The retail executive who has helped hundreds of brands enter the lucrative Chinese market has shared the secrets to success just two years out from a massive forecast spending hike in China.
For years, as the Chinese market booms on the back of an unprecedented spike in discretionary spending, China has been one of the most sought-after markets for Australian retailers.
Dustin Jones, managing director of Fung Retailing’s ARC, has been at the forefront of this wave of investment, helping some of the world’s most successful brands sell into China – and boost their profit margins as a result.
Despite currently having the third-largest consumer market in the world, Mr Jones says this appetite for spending in China will only accelerate, with a massive spending hike to come in just two years’ time as a new generation of spenders break into the Chinese market.
“The economic silver of China is coming and that’s about two years away when the millennials in China begin to inherit the financial wealth of his or her parents or grandparents and it will be the wealthiest gen to have ever exist in an Asian market. That type of economic power will create a huge appetite for consumption,” he says.
“It’s going to be something that gives back in dividends if retailers are willing to put investment at the front of this. We talk a lot about preparing brands for the economic silver that’s coming,” he told Retailbiz.
As brands await this retail windfall, they have an immense opportunity to get ahead, he says.
“It’s not if but how and not when but now. It’s not if you get started but how and how fast – and you do that first by establishing your digital presence and social awareness with that consumer and secondly by taking a management partner that can get those steps to scale,” he says.
Brands with an “authentic” and unique offering have a particular upper-hand in a population of 1.4 billion people all hungry to stand out, he says.
“Differentiation becomes even more important in how they look or dress and experiment with products so there’s a real opportunity for foreign market players to come in and offer that,” he says.
But not every brand should take on the Chinese market, Mr Jones says, with brands selling baby care, fashion, retail and beauty products with a “unique style and sensibility” having a particular upper hand.
“There are certain segments of the Chinese market receptive to new brands and certain product types and other categories where the Chinese economy hasn’t evolved yet or it’s oversaturated.”
And for those brands that have an offering that might appeal to the Chinese consumer, there are still extensive barriers to entry like a lack of resources, according to Mr Jones.
“It’s a natural progression for brands but they face complex problems like sizing and compliance and regulation.”
Tips to thrive in an evolving market
With a push and pull of barriers and opportunities, Mr Jones says that as well as having a unique offering and equipping yourself with a social strategy and digital presence, it’s essential that retailers think about their internal leadership capabilities before tackling the Chinese market.
A lack of leadership alignment on long-term vision for Asia and China is the number one cause of failure for retailers looking at tackling the Chinese market, Mr Jones says – making it a key hurdle to overcome.
“If you can’t get alignment of your organisation to be all in on China it’s going to be very difficult to succeed because most brands are compartmentalised and the CEO needs to cut across those apartments and find full alignment. Those engines have to work in a foreign market and the leaders have to be aligned to the ambition of growth in a foreign market,” he says.