Case Study - Base Formula Ltd
An interview with Marketing Director Jackie McKellar
After 15 years of selling "essential oils, cosmetic bases and aromatherapy supplies" to domestic UK businesses (B2B), Base Formula were taken by surprise when they found that a whole new market had discovered their products – China. Now around 50% of their sales are export B2C, and their main customer base is Chinese - a transformation that took just five years, and a journey that is far from over. Chamber International's Matthew Grandage met with their Marketing Director, Jackie McKellar, to find out more…
What is Base Formula's business? We're a natural aromatherapy company, and have been supplying spas and professional aromatherapists with top grade essential oils, cosmetic bases and aromatherapy supplies since 1996. We were founded by Chris and Karen Keating, and are based in Melton Mowbray, Leicestershire.
How did you start exporting to China?Two things happened around 2010 which are important to this story.
The first was that we discovered new information about our customers. We launched a new website and were starting to pay more attention to the analytics, which gave us greater insight as to who was accessing our site. We also realised that a number of orders had been placed by people with Chinese surnames, living in cities like Manchester and Birmingham, and with room numbers in their addresses. So we guessed that they might be international students. That was a surprise, because our company was set up to supply business customers, not individual consumers.
The second was that we were contacted by someone from China who wanted to be our agent there – again a complete surprise.
We don't know exactly what the relationship was between these two, but they happened at around the same time.
So we started to ask: What are they buying? And why? We discovered that Chinese students had been trying our products while at university in Britain, and then doing what Chinese students do – telling all of their friends. Some had gone back to China and told people there too, and brand awareness was growing rapidly [I notice later that one review of their range on UK-based Chinese lifestyle e-magazine Red Scarf has over 50,000 views]. The content of the "shopping basket" when orders were placed from China was the same as when Chinese students in the UK bought from us, but different from what our other customers were buying. Our Chinese customers weren't buying essential oils at all – they were buying aloe vera gels and using them with other products of ours to make rehydrating "sandwich" face masks – something we'd never heard of before! Though we didn’t set out to be a B2C skincare company, that’s exactly how our Chinese customers saw us.
What are some of the challenges you've faced? Once we'd decided to embrace this new opportunity, we had to work out how to manage our brand in the Chinese market. We were "in", but it's been an ongoing series of massive challenges, trying to stay in. There have been huge legislative challenges, understanding the changing regulations and getting products approved – sometimes we've had to re-apply more than once because the regulations changed, and then the whole process can take a year. All our export sales are through ecommerce (including JuMei and TMall), but managing a brand within multiple ecommerce channels is challenging too. Chinese ecommerce is complex and a bit of a minefield – it's very fast-growing and lucrative.
Have we finished the job? Not at all! If we're to keep in this market then we have to fight to keep up. It's a massive commitment.
Tell us one way that you stay focused on the market. One of our employees in China was a student in the UK before joining Base Formula – she worked for us in Melton Mowbray for two years before returning to China to get married. I've been to visit her home, a town called Luzhou, about 3 hours' drive from Chengdu. [Matthew: Hey! I know that town - used to live in that province.] It's not fancy – fruit and veg stalls on the street, little shops everywhere – but everyone has a smart phone and access to 4G. So a woman there might be out with friends or in a taxi, she goes on TMall with her phone and places an order, and she expects it to be delivered within two days! Our warehouse is in Hong Kong (about 500 miles and a customs crossing away) – that's quite a challenge!
Our young Chinese customers' expectations are phenomenal in terms of speed, quality and customer service. They are very exacting! You have to take the time to understand their culture and how they do business, or you simply won't succeed! We have been on a steep learning curve over the last few years and are constantly having to change and evolve the way we work in order to progress in this market. It is extremely challenging, but with such huge potential, we are determined to develop this market and invest in its future.
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By Chamber International’s China Affairs Associate, Matthew Grandage