Tapping China’s E-Com Goldmine

(November 23, 2016; NZBusiness)

Online retailer NetPharmacy partnered with cross-border e-commerce specialist Azoya in 2015 to improve its access to the highly lucrative China market. NetPharmacy co-owner Rachelle Kazenbroot explains why it was a smart and timely move.

When Emily Zhong, GM New Zealand for Azoya International, walked into NetPharmacy’s Parnell headquarters last year to introduce co-owner and director Rachelle Kazenbroot to Azoya’s e-commerce solutions in China, the outcome was never in doubt. It was a partnership meant to be.

Shenzen-based Azoya, which in July this year had exclusive business partnerships with more than 35 retailers across 12 countries and is backed by Lenovo Holdings, is working to establish a presence in New Zealand, after successfully establishing its service across the Tasman. It describes itself as a ‘bridge to China retail’.

NetPharmacy is a physical and online pharmacy that’s been around since 2000. It had significant orders from China through its own website and supply chain long before Emily walked through that door, but Rachelle could see the timing was right to take their e-com presence in China to a whole new level – to strengthen and build market penetration.

And who better to partner with than a company on the ground in China; one that understands the culture and commercial climate, the current e-com trends, and Chinese customer behaviour?

It’s widely known that Chinese people value natural and organic health products; it also happens to be a passion of Rachelle, and has been from an early age.

A fully-trained pharmacist, Rachelle observed first-hand New Zealand’s love affair with prescription drugs over many years, and how poorly informed people are on natural health products.

When she purchased her Parnell Road pharmacy in her mid-20s (she now owns two pharmacies) Rachelle immediately turned the whole operation around into a kind of “mini natural health shop”. Rather than just “count pills”, her focus was always on promoting health and adding value to the business.

Three years studying herbal medicine was another addition to Rachelle’s considerable ‘fount of knowledge’.

She launched her online business when Google was about the only player in town, images were not allowed, broadband didn’t exist, web designers were almost non-existent and the New Zealand dollar was worth around 42 cents US. At the turn of the century, not surprisingly, Americans revelled in being able to access pharmacy medicines from down-under so cheaply.

Clearly, since those days the playing field has altered dramatically.

Visitors to NetPharmacy’s website don’t just get access to a broad range of natural and organic health products, 50 percent of which originate in New Zealand, they also access a free advisory service. “Everyone can benefit from our knowledge and purchase the correct products. For us, it’s about getting people on the right track,” explains Rachelle.

This is especially important for the China market, where consumers are increasingly health conscious but poorly educated about health products, and flocking to e-commerce sites.

Now one of those sites is the Mandarin-based NetPharmacy site set up on the Azoya platform in China to specifically market to Chinese customers.

Rachelle says the partnership is working well and sees it as a long-term arrangement.

“Azoya has a large audience and is a trusted and reliable local partner. We’re able to avoid any frustrations arising from traditional international expansion – such as confusion over government policies and market adaptation.

“At the same time Azoya remains invisible to Chinese customers. As far as they are concerned they are buying products and services directly from NetPharmacy.

“We merely act as the fulfilment house. I come up with the deals, and I write articles which are translated for the site.”

Keep an open-mind

The Azoya partnership follows a long association NetPharmacy has had with Chinese customers online. Rachelle’s advice for other businesses looking to tap into the China market is to be open-minded and prepared to react fast.

“China’s e-commerce landscape is changing all the time and policies relating to cross-border business transactions are under constant revision. It’s a case of adapting and evolving with the dynamic market. The variety of promotions, strategies and tools must be constantly analysed and changed,” she says.

Although born and based in New Zealand, Rachelle has an Indonesian Chinese mother, and has employed Chinese staff from day one. She understands how Chinese think.

“They not only care about the quality of our products, they also care about logistics and customer service. So we must adapt to the changing environment to provide that service.

“The Chinese are demanding, highly reactive consumers; they want immediate results,” she says, “and you have to provide everything.

“The China market is really about expecting the unexpected and dealing with it.”

Looking ahead, while 2015 was a boom year for NetPharmacy and the China e-commerce market, the cross-border rules have since changed. Things have become harder in the past six months and Rachelle is reluctant to make predictions for 2017.

“There will be hurdles for single platforms because the Chinese government is tightening up on everything.” She thinks the key to survival for smaller companies is forming a collaboration with other players. “It may be a case of giving up some control of your business, otherwise you might lose control completely.”

Overseas sales, which currently make up around 20 percent of NetPharmacy’s overall sales, are largely dictated by the New Zealand Dollar, she explains, and freight costs are also a major contributing factor.

One particularly successful marketing initiative organised by Azoya this year was bringing several prominent Chinese bloggers to New Zealand. Hosted by Net Pharmacy and with the support of several leading New Zealand health supplement brands, it was a useful two-way exchange of information between the bloggers and local brands.

“You have to understand that if one Chinese blogger thinks a product is good, then millions of followers are going to think it’s good as well,” says Rachelle.

She’s looking forward to more sales of New Zealand products through her Azoya partnership, and to the release of her own brand of organic skincare products and supplements, currently in launch phase.