14 Aug 2014
Birth of "Two-child" Policy Nurtures New Mainland Opportunities
With the incoming selective two-child policy inevitably going to accelerate the birthrate across China, shortfalls in the mainland's childcare and maternity products sectors clearly offer huge opportunities for many Hong Kong companies.
With China's one-child policy having wrought a host of economic and social changes since its introduction in 1979, the country's move towards a selective two-child policy is expected to have similarly huge repercussions. According to the latest forecasts from the Chinese Academy of Social Sciences, the new policy will result in an additional 1.5-2 million births per annum in the period 2015-2019.
The shift in policy, announced in November last year, means that couples may now have two children if either parent is an only child. Previously this was only possible if both parents had no siblings. As one of China's most populous provinces, the impact is expected to be particularly noticeable in Shandong. This East coast province is now expecting to welcome an additional 200,000 newborns per year. As a result, many of its medical, post-natal and child-related industries and services are gearing up, both for the challenges and for the opportunities this represents.
According to industry figures, the total spend relating to the newborn-to-12-year-old sector in 2013 equated to some Rmb1.15 trillion. With the new policy expected to drive annual growth of 25%, it is expected that that figure could top Rmb3 trillion by 2019.
Civil servants and other employees in government-owned sectors are expected to be the key beneficiaries of this relaxation in the country's birth control programme. As well as being relatively affluent, members of these groups are said to have a greater propensity to have an additional child.
In the wake of the widespread national anticipation spurred by the move to the new policy, Shandong introduced its own local guidelines on 30 May this year. These are designed as a blueprint for those looking for success in the growing mother and baby market. The guidelines identified four important considerations for businesses in the sector – trust, dedicated products, new sales channels and the growing importance of O2O (Online-to-Offline).
In the mother and child sector, safety is always the top priority. Due to lack of confidence in domestically-produced milk powder, mainland consumers are keen to source such products from overseas suppliers. Maintaining product safety and developing consumer trust are, therefore, primary considerations.
Dedicated baby products
Contemporary parents have a distinct partiality for electrical home appliances tailored especially to the requirements of babies. Prime examples here include thermostatically-controlled milk warmers, multi-function baby food makers and steam sterilisers.
New sales channels
As well as fully utilising traditional sales channels, new marketing tools – notably mobile phone apps and the WeChat platform – should also be properly exploited. If used properly, these channels can significantly enhance the effectiveness of conventional marketing.
Emergence of O2O
Online shopping platforms offering competitive prices, convenience, efficiency, and door-to-door delivery services have proved increasingly popular over recent years. All of these factors make this model particularly suitable for the mother and child sector, making a slew of entrants almost inevitable.
One company already fully aware of all four of these principals is Qingdao-based Supu Mall (supuy.com). With its own website, delivery centres and purchase centres, the business has also established a presence on a number of major B2C platforms, including Tmall.com, JD.com and dangdang.com.
As an additional move, it has developed its own mother-and-child-friendly brand – Mianxin. This has seen its website become established as one of the most well-known one-stop online shopping platforms for mother and infant products in the region.
According to the company's marketing department, Supuy actively moved into the O2O sector in the latter half of 2013. On top of its traditional range of mother-and-child products, the company has also teamed up with a number of specialists in related sectors to create Shandong's first alliance of mother-and-child service providers. Members of this alliance include suppliers of early education services, child photography, child swimming, child massage, maternity care centres and professional nanny training.
The company has been at pains to establish a high profile for itself in its target sector. This has seen it unveil a number of initiatives, including an incentives programme and series of expectant mother seminars. Its proactive stance has seen the business enjoy a 100% per annum growth rate in terms of new users. The implementation of the two-child policy is seen as being of inevitable benefit to its future growth.
Conventional outlets diversify
Faced with increased competition from online outlets, conventional shops have been obliged to diversify in order to survive. This has seen many mother-and-child shops expand beyond their core offerings of milk powder, nappies and feeding bottles. A number of them now also offer a range of value-added services, including paddling pools, playgrounds and dedicated rest areas for expectant mothers.
Nanny and playgroup shortfall
The new policy has also highlighted a number of opportunities in the market, in particular in those areas where there is a perceived shortfall at present. This includes the greater provision of properly-trained nannies, an expanded range of toy shops, as well as the opening of new maternity care centres.
With parents ever more aware of the importance of early learning for their child's development, playgroups and early learning centres are frequently over-subscribed. This clearly suggests a distinct gap in the market.
The Hong Kong opportunity
With widespread uncertainties about mainland-manufactured food and pharmaceutical items, Hong Kong products are seen as offering a degree of reassurance to young parents. This has seen many of them willing to pay a premium for such items.
There are said to be particular opportunities in the provision of a number of daily necessities, most notably clothing, toys, furniture, bath and skincare products, as well as baby strollers. Global brand names are particularly highly sought after.
Aside from the product sector, Hong Kong's mother-and-child service industries are also widely perceived as being far more mature than their mainland counterparts. In light of this Hong Kong service providers may find opportunities in terms of offering pre-natal classes, maternity care, infant care and early education facilities.
Jessie Jiao, Qingdao Office