Chinese consumer brands look to crack the global market with Singapore as a testbed

Chinese consumer brands are using Singapore as a cultural testbed for global expansion, due to the city’s unique fusion of Asian and Western cultures.

In August alone, Chinese tea brand Chagee opened three stores in Singapore. Pop Mart, a Beijing-based collectible toy retailer, wrapped up its second annual toy show on the island late last month with more than 50 artists.

While Chinese companies have long toyed with global ambitions, their latest strategy involves a concerted effort to reach Southeast Asia through Singapore.

“Singapore is what we call where east meets west, right? So for Chinese companies, if they want to go overseas, I think Singapore is a good middle ground,” said Xiaofeng Wang, a principal analyst at global market research firm Forrester. .

Pop Mart executives are considering setting up an international headquarters in Singapore, Jeremy Lee, Southeast Asia Go-to-Market Director at Pop Mart International, told CNBC on the sidelines of the Pop Toy event in late August.

“If there’s anything they (Pop Mart executives) want to launch in Southeast Asia, anything they want to see or work on, (Singapore) is a good testbed to start with… or not, then there’s a good buzz from there, said Lee.

Pop Mart sells products in 30 countries through online or physical stores, according to its website. First-half overseas sales rose 260% year-on-year to 1.35 billion yuan ($189.90 million). That helped boost sales growth by more than 60%, even as China’s economy slowed.

After decades of making only Western products, Chinese companies are increasingly launching their own brands.

The new generation of Chinese brands is different – they don’t try to hide their “Chinese identity,” says Wang Forrester.

However, new brands embrace their cultural identity, using original characters and designs to enter overseas markets, which in turn leave them out of competition, he said. That “gives a unique advantage.”

One of the hallmarks of the Chagee tea brand is the design of the cups and bags that carry the same elegance as the popular Christian Dior bags. But the name of the company and its products in Chinese attract the attention of traditional Chinese opera. Chagee is also a shortened version of the original name in Mandarin, pronounced “onion chaji.”

Chagee’s new directly-owned store is part of the tea brand’s revamped efforts to tackle Singapore – a “launch pad” to tap into its huge potential in the Southeast Asian region, and eventually the world, said Lu Mian, managing director and managing director of Chagee. head of global market operations.

“In the next 5 years, Chagee will focus on expansion efforts in eight countries, namely Singapore, Malaysia, Thailand, Indonesia, Vietnam, the Philippines, Japan and Korea, with a priority on SEA countries,” Lu told CNBC.

Chagee will establish its Asia-Pacific headquarters in Singapore in 2023 and expand its Southeast Asia team, although the company did not disclose the number of people.

Embracing a Chinese identity has worked for some of these companies, including a small Chinese toy company that joined the Pop Toy show in Singapore last month to launch exclusive toys.

For example, the newly launched doll toys from Hidden Wooo – a three-year-old Chinese brand – were snapped up by early bird ticket holders for $129, hours before the show opened to the public on August 23.

But some also find it challenging to sell their wares because of the cultural background, even though Singapore is a mixture of Chinese, British and Southeast Asian cultures.

Hangzhou-based Dodo Sugar, which participated in the Pop Toy show, said it was difficult to convey the concept behind the products to an international audience because the designs were often based on Chinese culture or stories.

The company still plans to expand to Singapore and Thailand through local partnerships to set up stores in shopping malls, while attending other events such as the Pop Toy Show to promote its toys.

Xiamen-based HeyCiao, which helps Chinese companies in business operations, including online sales, told CNBC that while the Chinese market focuses on “cute” styles, Singapore’s market is more diverse and includes cool and alternative designs.

In addition to some aesthetic challenges, Chinese companies also encounter business strategy and operational issues in Singapore.

Earlier this year, Chagee had to end a five-year effort to enter the market with a local franchise partner. Now the company is focusing on directly owned stores.

Chinese companies should also pivot from, for example, WeChat, to YouTube and Facebook, said Pop Mart’s Lee.

“We know that in China, some ecosystems will be closed … They will work in China, but they may not work outside … these are different applications.”

Pop Mart said it is expanding its e-commerce presence through platforms such as Shopee, Lazada and Tiktok Shop.

The ByteDance-owned TikTok platform will be a “huge channel” for Pop Mart, Lee said.

TikTok Shop is also similar to Douyin’s partner in China, creating a familiar infrastructure for Chinese companies looking to expand overseas. The video-sharing social media app has set up its Asian headquarters in Singapore. Another headquarters is in Los Angeles.

Pressure on Chinese companies to reduce Singapore and other overseas markets will grow.

Other Chinese consumer companies are also approaching Singapore for global expansion. JD.comwhich has been slower than its peers to expand cross-border e-commerce, announced last week that it has added shipping and delivery options to Singapore.

Wang Forrester believes that if China’s economic growth slows, the level of global expansion for Chinese companies will certainly increase, driven by the need to seek higher growth and profits in overseas markets.

—CNBC’s Evelyn Cheng contributed to this report.