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China backdown boosts Aussie brands

News, 22 March 2017
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BEIJING: A delay on restrictive e-commerce regulations in China has boosted the fortunes of Australian health and nutritional brands that rely on the country's booming online market.

The new regulations, which were announced in April last year and would have required international brands to meet complex new licensing and labelling requirements, were controversial among brands worried about the potential impact on their Chinese sales.

In just five years, China's cross-border market has soared from around Rmb 53bn (US$7.7bn) to an estimated Rmb $626bn, according to Mintel figures cited by the Financial Times.

Brands have been quick to recognise the opportunity in China, with many Australian nutritional brands opting to sell via popular e-commerce platforms, such as Tmall.

Many brands, such as a2 Milk, have also found success by targeting the less formal, but incredibly powerful, "daigou" network of Chinese personal shoppers, who buy in Australia to resell online in China.

(For more, including how a2 Milk accesses China's discerning consumers with a network of personal shoppers in Australia, read Warc's exclusive report: Australia's brands crack China with 'daigou' personal shoppers.)

The regulations may have dampened China's booming e-commerce market for international brands, which enjoy a reputation for being more trustworthy than many China-produced brands and are thus popular in the country.

Chinese authorities are also realising the potential of international e-commerce in the country, with the number of pilot free trade zones – which can house cross-border e-commerce operations – boosted from 10 to 15.

News of the decision to delay an increase to e-commerce taxes will come as a relief to many Australian exporters. Several companies, including Blackmores, have endured a rocky year on the share market as the impact of the proposed regulations remained unclear.

According to the Australian Financial Review, Blackmores shares have more than halved since the new regulations were flagged, while infant formula producer Bellamy's share value was slashed by more than 70% over the same period.

Shares in Australian diary brand a2 Milk and Blackmores jumped on news that the new regulations would be delayed.

Data sourced from Financial Times, Australian Financial Review; additional content by Warc staff

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