expand overseas despite Covid travel restrictions.

Ant Group, Alibaba’s fintech company, announced last June It launched a digital wholesale bank in Singapore after obtaining approval from the Monetary Authority of Singapore.

Also in June, a Hong Kong-listed gaming company Bob Mart It tested the waters of the United States by opening its first temporary site near Los Angeles. The company sells sets of collectible toy figures – in unmarked boxes. This means that the customer may get a new game to add to a collection, or the same one that the customer has already purchased.

Like Miniso, Pop Mart stores are becoming popular in Chinese malls. There is also a Pop Mart store at Universal Beijing Resort.

Localization Challenges

Read more about China from CNBC Pro

Not to mention the challenge of becoming an effective international organization. CNBC report on Chinese tech companies The work-at-home culture – which includes heavy use of Mandarin and long working hours – has often found its way abroad and discourages local employees from staying.

But whether in electric cars or home appliances, conversations with several Chinese companies reveal a deep-rooted but vague ambition unaffected by the pandemic: to become a global company.

Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.

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