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Supply Chain: Distributing in China

By: Simon Kaye, Jaguar Freight
Posted: April 2, 2008, from the April 2008 issue of GCI Magazine.

The Chinese market has become the eighth largest in the world and the second biggest in Asia. Better distribution channels are crisscrossing China every day, and leading indicators show that the antiaging, skin care and sunscreen markets will continue to expand and strengthen. Western products have tremendous weight in China, and as the market evolves, strong distribution networks will become absolutely vital to ensuring that products reach their targets.

Electronic tracking heuristics and taking advantage of already-established connections that people in the freight-forwarding industry have will become not an option but a necessity. When dealing with a market with as much tremendous potential as China, creating the groundwork now will lead to far fewer headaches in the future, and a robust system that can handle limitless growth and tumult will be invaluable when it comes to competing against local cosmetics companies.

The Market Moves West

Current volatilities tied to the sub-prime collapse notwithstanding, the Chinese economy is growing at a rapid rate. The Chinese mid-income group is especially fertile in the richer parts of China, such as Hong Kong and the country’s East Coast, and this has given rise to a demand for more cosmetics from American and European suppliers.

Additionally, the idea of the supermarket is catching on in China. As the situation improves for well-off and middle-income Chinese, the poorest also find themselves able to shop for consumer cosmetics at new supermarkets that are cropping up in the wake of increasing prosperity, bringing in toiletries and hygiene products never before seen in the East.

According to Euromonitor International’s yearly report, premium fragrances are seeing some of the biggest gains, as white collar females are finding themselves with new disposable income. Since fragrance is a status symbol in China, these women are the biggest purchasers of both men’s and women’s perfume, and are giving rise to the spread of specialized chain retail perfumeries, where other cosmetics are also sold. Euromonitor predicts strong growth across the board for those able to take advantage of the current bullish climate for cosmetics in China. While the multinationals still lead the market with their global brands, smaller domestic partners are making inroads, with their emphasis on traditional Chinese medicine and lower prices.

Boots On the Ground Vital