Despite political tensions, China’s retail outlook is robust for FMCG

While the political relationship between Australia and China became fragile in 2020, the retail outlook is far more robust.Looking back over last year, the state of Australia’s relationship with China has never been far from the front-page headlines of our major media outlets, despite the turmoil of living through a global pandemic. As we look forward, hoping for more stability and certainty, and less turmoil, it’s a good opportunity to look back at what happened last year and how things may turn out in the future.Strained relationshipAustralia’s relationship with China was already strained in the years leading up to 2020. The banning of Huawei from our 5G network in response to security advice, and the introduction of new foreign interference laws which appeared to target China (both in 2018) had already had an impact, and so most of us China-watchers were hoping to see some improvement in the relationship between the two countries in 2020. Unfortunately, it only got worse for reasons none of us could have foreseen.The year started with the outbreak of Covid-19 in the Chinese city of Wuhan (population 11 million) and we all watched with astonishment as China adopted draconian lockdown policies to stop the spread of the virus and isolate those who had been infected. We now know that this was just the start of a global pandemic which has spread to every corner of the planet, crippled economies and changed everyone’s lives. It’s also moved everyone online for work, business, marketing and shopping (more of that later).What followed was an “annus horribilis”. Starting with Australia’s call for an international enquiry to establish the origins of Covid-19, followed by an escalating tit-for-tat battle and diplomatic “war of words” between the two countries, culminating in China’s decision to impose bans and/or tariffs on seven Australian commodities (wine, coal, barley, copper ore and concentrate, sugar, timber and lobster). There is good reason to wonder whether Australia was wise to place so much emphasis on China after signing the FTA in 2015. There has certainly been much talk of the need to diversify and place less reliance on China.Retail in ChinaMeanwhile, while the politicians and diplomats have fought it out, China’s economy has bounced back from the Covid-19 crisis with a strong focus on domestic consumption and innovation. China’s retail sector is booming again, as evidenced by Alibaba’s “Singles Day” in November (China’s version of “Black Friday”, which falls on November 11 each year and was extended to 11 days in 2020). It broke all records again, recording RMB372.3 billion ($76 billion) on the day itself and RMB467 billion ($96 billion) over the whole 11-day period.Of significant note is the major shift towards online shopping, which has taken a big leap forward in 2020. A quick glance at the number of users across Alibaba’s numerous digital platforms provides plenty of evidence of the rapid development of China’s online retail marketplace:●     China retail marketplaces – added close to 119 million MAUs (monthly active users) while the number of annual active consumers reached 742 million in the last quarter.●     B2B – 1688.com has 920,000 paying members and 41 million active buyers (domestic); Alibaba.com has 190,000 paying members and 26 million active buyers (international).●     Supermarket chains – Freshippo reported that its annual active consumers have exceeded 25 million. It’s also expanded its footprint from 159 stores to 227 stores in the past year.Chinese shoppers are now spoilt for choice in terms of accessing technology, connectivity and platforms that we can only dream about from watching sci-fi movies. Leveraging new and exciting innovations in live streaming, artificial intelligence, holograms, social media and digital payment systems, all accessible via 5G fast networks, China’s e-commerce marketplace is now way ahead of its time.What does this mean for Australian FMCG players?It may come as a surprise to learn that, despite the rising geopolitical tensions between the two countries, Chinese people are voting with their e-wallets to buy the best brands and products that they can swipe into their online shopping carts, irrespective of where they come from, including Australia.Reports from last November’s Singles Day suggest that Australia was fourth on the list of sales of overseas brands, with more than 2000 Australian brands on offer, attracting 800 million Chinese shoppers who spent over $1 billion on Australian goods during the 24-hour shopping spree. This was a much better result than expected and will encourage Australian FMCG players to start or continue their China journey in 2021 with perhaps a little more caution than before.So, here are my top tips for Australian FMCG players considering their options in China 2021: ●     Seek independent and objective advice – go in with your eyes open.●     Work hard to articulate your brand attributes and value proposition in a Chinese context.●     Go well beyond “clean and green” – articulate the health benefits of your product.●     Build an online presence in China via the numerous Chinese e-commerce platforms.●     Develop a compelling digital marketing strategy in China.Let’s leave the final words for 2020 to China’s President, Xi Jingpin, who said in November that he expects China’s goods imports to exceed $US22 trillion in the next 10 years. That’s a big number. Imagine what it would mean for you and your business if you could get a small slice of that!