BEIJING — Some Chinese consumer brands seek growth in foreign markets such as the United States and Southeast Asia.
Consider Miniso, a Guangdong-based toy and household goods retailer. Miniso, sometimes referred to as China’s Muji, opened its flagship store in SoHo in February.
In late June, founder and CEO Jack Ye told CNBC that the store’s gross merchandise value — a measure of sales over time — is around $500,000 per month, with $1 million per month expected by December.
Moreover, he stated that Miniso’s gross profit margin for directly operated stores in the United States is well above 50 percent.
According to a CNBC translation, Ye said in Mandarin, “If we can establish a solid foothold here and build a successful business, we will have no problems in the United States.” His goal is to become the first “under $10” retailer in the world.
In 2015, Singapore marked the start of Miniso’s international expansion, which began in mainland China nearly a decade earlier. As of March, 37 percent of the company’s 5,113 stores were located abroad.
Greater expansion outside China
Miniso’s sales declined during the pandemic, as did those of many other businesses. China continues to account for over two-thirds of its revenue. The pandemic has had varying effects internationally and domestically in recent months, as evidenced by data indicating a relatively rapid increase internationally compared to domestically.
The company’s China revenue grew by 11 percent year-over-year to 5.91 billion yuan in the nine months ending on March 31, while its overseas revenue grew by 48 percent to 1.86 billion yuan.
Since the pandemic began in 2020, retail sales in China have lagged. The housing market decline has not helped. According to surveys conducted by the People’s Bank of China, locals’ propensity to save, as opposed to spend or invest, has reached its highest level in 20 years.
The expansion of Chinese companies into foreign markets will be a major trend in the future, according to Charlie Chen, head of consumer research at China Renaissance. China has actually entered a stage of relative prosperity with a relatively high GDP per capita.
In 2020, the penetration rate for products such as air conditioners was 73.8% in rural households and 149.6% in urban households, according to the speaker. China Renaissance anticipates that these penetration rates will rise steadily over the coming years.
“Very little incremental volume or demand can be generated in China in a short amount of time,” Chen stated. Where these air conditioner and home appliance manufacturers can earn more money is overseas.
In February 2022, Miniso opened its first flagship store in SoHo, New York City.
Miniso
According to the International Energy Agency, 15 percent of Southeast Asian households are equipped with air conditioners.
Over the past several years, Midea, Hisense, and Haier Smart Home have expanded into markets outside of China. In 2016, Haier acquired General Electric’s appliance division for $5.4 billion. Hisense’s goal is to generate fifty percent of its total revenue from international markets by 2025.
These businesses are experiencing robust growth overseas, if not faster growth than in China.
Chen stated, “If [Chinese companies] want to enter overseas markets, [they] must build their brand and compete with existing rivals.” “The expense will not be modest. They would not be profitable at first. However, they’re investing.”
If Chinese companies are able to establish their brand overseas, they will be able to compete with lower prices because they own or work directly with factories in China. This has enabled companies like Shein to become global e-commerce titans.
Similarly, Miniso’s Ye explained that his strategy in the United States is to combine the company’s supply chain network in China with the work of New York designers, so that products can go from designs to store shelves in approximately three months.
Ye stated that this procedure could take six to twelve months if the design firm had to locate its own factories.
“Abroad, what we currently lack are design concepts suitable for the locals,” he said. He stated that Miniso plans to open its North American product development center later this year and is searching for New York office space.
June expansions
Despite travel restrictions imposed by Covid, other Chinese companies have continued to expand overseas.
Ant Group, Alibaba’s fintech subsidiary, announced in June that it had launched a digital wholesale bank in Singapore after receiving approval from the Singapore Monetary Authority.
Also in June, the Hong Kong-listed toy company Pop Mart opened a temporary location near Los Angeles to test the U.S. market. In unmarked boxes, the company sells sets of collectible toy figures. That means a customer may receive a new toy to add to a collection or the same toy they have previously purchased.
Similar to Miniso, Pop Mart stores are now ubiquitous in Chinese shopping malls. Even Pop Mart can be found at Universal Beijing Resort.
Localization difficulties
It remains to be seen whether the recent overseas expansion of these Chinese companies will continue.
Due to economic or geopolitical factors, many Chinese businesses have not been successful abroad. Consider ZTE’s inability to expand its smartphone business in the United States following U.S. sanctions.
Concerned about data security, the U.S. government has exerted pressure on wildly successful companies such as ByteDance’s TikTok, which is owned by Beijing-based ByteDance.
Not to mention the inherent difficulty of establishing an effective international organization. According to a CNBC report on Chinese tech companies, the business culture at home, which is characterized by extensive use of Mandarin and long hours, often spread abroad and discouraged local employees from remaining.
Conversations with many Chinese businesses, regardless of whether they manufacture electric vehicles or home appliances, reveal a deep-seated but vague ambition that has not been affected by the pandemic: to become a global company.
