“The business strategy for Chinese brands going overseas: brand first, sales second. Once a product goes viral, it becomes a bestseller.”
From August 20 to 22, the 6th China FMCG Conference, themed “Navigating the Era of Shrinking Volume,” was held in Shanghai. During the conference, over 100 guest speakers and more than 2,000 manufacturer and distributor representatives from across the country explored how distributors and brand owners can seek growth in the current environment.
Among them, Mr. Gao Yunchao, CEO of Royo Group, delivered an insightful speech titled “RoyoPanda: The Exploration Journey from 0 to 100 Million in Overseas Markets.”
The following is a summary of Mr. Gao Yunchao's sharing, as reported by New Distribution.
Royo Paper represents another group—small and medium-sized factories.
How do small and medium-sized factories go overseas? It is not as grand or complex as it seems, but it is also not a path of glory.
“The highest good is like water; great wisdom appears foolish.” Royo Group adopts “the highest good is like water” as its corporate philosophy, advocating “benefiting all things without contention” and promoting symbiosis and win-win outcomes.
Royo Group focuses on health and environmental protection, eliminating distractions and desires, and staying true to its original intention like a fool—this is the great wisdom of life.
Founded in 2005, Royo has been dedicated to bamboo pulp household paper, with production bases in Chongzuo (Guangxi), Meishan (Sichuan), Yongchuan (Chongqing), and Baoding (Hebei).
The Road to Going Overseas
Royo is highly representative; it is a microcosm of Chinese small and medium-sized factories going overseas.
In November last year, Royo established its overseas business department; on the 13th, the first staff member reported; on January 8th, the first container was sent to Thailand; on January 19th, the first batch of product testing in Thailand was completed, achieving 1,000 units in a single day; on March 1st, expansion to Malaysia began, accelerating the development of new countries; on March 6th, the entire platform saw orders surge to 5,000, with monthly GMV reaching 1 million.
By April, GMV tripled; in August, the shift from 2C to 2B began, and the entire chain aligns with China's 1.0 to 6.0 overseas expansion process. This month, shipments to Malaysia are expected to exceed 100 containers.
Overseas is indeed different from China; the boss must go personally to truly perceive the differences.
In Southeast Asian countries, each country is relatively small, but each has different cultures and differences. When going overseas, you must first choose well, determine your country strategy, and then go out. If you haven't chosen well, don't go; some risks were not even considered at the design stage.
Whether you are a distributor or a factory owner, going out is definitely the right move.
Retail prices in these countries are generally high. Moreover, in terms of household paper, the quality is insufficient, and supply chain efficiency is not as high as ours. This was only discovered after visiting in person.
Operational Strategy
Why talk about operational strategy? When a company goes out, its operational strategy is crucial. Whether to choose 2B or 2C is a completely different approach.
For example, small and medium-sized factories, brand owners, or distributors often rely on TikTok, Shopee, and Lazada. But 2C also has its problems. Generally, starting with e-commerce platforms leads to rising sales, but supply chain stability becomes an issue; sales are explosive and uncontrollable.
When new stock is replenished, a hot product can become a slow-moving item. I once encountered a situation in Malaysia where a tissue product reached the top in 5 days. Following normal logic, our operations team replenished according to a 15-21 day cycle, but it became slow-moving after replenishment because the product testing scale was insufficient.
Don't be blinded by short-term sales growth; always look at a longer cycle.
Second, 2B for volume. Small and medium-sized sellers, brand owners, or factories are a domestic replica; they still need to make friends with local distributors. Because Southeast Asian countries are very slow and inefficient, we communicated for four months on one order before they finally placed it.
But once orders are placed, they are sustained and stable. 2B is a process of continuous growth, while 2C is a process of explosive rises and falls. Every partner must think clearly about this.
For 2B, localization is also necessary. Let me share the most important tactic for 2B localization: find industry leaders. It's that simple; there are no other tricks. With cultural and language barriers, and the boss not knowing, just use it directly, combined with China's efficient supply chain management—it's very practical.
Finally, factory pre-positioning. In some countries, we seek local partners, and next we will move factories forward in Vietnam and Thailand. This is the path we are taking in our operational strategy.
Supply Chain Management
In the overseas expansion process, I have summarized four lessons:
First, product management is extremely important.
The product testing cycle must be relatively extended; if it's too short, many problems won't surface.
Second, logistics management.
You must choose a reliable partner. Royo is not a professional logistics company; it focuses on business, brand, and manufacturing. Therefore, choosing a professional logistics service provider is crucial. Relatively speaking, this reduces later problems and keeps costs controllable. This is a safety issue.
Third, overseas warehouse management.
As long as you do 2C, you will face overseas warehouse issues in the early stage.
For selecting overseas warehouse suppliers, my advice is: In foreign business, contracts are very important. When choosing a third-party warehouse, include the details you encountered domestically in the contract and legal terms in advance.
Of course, the most important legal clause is about slow-moving inventory. You must calculate the cycle in advance and stipulate the risks in the contract beforehand; otherwise, it will be a big problem later.
Fourth, risk control.
When traditional Chinese small and medium-sized brands go overseas, they first use their own stock, which has the lowest supply chain risk, and they also recognize Chinese. After product testing, you can appropriately develop packaging styles and products that appeal to local culture and consumer preferences.
But in the process, the most important thing not to forget is intellectual property.
Especially on 2C platforms, we face competitors and various forms of competition. By laying out intellectual property in advance, when competitors copy or imitate you, the platform will protect you first.
If you haven't gone out yet, lay out your intellectual property first; otherwise, it will be troublesome when you go. We changed our trademark twice in two countries because we couldn't register it. The fastest way is to plan ahead, purchase in advance, and make reserves.
Of course, another important point: in 2B, money can easily become a problem. National financial controls are strict; never, ever accept money from underground banks. If you do, problems will arise—it's just a matter of time.
In many places, the biggest issue with 2C is 9810. In many provinces, 9810 is not fully open yet, or after opening, applications are very slow.
At this time, you need to consult professional financial personnel to avoid problems in advance. Otherwise, when the money comes back, foreign exchange still needs endorsement from the foreign exchange bureau, involving various issues. These are some of the problems encountered in cross-border and current platform 2C products.
Business Operations
Some suggestions on business operations.
First, team building. Royo's current team is 99% in China, in Chengdu. We recruited at high salaries from Shanghai, Guangdong, Zhejiang, and Shenzhen to solve their concerns, and we also have some external professional institutions.
Second, business model design, building from 2C to 2B. Each entrepreneur should evaluate and assess for themselves.
Third, pre-due diligence must be detailed, and the boss must personally grasp some processes, with real-time review and adjustment. Indeed, the chain is long, and risks are much greater than domestically.
Fourth, dual-wheel drive of risk control and business expansion. Many small and medium-sized bosses are business-driven, but overseas, risk control is the first priority; business is second.
Royo advocates nature and loves nature. Through “bamboo instead of wood” and “green circular production capacity,” it has completed the integrated layout of forest, pulp, and paper. Using environmentally friendly and technological bamboo fiber materials, it forms a green circular industry, committed to providing environmentally friendly and healthy products, contributing value to protecting the natural environment and achieving a better life.
Royo, dedicated to environmental protection and health.
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