Navigating Covid-19: A ‘Big Health’ Promoter

Under the successive onslaught of local disruptions and the Covid-19 pandemic, many Hong Kong retailers, brand owners and distributors that used to depend on bricks-and-mortar stores are actively going online and using cross-border e-commerce (CBEC) platforms [1] to open up the mainland consumer market. As the living standards and health awareness of mainland consumers improve, and following the successful launch of the Healthy China Initiative, the ‘big health’ industry is set to generate new opportunities for Hong Kong businesses in this time of adversity.

In view of this, HKTDC Research interviewed Rebecca Wong, Chief Executive Officer of Zenecom 360 Marketing, to find out how Hong Kong businesses can capture the mainland big health products market by combining CBEC platforms with O2O (online-to-offline) marketing.

Advantages of CBEC Model

In Wong’s view, the CBEC model allows Hong Kong businesses to switch to online marketing in no time. She said: “Generally speaking, imported goods need to comply with CCC (China Compulsory Certificate) requirements to sell in bricks-and-mortar stores on the mainland, a process which takes between one and three years on average and involves hefty costs. The CCC requirements are exempted if sold via CBEC, which means Hong Kong businesses can enter the mainland consumer market at a much lower cost.

“Besides, the CBEC integrated tax rate is based on zero tariff, and other taxes – such as import VAT and consumption tax – are collected at 70% of general trade. The applicable tax rates are generally lower than those for other import models.”

Wong said: “Hong Kong businesses can further reduce logistics cost by adopting the import model of ‘bonded online shopping’. Under this model, Hong Kong businesses may import large quantities of big health products from overseas warehouses for storage in bonded warehouses on the mainland after completing customs record filing. They only need to clear customs after customers have placed orders.

“The average transportation and storage cost of sending each product from Hong Kong to the mainland bonded warehouses, together with the cost of last-mile delivery (i.e., delivery from the bonded warehouse to the customer) only amounts to about RMB10, which is much cheaper than the logistics cost of about RMB30 to send the item from overseas warehouses directly to the customer.”

Formulation of Targeted Marketing Strategies

Although the CBEC model is conducive to lowering the threshold for entering the mainland consumer market, Hong Kong businesses must formulate targeted O2O marketing strategies to secure a firm foothold on the mainland market. Wong said: “Mainland China is a huge market with 1.4 billion consumers and is receptive to all kinds of consumer goods. However, if a company is not well prepared, fails to find an advantageous position and identify target customers in the competitive market, and has not formulated a holistic O2O marketing strategy, it will not be able to reach millions of netizens and effectively translate exposure or network traffic into sales volume, even if it is capable of spending hundreds of thousands of yuan a month on marketing.

“Based on our years of marketing experience in mainland China, marketing strategies must combine online, offline and other publicity channels and accurately target customer groups to yield twice the result with half the effort.”

In targeted online promotions, Wong stressed the need to choose suitable key opinion leaders (KOLs) and key opinion consumers (KOCs) for word-of-mouth marketing and publicity among target customers. She said: “To start with, Hong Kong businesses must find KOLs and KOCs suitable for the nature and positioning of their products. Most KOLs have their own followers and are active on different public platforms (public domain traffic), such as Xiaohongshu (Little Red Book) and Douyin (TikTok), in fields such as makeup and sports.

“KOCs are opinion leaders in private domain traffic. They usually have things in common with other participants, such as interest and identity (e.g. first-time mums) and can conduct marketing among target customers.”

Wong emphasised the need for a structured, planned approach to building up a brand’s social media profile through the use of opinion leaders, saying: “Brands can begin strategic word-of-mouth marketing after choosing the suitable candidates. They usually invite KOLs to start ‘seeding’ by making product evaluation or comparison on designated social platforms to increase the exposure of their products and brands.

“The KOCs can also share original content in WeChat groups and explain the properties of the products and share their afterthoughts with fellow group members to produce greater synergy effect. KOLs may be hired for live-streaming marketing when the products have gained considerable exposure. They may make exclusive offers in live streaming to lure customers to make snap purchase decisions and translate product exposure into sales volume.”

Wong reminded Hong Kong companies not to underestimate the importance of using offline sales channels to boost consumer confidence. She said: “For big health products, total sales in mainland retail pharmacies and through online e-commerce exceeded RMB380 billion and RMB80 billion respectively in 2018. For this reason, we are co-operating with the health insurance designated pharmacy Dashenlin to display WJH products in its 4,000-plus chain stores.

“Through O2O promotion, potential customers can read users’ evaluation on online platforms and see the products for themselves in the sales outlets. This boosts their confidence in our products and brands and prompts them to eventually place orders on WJH. 

“Besides co-operating with pharmacies, we have also established similar partnership relationship with different offline point-of-sales (POS) chains, such as large stadiums and children’s amusement parks, to display our products and promote offline marketing among different consumer groups. Looking to the future, we plan to increase our offline POS terminals from the present level of 10,000 to over 250,000 by 2025.”

Wong stressed that the CBEC model of marketing is a ‘no pain no gain’ process. She said: “Generally speaking, companies need to concentrate their resources on marketing on chosen social platforms for at least six months to achieve the desired results. Without intense cultivation it is impossible to accumulate brand and product visibility, let alone translate product exposure into sales volume. If they do this well, they are likely to break even in the first year, begin recouping part of the marketing expenses in the second year, and start making profit in the third year.”

[1] CBEC platforms refer to third-party websites or websites set up by enterprises themselves that sell imported goods to mainland consumers.

[2] Haitao, or overseas online shopping, is a shopping model for mainland consumers to directly place orders with foreign shopping websites and have the goods mailed or couriered to them by international logistics or forwarding companies.

[3] CBEC enterprises refer to overseas-registered enterprises which sell CBEC retail imports to domestic consumers on a cross-border basis, and are the owners of the goods.

[4] Some drugs may soon be allowed to enter the mainland consumer market via CBEC channels according to the Implementation Plan of Beijing Municipality for the Pilot Programme of Selling Pharmaceutical Products Via CBEC formally issued at the end of 2019.