2018
China maternity
White-paper
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Market overview
| Background
China’s Maternity Market became a recognisable market to the West at the start of the 21st
century, when the Chinese Generation X (70s and 80s) began to have children.
Before this time there was no such“Maternity Market”. Mothers from prior generations went
to stores to buy necessities and relied on homemade items for other needs.
Thanks to China’s economic liberalisation in 1978 and beyond, the generation from the late
70’s / 80s were brought up in an increasingly wealthy and open society. This generation of
parents cares for their children in different ways to their parents and grandparents.
Firstly, they tend to rely on science and learn how to look after their children from the
book rather than the learned experience of their parents. This has tended to make them
significant consumers for mum and kid products, but also hungry students seeking new
information and eagerly sharing it.
Secondly, they have grown up in generally wealthier society and are not as thrifty as their
parents.They have a bias toward purchased items rather than concentrating on homemade
items.
Thirdly, they are the first generation in modern China who have experienced fierce
commercialandeducationalcompetition.Thismeanstheyforeseethepossiblecompetition
for their children once they become adults. They want their children to ‘win’ from the very
beginning (-------------)”. This is especially apparent in tier 3 and lower tier cities, where
some mums buy cheap products for themselves or for other family members, but buy only
imported or expensive products for their children.
Whilenotexhaustive,thesethreefactorssignificantlyaffectthecurrentconsumerbehaviour
of Chinese mothers.

When making purchasing decisions for their kids, mums:
aAre consumers, but their purchasing power for children’s products is relatively high for
atheir income level. For their children they will choose the best quality and tend not to be
asensitive regarding prices.
aThey are learners and information sharers. They learn how to synthesise information and
alook after their kids by gathering information from websites, celebrities, experts and
afrom manufacturers.
aTheyalsoexchangealotofinformation.Thismeanstheyarehighlyreliantonsocialmedia
aandtheirpurchasinginteractionshappenmostlyinrealcommunities (likeneighbourhood
aor mum and kid stores nearby) or virtual communities (like Wechat groups or online
acommunities such as BabyTree etc.).
2018 MARKET SNAPSHOT
The maternity market is performing strongly. A majority of companies selling in this market have
grown in the last two years. 60% of companies grew by more than 20%. Additionally a large
majority of maternity companies expect to grow from one year to the next
Consumers in this market have evolved their preferences for baby products. There is a strong
interest in non-traditional products such as baby swimwear, healthy nutrition and post-natal
comfort products. According to the survey 84% of respondents think it is necessary for companies
to expand the range and types of maternity products that they sell. This reflects a desire for
innovation in the market. 76% of the respondents also said that consumers expect upgraded
products and services from the maternity brands they purchase.
Improving customer service and experience is still the highest priority for nearly half of all brands
surveyed.
Source: 2018 CBME China Pregnancy and Baby Industry Survey Report

| Channel Information
In general, China’s channels can be explained from version 1.0 to version 4.0:
• Version 1.0 Offline channels, including convenience stores, mum and kid stores,
• department stores, shopping malls, supermarkets, hypermarkets, etc
• Version 1.1 Daigou channels groups of overseas buyers who ship product directly to
• friends and family abroad
• Version 2.0 Online channels and stores such as jd.com, tmall.com, etc
• Version 3.0 Mobile apps like biyao, missfresh, etc
• Version 4.0 Wechat based small programs including numerous newcomers such as Birth
• Mom, Hipac, etc (weishang)
** NotethattheWechatbasedsmallprograms(version4)aredifferentfrommobileApps(version3).Standalong
**alongappscannotprovidetwoimportantfunctions,informationsharing(showwhattheybuyandexchange
**relevant knowledge and information) and profit sharing (introducing buyers and commissions from
**introduction activities). The Wechat based small programs can provide these two functions, which is why
**they are growing much faster than apps and online stores.
Unlike general channels, the Mum and Kid channels are quite unique. If we draw a map for
China’s mum and kid stores, we will see the channels revolve around two centres:
• Centre 1 is the shopfront community. The real community is offline mum and kid stores.
• Every mum and kid store is within community and is like a club for the mums nearby.These
• mums go to the store to buy products, and they learn new information and make friends
• in the process. Around every mum and kid stores are many personal groups connected by
• Wechat. The Wechat group managers/organizers use these groups to educate the mums
• and sell the products. Yutianchuan.com is a typical mum and kid store who use each real
• store as a community centre.

• Centre 2 is the virtual community. The virtual community is an online information
• centre. There are many kinds of virtual communities, such a Babytree or Little Red Book.
• These have different target audiences but all focus on young mums. The most typical
• example of the virtual community (and one growing fastest) is“baituolemama (---------)”.
• This is a Wechat Public Account, with a Wechat “small group” store of the same name
• as well as a big group of subsidiary Wechat Public Accounts. It has no real store, and no
•traditionalonlinestores.ItheavilyreliesonWechatcommunicationandWechatprograms
• to build a customer base and drive sales.
The virtual community tends to drive volume sales in tier 1 and tier 2 cities, while the
shopfront community works better in tier 3, 4 and 5 cities.
There are many channels surrounding these two centres, including all the 4 versions
mentioned above. However these channels mainly function as a display while the two
centres function as the promotion engine and brand building efforts.
If a manufacturer wants to develop Mum and Kid products for the Chinese market and sell
them well in China, they need to understand this current state of the maternity‘eco-system’.
Manufacturers should learn the needs of customers from the two centres, develop their
products accordingly, and promote and sell their products by leveraging the promotional
engine and display arena shown above.

Transaction scale of Chinese online market
Transaction scale of Chinese retail market
Channel characteristics

Entering the market
| Negotiation advice
It is good to acquire the following information prior negotiations begin:
aDetermining genuine willingness to purchase
aSales descriptions of products that are currently sold instore
aNumber of shops and location information
Once negotiations are underway, these are some points to negotiate over:
aPrice, gross profit and charging items
aWhether test distribution is allowed
aWhether the suppliers can enter the online shopping mall
aSupplying methods, return and/or exchange policies, loss policies, settlement methods
aand payment period
aPromotion and brand display
Points not to neglect:
aAny plans for branding or marketing communications
aIntellectual property
Product Categories – Maternity and Infant

What to bring to Chinese distributors – checklist

| Additional considerations advice
aSale Channels
aSale Channelpecial counters in supermarkets or malls
aIn large shopping malls or supermarkets, special counters are helpful to establish the
aimage of the brand. However, this may cost much.
aChain shops
aCooperation with maternity and infant brands can also be helpful to establish the image
aof the brand. Consumers are easier to approach the brand. Member registration and
apromotion activities will also help to increase sales.
aChannel agent
aCooperation with channel agents in different regions can develop the Chinese market
arapidly and thus can increase sales. However, this requires special channel management
aand brand positioning.
aB2C
aCooperation with B2C platforms may be helpful to establish the image of brand, however,
athe price will be lower. Further negotiation about business in hypostatic shops may be
adifficult.
aC2C
aFor brands that first enter Chinese market, we do not recommend this method, since the
aprice will be lower and it does not help to establish the image of brand.
aGroup-buying websites
aThis method of sale can be considered after the brand is well-known in China; it helps to
apromote sale.

aHow can you popularize your product?
aImage display
aTerminal display, printouts (brochure, brand introduction, product catalogue), training of
asalesperson, development of website, Weibo (mini blog) and WeChat.
aEvents and activities
aProbation, promotion, seminars, parties, exhibitions (Children-Baby-Maternity Expo in
aJuly 2015, Guangzhou International Stroller and Baby Product Fair in April 2015, MICE in
aZhengzhou in May 2015) and group-buying activities.
aCooperation
aCooperate with hospitals (doctor, seminars, maternity and infant housekeeping
acompanies, children education, entertainment area in shopping malls, websites and
amedia.
aAdvertisement
aTV, outdoors, vehicle body, print media, Internet, etc.
aPublic relation publicity
aAnswer questions about child caring through Wiki, advertorial on maternity and infant
amedia, BBS and new media.

VERSION 1: store
Leyou
In Currently, Leyou focuses on developing OEM and exclusive agent products to increase its sales.
Very recently US firm Warburg Pincus purchased Leyou for $400 million USD, expecting growth in
the market.
Time of Establishment
Founded in 1999 with headquarters in Beijing
Hypostatic shops
Currently there are over 580 Leyou Shops invested by the brand owner
Market Positioning
Target to middle and high end customers by one-stop shopping service
Online strategy
Self-developed customer app, omnichannel marketing and big data strategy
Warehousing and Logistics
Supported by its own warehousing and logistic facilities, while Leyou online orders are also
delivered by third party logistics, on demand
Purchasing Process
• Centralized purchasing (purchased by the HQ), plus localized purchasing (purchased by local
• shops).
• New suppliers will be required to contact the HQ, and they will be suggested by Leyou to supply
• Leyou online channels (as above mentioned) first.
• Commonly, only those products that are performing well in online channels will be introduced
• by the hypostatic shops.
• Leyou prefers to negotiate with the foreign manufacturers for exclusive distribution, instead of
• negotiating with the importers and distributors in China.
Revenue of the Past 3 Years

Product SKU Proportion and the Proportion of Each Imported Product

VERSION 2: online channel
Jingdong (JD.com)
JD.com is China’s largest online retailer by revenue. It’s B2C e-commerce market share in the 1st
quarterof2017was26%.ItprovidesconsumerswithmillionsofSKUproductsof13maincategories.
JD.com is popular for its low price, good quality, fast distribution, various payment methods and
excellent service. In addition JD.com provides third party vendors with online sale platform. It has
cooperated with many maternity and infant brands, providing consumers with various promotion
and all kinds of products.
Time of Establishment
Founded in 1998, online business started from 2004.
Number of Shops
JD.com is the largest comprehensive online retailer in China. It owns over 292.5 million registered
members, selling millions of commodities including Maternity and Infant products
Warehousing and Logistics
JD.com has 14 fulfillment centres, 515 warehouses and 163,600+ employees in China. It has
invested in smart technologies such as drones and automatic vehicles for delivery, and opened
the world’s first fully automated warehouse in Shanghai
Future Expansion
• Reaching more tier 3 to tier 6 cities
• Continue strengthening its own
• logistics system
• Introducing more brands
Purchasing Process
New suppliers are welcomed
Revenue of the Past 3 Years

VERSION 3: Mobile apps
Missfresh
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VERSION 4: WeChat mini program
Ding Dang
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About Tavi & Co
We are a specialist business development consultancy with a track record in
new market activation in food, beverage, skin-care, supplement and consumer
sectors. Based in Melbourne and Beijing we offer business solutions for
clients seeking smarter access into new markets. We work with international
distributor networks, research and regulatory teams to recommend the best
practices in business development.
David Desmond
Director