Will Western Niche Labels Become Ventures’ Next Sweet Spot in China?

What Happened: On February 9, the e-commerce solution company Kuai Commerce announced a second seed round of funding — £2 million ($2.7 million) — to launch its first group of international D2C clean beauty brands targeting Gen-Z consumers in China. Kuai will not only ship their products to China, but also handle all marketing, logistics, back-office and customer support. Kuai’s long-term outlook is to transform into a SaaS (software as a service) platform, a company where international brands can sell their products D2C in China using the power of social commerce. 

The Jing Take: In 2021, China’s social commerce market was projected to reach 5.8 trillion yuan ($911 billion), a year-on-year increase of 45 percent. The leading player in the sector, Xiaohongshu, raised $500 million in funding from existing shareholders in November 2021, confirming the huge market opportunity of social commerce in the mainland. Meanwhile, Shopify and Chinese retail giant JD.com reached a strategic alliance last month to solve cross-border commerce challenges for global merchants. 

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With so much interest in the Chinese market, more and more international D2C brands with lean budgets are looking for an affordable way to get their products into China. Today, with partnership agencies like Kuai Commerce, these brands will now have an operational advantage to compete with agile local sellers, especially when it comes to brand storytelling and the nuances between Chinese and Western consumers’ value propositions. 

However, many local e-commerce service partners (commonly known as Tmall Partners) have consolidated their position in the e-commerce sector and have built strong portfolios through helping international brands execute their e-commerce strategies in China. Given this, smaller international labels need to scout out the right partners to make their foray into China’s ever-competitive — and hopefully lucrative — market.  

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.