Chemist Warehouse ‘a gateway into China’

Chemist Warehouse has built up a customer base of almost six million in China on Alibaba’s TMall Global platform.

A daigou, or personal shopper, for customers in China. Picture: Chloe Smith

The privately owned Chemist Warehouse group is stepping up its sales of Australian consumer goods to China, pitching itself to a growing number of brands as the gateway to an increasingly affluent middle class, as Beijing tightens controls on informal e-commerce channels.

“We see future growth here,” the Sydney-based chief executive of Chemist Warehouse’s China division, Nancy Jian, told The Australian during a recent visit to China. “We already have almost six million customers in China on Alibaba’s TMall Global platform, which we have built up in the past 3½ years,” she said. “A lot of the consumers in China already know us and trust us.”

While the company does not release sales figures, Ms Jian said the Chemist Warehouse site on Alibaba’s TMall Global platform had sold more than $22 million (100 million yuan) of goods in China in the first seven hours of trading during the annual Singles Day sales frenzy on November 11 last year.

Ms Jian said Chemist Warehouse was already the largest single foreign platform on TMall Global specialising in consumer and health products such as baby formula, skincare, vitamins and health supplements.

Chemist Warehouse signed an exclusive deal with Alibaba in September 2015 and threw itself into its first Singles Day selling campaign in China that November.

While it maintains a permanent presence on the TMall Global platform, the annual Singles Day shopping day, hosted by the Alibaba e-commerce group, continues to be the highlight of the Chinese shopping year and the largest shopping day in the world.

In November 2015, Chemist Warehouse became the first ­retailer in the world to sell more than one million yuan of goods ($220,000) in three minutes, and then the first foreign merchant to sell 10 million yuan of goods ($2.2m) on Singles Day, a feat it achieved in 46 minutes. But that was only the beginning.

“We have been smashing our targets every single year on Singles Day,” she said. “For the past three years in a row, we are the only merchant that continues to hit 100 million RMB ($22m) in sales faster each year.

“In 2016 we hit it in 24 hours. In 2017 we hit it in seven hours and five minutes. In 2018 we hit it within seven hours.”

The company will not disclose how much it sold during the 24-hour Singles Day last year, but Ms Jian said sales in China are continuing to grow strongly.

Malaysian born Ms Jian, who speaks Mandarin, Cantonese, ­Bahasa and English, moved to Australia when she was 15 to finish high school in Adelaide.

She went to university in Melbourne where she studied to be a pharmacist. She moved to Sydney when she joined Chemist Warehouse as a pharmacist, moving up the ranks to the point where she now manages 10 pharmacies.

Her Chinese background has been a major asset to the chain as it began to see the potential of the Chinese market for the types of goods sold in Chemist Warehouse stores.

It was about 2013 when Chemist Warehouse began to see the potential of the Chinese consumer market, as it observed an increasing number of Chinese daigou, or personal shoppers, coming into its stores filling their suitcases with products to sell to family and friends in China.

“We saw a lot of daigou buying from us and selling into China,” she said. “In 2015 Australia signed a free-trade agreement with China. At the same time China began to open up free-trade zones and set in place a structure [to handle goods that had been imported through e-commerce],” she said.

“We were approached by Alibaba and a lot of other platforms to sell our products into China by e-commerce. We chose to work with Alibaba. Its infrastructure system is more suited to the Chemist Warehouse model and the potential we could see to get into China. We also offer the use of the Alipay system, which makes it easier for Chinese tourists and Chinese consumers to make payments.”

Ms Jian said health supplements are the biggest single product sold through its store on TMall Global.

“Australia is very famous for its authenticity and the high standard of its vitamins,” she said. “Not only that, they also like our baby formulas and products and skincare.”

She said Chemist Warehouse was able to use the data it accumulated from selling to Chinese customers in Australia, and now online through TMall Global ­direct to China, to get an insight into the buying habits of consumers in China.

“That’s the reason for our success in China,” she said. “We know what the consumer wants. They were already shopping in our stores in Australia before we came to China. We analyse the data and we know what they want.”

Ms Jian said some 80 per cent of Chemist Warehouse’s customers in China were women, with most aged between 18 and 33.

“It is getting younger and younger,” she said. “There is a new generation of e-commerce consumers coming up, especially for the medium-tier consumers as they can afford it.

“In the past, imported goods in China were always expensive. But, now through e-commerce, the price is becoming more affordable, especially with vitamins.”

Ms Jian said the stricter e-commerce laws introduced into China this year will make it harder for the informal daigou channel around the world to sell goods in big quantities back to China, but are not a problem for companies such as Chemist Warehouse, which is familiar with the requirements of Chinese customs and can sell its goods through official free-trade zones.

She said the Chinese government was supportive of expanding e-commerce, with the establishment of some 37 free-trade zones across the country that handle goods imported through e-commerce platforms.

Under the system, Chemist Warehouse can transfer goods from Australia to bonded warehouses in China. Once the goods are ordered online by the Chinese consumer, they are packaged in the warehouses, scanned by Chinese customs and then sent to the consumer in China.

The expansion of free-trade zones allows foreign sales platforms such as Chemist Warehouse to be closer to more customers in China, allowing for faster deliveries.

“President Xi has approved more provinces to open up free- trade zones,” she said. “It makes imports a lot easier and consumers want it. Over the next few years cross-border e-commerce will continue to grow.

“It will become more regulated, which is why the new e-commerce regulations are there. In future there will be less daigou selling and there will be more platforms like us — merchant with good reputations — selling the same end products, which are safe for consumers.”

Ms Jian said one of the common problems some Australian companies made when selling into China was trying to compete on price.

“There is a saying in China that there is no ‘lowest price’, there is always a lower price,” she said. “People wanting to come to the China market need to have some good planning and know what they are doing. Lowering the price is not the way to go as there is always someone else who will go lower.”

She said it was important for Australian companies wanting to sell into China to seek out partners who could advise them on the market. Chemist Warehouse wanted to help Australian companies to sell in China, she said, particularly those whose goods were already being sold in Chemist Warehouse stores.

“The reason we are here is to bring the suppliers and brands with us to come to China together,” she said. “If you do it alone, the journey can be long and hard. It’s better to do it together.”