China supply chains give birth to potent global brands

Shein’s Japanese-language app is difficult to recognize as a Chinese brand. (Photo by Shuhei Yamada)

SHUHEI YAMADA, Nikkei Asia Tech chief editor | China

TOKYO — A number of Chinese consumer goods startups have spent the past decade zipping along an expressway created by the country’s famed supply chains as well as the world’s big online retailers, one that has recently begun delivering them to global prominence.

The new brands are appealing to young people not only in China but also in Japan, the U.S. and Europe, where they began generating revenue in 2020.

GenBridge Capital, a Chinese venture capital company, took note of the trend in an internal report compiled in April.

The VC was founded in 2016 by executives who had headed the investment division of JD.com, China’s big online electronics retailer. GenBridge, which specializes in the consumer goods sector, now manages dollar-denominated investment funds totaling some $1 billion.

In the report, it referred to investments in apparel brand Shein and electronics brand Anker as successful examples of funding.

Shein was created in 2014, mainly to sell Chinese-made apparel products via online outlets in the U.S. and Europe. Its products, geared toward young people, are priced 20% to 50% lower than those offered by Zara and other rivals.

Anker makes smartphone chargers, earphones and other accessories. Anker Innovations Technology was founded in 2011 in Changsha, Hunan Province, to manage the brand. It debuted last August on a Shenzhen Stock Exchange market for startups.

The company earns more than 98% of its sales outside of China.

The GenBridge report says Shein and other up-and-coming Chinese brands have followed a three-stage evolution process. In the first stage, from about 2010 to 2012, the brands found success selling their products online in China. From 2013 to 2018, they gained footholds in foreign markets as American and European e-commerce companies like Amazon increased their procurement from China. Then around 2019, the young Chinese companies began to wield brand power of their own.

In the first stage, the companies improved their products’ quality and price competitiveness by leaning on China’s “factory of the world” infrastructure. In the second stage, their product designers honed their skills and the companies themselves improved their sales techniques as they competed internationally. Eventually, they gained global recognition.

China’s advanced supply chains and the world’s penchant to shop online bestowed another benefit on these companies: They shortened the time needed to establish a brand. “Reserve brands, born in China, are appearing one after another,” said Tojiro Kataya, a GenBridge research analyst.

GenBridge sees furniture and baby goods as promising sectors in the near term.

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