Babycare's Li Kuo Says No to "Passionate Overseas Expansion" Despite Entering Over 8,000 Offline Stores in Japan | Exclusive Interview by Houxue
Text | Ren Cairu
Interview | Ren Cairu, Qiao Qian
Editor | Qiao Qian
The situation continues to reverse.
Two years ago, Japanese diaper companies represented by Kao successively stopped production in China or withdrew from the Chinese market, and the long - standing glory of Japanese brands faded. Babycare, born in the wave of new consumption, started with a baby carrier. Going against the low - price competition and following a determined full - category route, it now ranks among the top 3 in the diaper industry in terms of market share, and holds an unrivaled first place in the market share of baby wipes.
However, the story of "domestic substitution" in the Chinese market is far from over.
In 2022, Babycare launched its business in Japan, and its founder, Li Kuo, attended a local mother - and - baby industry exhibition for the first time. Unexpectedly, some well - known Japanese brands around the world seemed to have studied everything about him, from his birth date to when he started his business, and were fully prepared. Overseas, Babycare from China has become a potential threat and disruptor.
"If your opponents care about you and worry about you, it means they recognize you," Li Kuo said.
Babycare is strategically climbing the "high - ground" of the mother - and - baby brand in Japan. Now, its wet wipe products are available in more than 8,000 offline stores in Japan, including local leading mother - and - baby chains like Akakchan Honpo and Nishimatsuya, the drugstore chain Matsumoto Kiyoshi, as well as multiple retail channels such as 7 - Eleven and Don Quijote.
Chinese consumer brands are vying to go global, and the story of Babycare is a side view of this trend. Li Kuo believes that all Chinese brands have the opportunity to go global because, in terms of supply sufficiency, "this century must belong to China." However, the variables lie in determination and patience. Emptying oneself and understanding the local customs and business rhythm are the new insights he has gained.
This is the second in - depth conversation between 36Kr and Li Kuo. Compared with three years ago, many of his previous thoughts have been proven correct and have been consistently implemented to this day. For example, the full - category strategy and the "three truth moments" of products (i.e., the moments when users select products from media information, open the product packaging, and make a second purchase) are still the confidence for Babycare to make good progress in the Japanese market without large - scale advertising and marketing.
However, different from three years ago, Li Kuo shows a kind of "restraint" towards his own inertia - restraining the pursuit of scale, convincing himself to accept double - digit business growth rates because "this is the right rhythm"; restraining the ineffective "passion" for the overseas market, talking more about the limitations of strategic models in the face of local customs and cultures; and restraining his own indispensability in the organization, learning to step back and guiding the people who should give the answers to make decisions.
Behind the changes of the founder, Babycare has entered a new stage. Since 2021, the company has initially completed the full - category expansion strategy set at the beginning of its entrepreneurship and has passed the high - growth period from 0 to 10. In the "from 10 to 100" stage of exploration, we talked with Li Kuo about the overseas market, the second growth curve, target - group expansion, and the foundation of all these - organizational capabilities.
Babycare wet wipes have entered more than 8,000 offline retail channels in Japan
"But this is their way of doing things"
36Kr: I heard you went to Switzerland last week?
Li Kuo: I spent more time outside in June. Last week, I visited Logitech, Hilti, On Running, etc. Switzerland values innovation highly, but its innovation is completely different from that in the United States and China. They are not so radical in formulating strategies. From the founder to the employees, they are in a relatively peaceful state, which makes you feel that "life is really beautiful." The local customs and outlook on life there mean a longer - term time rhythm.
36Kr: Is this related to your overseas business?
Li Kuo: It's not directly related because it's part of my courses. However, it's quite helpful for understanding consumption from the perspective of local customs. Previously, we thought of Europe as a whole, but in fact, the consumption habits in the German - speaking and French - speaking regions of the same country can be completely different. You can also see the relationship between the political system, brands, and business in a region, which deepens your understanding of some things.
36Kr: When did you "figure out" that Babycare should go overseas?
Li Kuo: The overseas strategy for us is like the "first - stage rocket" and the "second - stage rocket." Whether to do it is a certainty. As for whether there is a specific time point to make a large - scale move, my understanding is more of a gradual process. After traveling abroad, I even more believe that you should respect the rules and the local rhythm.
Actually, many founders make a mistake by bringing the Chinese rhythm overseas, but there is a "time difference." In the past one or two years, our overseas business may not have developed very fast, but the performance we've achieved has confirmed some of our judgments.
36Kr: What are the milestones of the overseas performance?
Li Kuo: For example, we have opened 4 stores in the Middle East, and the locals really like our products. In Japan, our wet wipes are sold in more than 8,000 stores.
36Kr: Why did you choose Japan?
Li Kuo: For mother - and - baby products, Japan is the "mental high - ground." Its business structure and the competitors it faces are more "sophisticated." We wanted to find a relatively strong market to see if our products could be accepted by local consumers. Once it is proven successful, it at least shows that there are no major problems with our product strength. If we achieve 5 - fold sales in the Indonesian market now, I may not feel as accomplished as when we capture the Japanese market.
I attended a Japanese mother - and - baby industry exhibition for the first time in 2022 and found that the competitors we are familiar with in China actually know a lot about me, including when I started my business and my age. If your competitors care about you and worry about you, it means they recognize you.
36Kr: Did they express this to you in person?
Li Kuo: No. The Japanese are very humble. When they meet you, they are very friendly, bowing and expressing their welcome. However, through the points they focus on in their words and whether they care about you, you can judge their attitude towards your entry into the Japanese market.
36Kr: In the past few years, many foreign mother - and - baby brands have failed in China. Can it bring you some experience for going global?
Li Kuo: They can be regarded as a case study. Why did they fail in China? First, I think they didn't conduct R & D for the local market. Second, they didn't utilize or respect the speed of the local market. China has experienced rapid changes in sales channels, and they couldn't keep up. Conversely, if we always want to achieve quick results at the Chinese pace when we go to other countries, it is also a mistake. Third, in terms of organizational support, they didn't give local teams enough decision - making power. Many basic decisions of these brands also need to be made globally, which leads to low efficiency.
36Kr: Which aspects of the Japanese business exceed your expectations, and which fall short?
Li Kuo: The pleasant surprise is the evaluation of our brand by local consumers and channels. They express their love more exaggeratedly, and many evaluations focus on the products rather than the price.
Overall, the progress is slower than I expected. I've had several meetings with partners and found that the Japanese will present a table and explain the data changes to two decimal places very clearly, but that's not my rhythm at all. I even thought it was unnecessary for me to attend those meetings, but this is their way of doing things, and I have to respect it.
36Kr: You said that many companies bring the Chinese rhythm overseas. Did you have a "passionate period" like that?
Li Kuo: I'm in an inner struggle. Maybe one second I'm very passionate and determined to make a big move, especially when the business performance is not so good. But in essence, I think we should respect the local time rhythm. Going too fast or too slow will cause problems. So on the one hand, I have impulses, and on the other hand, I can restrain myself quickly.
36Kr: Does your "impulse" mean going to Japan to supervise the business in person?
Li Kuo: Yes, including the business in the United States and Europe. Especially after my recent trip, when I look at this rationally, I know what the right rhythm is.
36Kr: What pitfalls have you actually encountered since going global?
Li Kuo: We previously wanted to launch our European business and set up a small team. Later, we found that the European market is too fragmented, and it's difficult to achieve high operational efficiency, so we shut it down. Many Chinese brands have been "passionately going global" in recent years, as if they just set off at a single order. There are some successful cases, but in fact, there are more failures that are not seen.
36Kr: How do you rank the difficulty levels and offensive rhythms of the current overseas markets?
Li Kuo: Japan, the Middle East, and the United States are the three relatively important markets. In terms of time, we started with Japan, then the Middle East, and then the United States. In terms of difficulty, I think the United States is the most difficult. It is a single large market, and the power of sales channels surpasses that of brands. However, I'm certain that we can succeed in this market.
Babycare participates in the ABC Kids Expo in Las Vegas, the United States
First, build "humanistic trust," then do business
36Kr: Were the channel partners very interested in your entry into the Japanese market when you attended the exhibition for the first time?
Li Kuo: They were very interested. However, Japan's social development has taken place in a relatively closed market, and its business has continued for many years. So there are many capital - related stories behind it, and the interest relationship between channel partners and brand owners is very deep, and there are even some cross - shareholdings.
36Kr: How do you plan to enter the market under the situation of cross - shareholding between channels and brands?
Li Kuo: We still create different business values. The channels expect changes, but the changes brought by the original brands are limited, and we are like an "alien species."
The first product the channel partners chose was the baby anti - fall pillow for learning to walk. There are similar products in Japan, but there has been no design upgrade for many years. We upgraded its materials, user experience, and appearance, so it was immediately favored. The same goes for water cups. The original water cup designs in Japan were relatively simple and monotonous, while our water cups are a bit cute. When the channel partners saw our product catalog, they felt very happy.
36Kr: Besides the novelty of the products, do you need to make more concessions in business terms?
Li Kuo: The question they asked more often was about the investment in brand building. They hoped that we would invest more. The business cooperation terms and profit distribution are relatively normal, and we are confident that we can meet the same conditions as other brands.
36Kr: How did you answer their most concerned question about brand investment?
Li Kuo: To be honest, my understanding is different. Many Chinese companies going global adopt a very traditional consumer - goods approach - entering a target market, first buying some media to create momentum, and then leveraging channel cooperation. This is not necessarily wrong, but the business efficiency is actually not high.
My idea is the same as Babycare's development in China. It depends on relatively high - quality products to drive the business. We talked about the "three truth moments" last time. When the products are on the shelves, if the first truth moment works, and consumers are interested and make a purchase at first sight, word - of - mouth and business will thrive.
36Kr: Were they very disappointed when you said you didn't have much budget?
Li Kuo: I said at that time that there would be a certain proportion of marketing investment according to our operation rhythm and brand development stage. I think this is also reasonable.
36Kr: What are the top three best - selling products in Japan?
Li Kuo: The first is wet wipes, the second is water cups, and the third should be the feeding series, such as spoons.
36Kr: Among them, there is no diaper, which is a major category for you in China.
Li Kuo: Diapers are still a major category in the mother - and - baby market, but we haven't promoted them in Japan yet.
36Kr: In terms of which products to promote, who has more say, you or the channels?
Li Kuo: I highly respect the judgment of the channels. In Japan, we don't build our own channels, which is completely different from our business in China. If they are interested in wet wipes and water cups, we can cooperate first. After establishing "humanistic trust" between the two parties, many business opportunities will naturally emerge.
36Kr: Do you not consider building your own channels in Japan for the time being?
Li Kuo: There is no such consideration at present. In fact, I think that when entering a new market, leveraging the resources of local partners is the most efficient way. Building your own channels is theoretically feasible, but it's difficult to cover the management radius, and the operational efficiency will be low. Especially in Japan, which is a market with a highly developed retail format.
Akakchan Honpo, one of the channels Babycare has entered, is a leading mother - and - baby chain in Japan
36Kr: Are the stores in the Middle East directly - operated stores?
Li Kuo: The stores in the Middle East are also joint - venture stores with partners, but they are exclusive stores for our brand, and we are in charge of all the standards and styles.
36Kr: Why is it this model in the Middle East and that model in Japan?
Li Kuo: Because in China, we have both models. My understanding of offline business is that if you have the ability to attract customers and traffic, I'll cooperate with you.
36Kr: How often do you inquire about the Japanese business now?