Cocoon is a Vietnamese cosmetics brand from Vietnam, which is famous for its 100%

organic products. As Cocoon has been popular among Vietnamese customers, the company
now should consider entering new markets. Thus, this report will recommend Cocoon enter
China through Tmall - one of the largest and most popular e-commerce platforms in China.
The report will begin with deep research and analyses of the Chinese market's environmental
factors through PESTEL analysis. Next, the paper will introduce the Tmall platform and
compare it with Shopee, then finally will suggest business opportunities for Cocoon to enter
the Chinese market.

1. PESTLE Analysis
a. Political and Legal
Politically, China is a communist country, which is dominated and controlled by a single
party (China’s Political System, n.d.). Having a quite similar political system to Vietnam, it is
easier for Vietnam SMEs to enter the Chinese market. Moreover, China and Vietnam have
joined the ASEAN- China Free Trade Agreement (ACFTA), which eliminate tariff for goods
classified as normal tracks and reduce the tariff for those categorized as sensitive tracks
(ASEAN, n.d.). For any Vietnamese businesses that want to enter the Chinese market, this
agreement will benefit those companies by eliminating or reducing the tariff. Besides the
regulations about tariff reduction, the products' certification of origin and product quality
checks are other points that all businesses have to pay attention to when entering China.

b. Economic
China is one of the most emerging markets in the world. Recovering from the COVID-19
pandemic, China has bounced back to 8.1% in terms of GDP in 2021, higher compared to the
world’s GDP of 5.8% (World Bank, 2022). In addition, the average income of the Chinese in
2021 is 106,837 yuan/ year, which is 15029 USD/ year (Textor, 2022), which is much higher
compared to Vietnam’s (170 USD/year) (Nguyen, 2022). These data have shown that the
Chinese economy is a strong and fast-develop economy, which promises higher purchasing
power from the buyers compared to Vietnam. However, according to World Bank, as the
impacts of the Omicron outbreaks and the prolonged lockdowns, it is projected that there will
be a sharp slowdown in China’s economy and real GDP in the last quarter of 2022 (2022).

c. Social and Environmental

The fast- development of digitalization and the impacts of the pandemic such as lockdowns
or social restrictions have changed consumers’ buying habits from offline to online mode.
After the pandemic, e-commerce retail sales have increased by 14.8%, and the penetration
rate of online shopping has reached 80% (Ma, 2022). In addition, based on Statista’s data,
China currently has more than 780 million digital buyers, which is the country with the most
digital buyers in the world (2022). With the huge online buyer population and the new-
normal online shopping habit of consumers, this is a good opportunity for businesses to
expand into the Chinese market through e-commerce platforms. Along with online shopping
trends, wellness is a term that Chinese people, especially the young generation, are interested
in these days (Luo, 2020). Particularly, after the pandemic, the Chinese are now paying more
attention to taking care of their physical and mental health, their skin, and their body. Thus,
this would be a good chance for the beauty industry, especially the skincare and body care
sectors to grow.

2. Comparison between Tmall and Shopee Applications

Shopee and Tmall are two popular B2C e-commerce platforms in the Asian market, where
users can freely find and purchase all types of products. While the two platforms are similar
for the buyers, there are some differences for the businesses. The key difference is the
requirements to join the platform. At Shopee, since there are no requirements when
registering a merchant account, anyone can sell their products, from big businesses to
individual sellers. However, for Tmall, the standards are much stricter. To register a merchant
account on Tmall, that business must be a legal entity and has a business license (GMA,
2021). Moreover, the products must be authentic products that have been registered in the
host country. Thus, with stricter obligatory, all products on Tmall are guaranteed to be high-
quality, while at Shopee, the risk of low-quality or unofficial products still exists.

3. Business opportunity for Cocoon in the Chinese market

According to the International Trade Administration (ITA), despite the slow growth during
COVID-19, after the pandemic, the Chinese beauty industry has recovered at a fast pace, with
which the skin care sector dominating the industry by accounting for 51% of the industry's
total revenue in 2020 (2022). By far, online retail is specified as the fastest-growing channel
for cosmetics sales (ITA, 2022). Thus, although being very competitive, online platforms are
still one of the potential ways for foreign businesses to enter the Chinese beauty market. For
Cocoon, the company can choose to enter the Chinese market through Tmall under the
Flagship Store since that is one of the leading and most popular e-commerce platforms in the
first half of 2022 (Ma,2022). The skincare products market on Tmall is currently led by both
domestic and foreign businesses like L'Oréal, Lancome, Kiehl's, and Winona (Zhao, 2021).
Compared to such popular competitors, Cocoon has an advantage as a 100% vegan cosmetic
brand since customers now care more about their health and tend to look for skin care
products with organic ingredients (Lim, 2022). Therefore, the company should concentrate on
promoting its organic products in its advertisements or campaigns to catch the customers'
interest. Furthermore, along with the activities on Tmall, Cocoon should also promote itself
on social media platforms to approach more customers’ attention, since 50% of the
respondents in McKinsey’s 2020 survey said that social media is the top source of persuasion
when they make buying decision(McKinsey & Company, 2020). Besides marketing,
choosing the right pricing strategies is also important if businesses want to be successful.
After the pandemic, Chinese consumers tend to be more price-sensitive. In a survey in 2020,
42% of the respondents said that they prefer to save more and would consider more carefully
when purchasing products than they did previously Covid-19 (McKinsey & Company, 2020).
In order to compete with the competitors and gain as many customers as at the beginning,
Cocoon should use the penetration pricing strategy to position itself as a high-quality yet
affordable price.

To sum up, Vietnamese SMEs have great potential to enter the Chinese market through e-
commerce platforms. However, it will be very competitive and challenging for Vietnamese
businesses since the Chinese market is filled with many aggressive rivals. Therefore, it is
essential that Vietnamese SMEs can choose the appropriate strategies and do marketing
activities effectively.
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