The VDS market in China by Daxue consulting

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2018 DAXUE CONSULTING
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THE VDSMARKET
INCHINA

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Key findings of the VDS market in China
China’s VDS market is consistently growing
E-commerce is a common way to buy foreign
VDS products
Direct sales is used by most brands in VDS
market
KOLs and social media platforms are
important channels to reach consumers
More market segments have been created by
consumers’ increasing needs

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Market drivers for international brands in China
1.
2.
3.
4.
5.
China’s rapidly growing middle class makes more people can afford better
health products
Chinese people’s growing awareness of health and disease prevention is an
opportunity for foreign companies to expand their business
E-commerce platforms provide international brands a chance to conquer
the Chinese market with less market barriers, such as tax.
Rising social media allows international brands to have better and faster
interactivity with Chinese consumers
KOLs are good way for product promotion, since they can easily impact the
purchasing decisions of the VDS consumers in China

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CONSUMPTION
ANALYSIS
The Chinese health supplement market has been
increasing fast in recent years. As for market
penetration, there is still plenty of room to
grow in comparison with other countries
— M i n C h u n , P r o j e c t l e a d e r o f D a x u e c o n s u l t i n g

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Consumption and
market size in
China
China is one of the major producers and consumers of
vitamins in the world.
Since the rising demand for VDS products in recent years,
the market value of vitamins is growing.
2.6
2.45
2.8
3.44
0
0.5
1
1.5
2
2.5
3
3.5
4
2014 2015 2016 2017
BillionUSD
Total market value of vitamins in China (billion USD – 2014-2017)
Source: 2017 vitamin market development analysis, Boyar.cn

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Consumer analysis:
People under 30 are
the main consumers
By 2017, more than half of the health products
consumers are under 30 years old, they have been the
main buyers of health products in China (include VDS
products).
Aging people (above 50 years old) are the smallest
consumer groups despite an over-all aging population,
which means there is room to grow.
27%
29%
14%
12% 13%
5%
18-24 25-29 30-34 35-39 40-49 above 50
Age distribution of health products consumers in China
(percent– 2017)
Source: 2017 health consumption report

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Consumer analysis:
More than half of
the consumers are
women
In 2017, around 56% of the health products consumers
were women in China, which means Chinese women have
built better health awareness compared to men.
However, China’s male consumers still keep higher
average consumption on health products.
Source: 2017 health consumption report
Female
56%
male
44%
Gender distribution of health products consumers in China
(percent –2017)

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Consumer analysis:
People have two
opposite opinions
about VDS products
On China’s social media platforms (Weibo, WeChat and
Zhihu), positive opinions focused on improving health,
nutritional supplements and disease prevention, negative
opinions mainly question the effectiveness of VDS
products.
There are more positive than negative opinions expressed
online, meaning many consumers still believe VDS
products are useful.
Feedback to
VDS products
Reason 1 Reason 2 Reason 3
Positive (60%) VDS products can
improve physical
health and immunity
Nutritional
supplements
VDS products are
helpful to prevent
disease
Negative (40%) Quite a number of
the VDS products
produce side-effects
to users
Excess dietary
supplements could
hurt users without
professional guide
No evidence showed
that VDS can prevent
disease

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Baidu Index –
Interest trends
toward the
segments (1/2)
In February 2018, search numbers of ‚vitamin
a‛ reached their lowest point during Spring
festival.
The search index of ‚vitamin c‛ declined
rapidly during Spring festival 2018 and from
18th August 2018. In our experience, during
the Spring festival, the search number of
many products dropped since people were
celebrating the festival.
The search keyword is
“Vitamin a” on Baidu index
“Vitamin c” on Baidu index
Baidu is the #1 search
engine in China. The
volume of search
(more than ¾ of the
total search made on
Chinese Internet)
exhibits the market
digital trends

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Baidu Index –
Interest trends
toward the
segments (2/2)
The search index of ‚vitamin d‛ was significant
high in the end of November 2017, when it’s
the National heart failure day in China and
vitamin d can improve heart function. Then it
dropped during spring festival
The search number of ‚vitamin e‛ reached its
lowest point in February 2018 because of the
Spring Festival.
“Vitamin d” on Baidu index
“Vitamin e” on Baidu index
Baidu is the #1 search
engine in China. The
volume of search
(more than ¾ of the
total search made on
Chinese Internet)
exhibits the market
digital trends

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Baidu Index –
Semantic analysis
(1/2)
The most related keywords of
‚Vitamin‛ are the ‚functions‛
and different kinds of vitamin
such as ‚vitamin b2‛, ‚vitamin
c‛ and etc.
‚Calcium Tablet‛ are
‚atorvastatin calcium‛, ‚which
calcium tablet brand is good‛,
‚Caltrate‛ and ‚By-Health‛.
Vitamin
Vitamin b2
Vitamin e
Vitamin c
Vitamin b Vitamin b1
functions
Vitamin b6
Functions of
vitamin e
Vitamin a
Calcium
tablet
By-Health
atorvastatin calcium tablet
Which calcium tablet is good
Caltrate
When is the good time
for eating calcium
tablet
Brands

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Baidu Index –
Semantic analysis
(2/2)
‚Fish oil‛ are ‛deep sea fish
oil‛, ‚functions/effectiveness‛,
‚cod liver oil‛ and ‚fish oil soft
capsule‛.
‚Royal Jelly‛ are ‚Propolis‛,
‚honey‛, ‚functions of royal
jelly‛ and ‚price of royal jelly
per half kg‛.
Functions and effectiveness
are the most important
elements among all related
words.
Fish oil
Royal jelly
Functions
Effectiveness
Cod
liver oil
Deep sea
fish oil
Functions of
deep fish oil
Effectiveness
of fish oil
Functions of fish
oil soft capsule
Functions of
royal jelly
propolis
honey
Functions
Effectiveness
Price of royal
jelly per half
kg
Functions of honey

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Zhihu questions –
consumer concerns &
need of information
On Zhihu, most questions and
posts about vitamin and dietary
supplement are focusing on 3
aspects:
1) How to pick and use dietary
supplements
2) Advantage and
disadvantage of dietary
supplements
3) Introduction of some brands
(mostly international
brands).
How to correctly use dietary
supplement?
There are some basic
principles to avoid fake
products: don‟t buy those
products with „magical
effects‟. Try to buy products
with single component, not
the products with unknown
component. Choosing
powder and capsule. Using
Google to search brands
and manufacturers.
Should we eat dietary
supplement?
Suggest people above 50
years old to eat different
kinds of vitamin and
minerals.
Vitamin b12, 2.4mg/day.
Vitamin b6, 1.7mg /day
/man, 1.5 mg/day /woman.
Calcium, 1200mg/day
/woman, 51-70 years-old
man 1000mg/day. Men
above 70, 1200mg/day, but
no more than 2000mg/day.
Zhihu is the first Q&A website. in China, and
has transitioned to a social media sharing
platform gathering more than 100 million
answers on various topics. The platform is
especially relevant to reach higher-, well-
educated social classes

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Social media
analysis - Wechat
On WeChat, most posts about vitamin and
dietary supplements are about the effectiveness
of different products for different uses, such as
the elderly and pregnant women.
Some posters comment that VDS is not as
useful as people think, especially for preventing
diseases.
Stop wasting money on VDS.
This post is about some theories that
vitamin and dietary supplement is not
useful for preventing diseases.
The post has 22,384 views and 58 likes.
This post is about the negative aspects
of buying dietary supplement overseas.
It focused on two reasons: 1. hard to
ensure effectiveness and safety of some
products. 2. sometimes products info
isn‟t completed.
The post has 3,126 views and 27 likes.
Wechat is the #1
social media in
China and an
absolute must-have
for a market entry
promotion. It
accounts for over 1
billion active users

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Social media
analysis - Weibo
Brands/products introduction and
effectiveness of VDS are the main topics of
most posts and articles on Weibo.
International brands are more popular than
domestic brands among those posts.
This post is the introduction of fish oil
and collagen solution products from
Australia brand Swisse (瑞思).
The post has 190 likes, 115 comments
and 13 shares.
This article indicated that some
expensive vitamin products have
incorrect information on their packages.
For instance, the actual vitamins C
amount is less than the introduction info
on the packages.
The post has 966 likes and 3,236 shares.
Sina Weibo is a
microblogging site
with nearly 400
million monthly users,
and is a well
leveraged platform to
spread marketing
campaign on Chinese
Internet

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Context of
consumption in
China
On the main popular social
media platforms in China, half
of the posts about VDS are
products and brands
introductions for different
consumers and situations.
International brands and
imported products are more
popular than domestic brands
among those posts.
The picture has been
shared on Weibo, it‟s
nutritional powder
for children above 1
year old, it released
by a American brand
A&Z Pharmaceutical
(安士制药). The
product has reliable
certification and
good effect.
The picture has been
shared on Weibo by
a vitamin products
buyer. It was
recommending a VC
product from a
Australia brand
Cenovis (圣诺).

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Online trends :
consumer
perception
Positive feedback mainly focuses on effectiveness, fast
delivery and reasonable prices.
Negative feedback is usually about defectiveness, bad
delivery, incomplete products info, fake goods and high
prices.
Buy the product for family, it‟s good. Always use this brand,
delivery is fast, quality is good.
The product is good, its effect is also good, insist on buying
it.
Already purchased several times, very good effect, I will
purchase regularly. The product‟s quality is good, delivery is
good.
Just checked the number below two-dimensional code, the
products is fake, can‟t believe JD is also selling fake goods.
It much worse than the same product in offline stores, same
name, but different products. I will buy products from offline
stores in the future.
It has no effect, it‟s not very good.

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COMPETITION
ANALYSIS
Sport Nutrition category is growing fast while
vitamin & dietary supplement remain the
most popular

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Market shares in
China
In 2017, the top 6 brands totally took about 43% share of
the dietary supplement market and Infinitus has been the
leading brand in China.
The differences of market share among top brands were
not large in 2017, which means market competition is
increasingly fierce.
Infinitus
12%
Amway
9% Tiens
6%
By-health
6%
Perfect
5%
DEEJ
5%
Others
57%
Market share of top VDS brands in China (percent– 2017)
Source: Qianzhan.com

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Competition
analysis: Fish oil
Many international and domestic brands have built
official stores/ flagship stores on China’s main e-
commerce platforms.
Capsule/ soft capsule is the main type of fish oil products
on Tmall.
Brands International vs
Domestic
Number of
followers on
Weibo
Presence on
Tmall/Taobao
and JD
Top seller product
on Tmall
By-Health (汤
臣倍健)
Domestic 2,622,898 Yes Soft capsule
Hengshoutang
(恒寿堂)
Domestic 62,868 Yes Shark liver oil
capsule
Swisse (瑞思) International 631,301 Yes Wild fish oil
capsule
GNC (健安喜) International 1,163,756 Yes Soft capsule

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Competition
analysis: Protein
powder
On Tmall/Taobao and JD, international brands are usually
more expensive than domestic brands.
Sports (muscle gainer) is a significant category among all
kinds of protein powder products.
Domestic
Number of
followers on
Weibo
Presence on
Tmall/Taobao
and JD
Top seller product on
Tmall
CONBA (康恩
贝)
Domestic 24,165 Yes Protein powder for
improving immunity
CPT (康比特) Domestic 98,665 Yes Muscle gainer
(post-workout)
Herbalife (康
宝莱)
International 4,147 Yes Meal replacement
MET-RX (美瑞
克斯)
International 92,205 Yes Muscle gainer
(post-workout)

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Competition
analysis: Vitamins
Most international and domestic brands have built official
stores/ flagship stores on main shopping platforms.
Weibo is one of the most important promotion channels
for many brands, but some international brands have not
made full use of their accounts.
Domestic
Number of
followers on
Weibo
Presence on
Tmall/Taobao
and JD
Top seller product
on Tmall
Yangshengtang
(养生堂)
Domestic 108,578 Yes Vitamin D soft
capsule
Huangjindadang
(黄金搭档)
Domestic 773,434 Yes Vitamin B6 tablet
Blackmores (澳佳
宝)
International 485,318 Yes Vitamin B for
energy support
Puritan‘s Pride
(普丽普莱)
International 5,961 Yes Complex vitamin
D

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Competition
analysis: Calcium
supplements
Most brands have created official accounts on popular
social media platforms to engage with consumers, such
as Weibo.
Domestic
Number of
followers on
Weibo
Presence on
Tmall/Taobao
and JD
Top seller product
on Tmall
Xiuzheng (修
正)
Domestic 5,065 Yes Milk calcium
chewable tablets
By-Health (汤
臣倍健)
Domestic 2,622,898 Yes Liquid calcium
D-Cal (迪巧) International 20,773 Yes Calcium tablets for
pregnant women
Caltrate (钙尔
奇)
International 2,385,351 Yes Calcium tablets for
bone health

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E-commerce
landscape of the
category
The price range of vitamin
products is very large on Tmall
and JD. The most expensive SKU
can be considered as luxury
products.
The price of top seller product is
almost the same with the
cheapest SKU, meaning cheap
price is a driving factor in the
market
Most expensive SKU Cheapest SKU
Top seller SKU
•Miaoyu (妙语)
•29.4 RMB
Top selling
SKU
•29 RMB
•13,500 RMB
Price range of
the category
•0.49
•Market still driven by price
Ratio top
selling price vs
average price
•59 RMBAverage price

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Business cases – Caltrate (钙尔奇)
Digital activity
Caltrate is a well-known
international VDS brand from
the USA, the brand is best
know for its calcium
supplements in China.
As one of the first international
VDS brands entered China’s
market, Caltrate has built
official/flagship stores on the
main popular e-commerce
platforms, such as
Tmall/Taobao and JD.
https://www.caltrate.com.cn/
Platform Presence Official
account
Volume (sales, product reviews
or traffic)
Caltrate.com.c
n
Yes Yes 80,516 monthly visits during past
3 months
Tmall Yes Yes Monthly sales are 51,995 items
JD.com Yes Yes About 13,200,000 comments
Kaola Yes Yes 6,149 followers on Kaola
Pinduoduo Yes No Daily sales are 359 items

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E-reputation in China
‚Caltrate‛ are ‚calcium
carbonate and vitamin D3
tablets‛, ‚calcium tablets‛,
‚how much is Caltrate calcium
tablet per bottle‛ and its
competitors ‚Gaizhonggai‛
and ‚D-Cal‛.
The brand is using Weibo and
Wechat to engage with
consumers by posting new
products and activities on
those platforms.
Platform Presence Followers Posting
frequency
Wechat Yes 42,520 8 posts in
October
Weibo Yes 238,535,1 14 posts in
October
Caltrate
calcium
carbonate
and
vitamin D3
tablets
Gaizhonggai
Calcium tablet
how much
is Caltrate
calcium
tablet per
bottle
Caltrate d
D-cal

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Daigou analysis
The last month’s top seller
price is 153 RMB, which is
higher than the top seller price
from Tmall official store.
The last month’s sales of
Caltrate products through
Daigou mainly came from
Tmall.
Via WalktheChat Agency
Daigou refers to shopping agents who are living
overseas and set up an unofficial reselling activity aiming
at residents of Mainland China (literal translation means
"buying on behalf of‚). The platforms used by Daigou
agents are Taobao, but also Wechat and Weibo for more
social-oriented e-commerce.
Brand Official
stores?
Sales on Tmall
official store
Sales on Daigou
Caltrate Yes Monthly sales are
11,362 items
36,210 items last
month

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Business cases – Centrum (善存)
Digital activity
Centrum is a popular
international VDS brand from
the USA, the brand mainly
focusing on vitamin and
mineral supplements in China.
The brand has been sold on
most popular e-commerce
platforms in China, such as
Tmall, JD and Kaola.
https://www.centrum.com.cn/#
account
or traffic)
Centrum.com.
cn
Yes Yes 25,441 monthly visits during past
3 months
Tmall Yes Yes Monthly sales are 97,261 items
Pinduoduo Yes No Daily sales are 244 items

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The most related words of
‚Centrum‛ are ‚centrum multi-
vitamin tablets‛, ‚multi-
vitamin‛, ‚Where is Centrum
from‛ and its competitor ‚By-
Health‛.
Weibo is one of the most
important promotion channels
for the brand, Centrum
recently posted a lot of
products information and
activities on its Weibo account. Platform Presence Followers Posting
frequency
October
Weibo Yes 666,337 12 posts in
October
Centrum
centrum
multi-
vitamin
tablets
By-Health
Where is
centrum
from
Multi-vitamin
Centrum official website
Centrum silver tablet

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Daigou analysis
Last month’s top seller price is
75 RMB, which is lower than
the top seller price from Tmall
official store.
Last month’s sales of Centrum
products through Daigou
mainly came from Tmall.
Brand Official
stores?
Sales on Tmall
official store
Sales on Daigou
Centrum Yes Monthly sales are
17,307 items
46,818 items

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Business cases – Amway (安
利)
Digital activity
Amway is a popular American
brand specializing in the use
of multi-level marketing to sell
VDS, beauty, and personal
care products in China.
Imported protein powder is
the most famous product
among all VDS products of
Amway.
The brand also provides
calcium and vitamin
supplements through popular
e-commerce platforms in
China.
account
or traffic)
Amway.com.c
n
Yes Yes 320,328 monthly visits during
past 3 months
Tmall Yes No Monthly sales are 10,046 items
Pinduoduo Yes No Sales is 0 on Pinduoduo
http://www.amway.com.cn/

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Business cases – Amway (安利)
‚Amway‛ are ‚official website‛,
‚Amway Nutrilite‛ and ‚price
list of Amway products‛.
There are many feedback and
opinions from Chinese social
media are arguing the sales
method of Amway, most
opinions are negative.
But, many users still like
purchasing its VDS products
for the good effect.
Platform Presence Followers Posting
frequency
October
Weibo Yes 41,352 0 posts in
October
Amway
Amway air
cleaner
Official
website of
Amway
Nutrilite
Amway
Nutrilite
Product price
list of Amway
Products
Amway
website
Official
website

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Business cases – Amway (安利)
Daigou analysis
The sales of the Amway VDS
products through Daigou
system are more than the sales
directly came from Tmall last
month.
Last month's top selling
product through Daigou is the
same with the top selling
product directly from Tmall.
Brand Official
stores?
Sales on Tmall
official store
Sales on Daigou
Amway No 38,902 items last
month

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Comparing online
interest for leading
brands
On Baidu index, By-Health and Amway both showed the
highest search number, and DEEJ had the second highest
search index during the past one year.
On WeChat index, Amway showed the highest index and
it's much higher than other brands in last 90 days.
The search brands are
Caltrate
Centrum
Amway
By-Health
DEEJ
The search brands are
Caltrate
Centrum
Amway
By-Health

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Advertising –
case study
Schroders (施罗德) is a well-
known international VDS
brand, its products span many
VDS markets.
The advertising video of
Schroders shows a clear
division of the targeted
consumers and corresponding
products.
It highlights that the brand can
provide varied products based
on different situations and its
products have good effect to
different age groups.
https://v.youku.com/v_show/id_XNDY5MjQ4MjE2.html?spm=a2h0k.11417342.soresults.dtitle
This is a advertising video of a international VDS brand Schroders.
The advertising video consists of 4 parts: a woman is working out, a man is working in
a office, a child and a aging person.
Then there are 4 kinds of VDS were recommended to the 4 people in 4 scenes. The
whole video showed the main targeted consumers of the brand and 4 kinds of
products.

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Brand naming –
case studies
The Chinese names of VDS
brands are strategic to match
phonetic sounds with a
positive meaning related to
health and safety.
For Amway, its Chinese name
is famous as the company’s
very persistent sales method in
China, then it had extended
meaning: highly recommend
something to someone.
•About the Chinese name, ‚钙‛ means calcium,
‚尔‛ means you, ‚奇‛ means unusual.
•The name shows the brand provides calcium
supplements and its products are unusual.
钙尔奇
(Caltrate)
•About the Chinese, ‚善‛ means good, ‚存‛
means store.
•The name indicates its products can help
users store energy and nutrition.
善存
(Centrum)
Justification /
reason / detail
#1
•About the Chinese name, ‚安‛ means safe, ‚
利‛ means convenient/easy.
•The name highlights its products are safe and
easy to use. It also has the extended meaning
of promoting in China
安利
(Amway)

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Distribution and
promotion in China:
direct sales are still
the main distribution
channel
In 2017, half of the retail sales of dietary supplements
came from direct sales (media shopping took a very small
part), thus, direct sales can be considered as the main
distribution channel in China.
Online sales took 1/3 retail sales of dietary supplements,
it has been another important sales channel.
Direct sales and
media shopping
50%
Internet sales
30%
Specialized
retailer
18%
Comprehensive
retailer
2%
Main distribution channels of dietary supplements in
China (percent – 2017)
Source: Qianzhan.com

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Online retail
Coverage in China
The main e-commerce
platforms (Tmall and JD) are
important distribution channels
for most vitamin and dietary
supplements brands
(international and domestic).
Many VDS brands are selling
products through their
official/flagship stores on
Tmall/Taobao and JD.
The number of brands on JD
are more than Tmall, mainly
due to the higher requirements
and deposit of Tmall for those
brands want to entry the
platform.
Market Segments Number of brands are
selling on Tmall
Number of brands are
selling on JD
Vitamin pills 200 635
Protein powder 199 539
Fish oil 199 556
Propolis 131 266
Whey protein 199 161

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Offline retail:
Coverage in
Shanghai
Specialized offline stores are important distribution
channels for VDS products.
In different kinds of the dedicated VDS stores in
Shanghai, protein powder and vitamin are the most
common products.
Segment Coverage in
Shanghai
Vitamin 23
Protein
powder
22
Royal jelly 3
Calcium
tablet
1
Baidu Map: 186 results Dianping: 800 results

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On-the-shelf:
representation of the
category in stores
In supermarket, the store is
organized to have different
kinds of VDS products placed
in the same isle.
However, there are also some
brands are placed on individual
shelves.
Big box is one of the most
common packages of VDS
products in offline stores in
China.

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Online sales:
volume assessment
On Tmall, among the main categories of fish oil, the sales
of DHA products are higher than EPA. The top selling
product of fish oil belongs to By-Health (汤臣倍健) on
Tmall.
Way of ranking: general, popularity, new arrivals, sales and price
Fish oil
Main brands
Tmall
recommendations
11.73
17.52
EPA DHA
Monthly sold items of fish oil on Tmall
(thousand–monthly)
1.38
5.32
0.45
1.32
Children Adult Aging people Pregnantal women
Monthly sold items of vitamins on Tmall by
different age groups (million –monthly)

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Promotion channels
to leverage for
international brands
in China
Dedicated Websites:
iHerb.com
China-puritans.com (中国营养
网)
J1.com (健一网)
Kuailedo.com (快乐多)
360kad.com (康爱多)
Specialized Magazines:
Health care (健康之家)
China health food (中华保健食
品)
iHerb is a shopping
website for health
care products, VDS
is one of the main
products provided
by the platform.
Health care is
specialized health
magazine, dietary
supplement and
health food are
important topics in
the magazine.

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KOL landscape in
China
KOLs are a huge part of
modern Chinese product
promotions, and VDS
consumers are influenced by
KOL’s shared opinions and
experiences.
KOLs related to VDS industry
mainly consist of doctors,
nutritionists and body
builders.
She is an attending
doctor of a
hospital. Her Weibo
account has
513,924 followers
and 2,544 likes.
One of her posts
about vitamin
products have
2,023 likes and
1,065 shares.
This is a sports
video KOL, her
Weibo account has
101,451 followers.
One of her posts
about vitamin and
protein powder
products from By-
Health have 997
likes and 101
shares.
The Key Opinion Leader (KOL), or influencers, are a
major part of the Chinese online journey, and therefore
of the online marketing funnels for international brands
in China. KOL will especially be as relevant to target
niche audience (micro-KOL) and mainstream consumers
(mass-market)

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Diversified demands
are creating more
market segments
In order to meet more specific needs from VDS
consumers in China, the vertical market segments are
deepening, and most brands and companies have started
to sell products targeting those new segments.
• Many VDS brands have been selling products target different
age groups in China, such as children, teenagers and the
elderly.
Different age groups
• In order to attract more customers, VDS products have had
more functions targeted different demands, such as sports
(muscle gainer), improving users’ immunity and anti-aging
function.
Different functions
Justification / reason / detail #1
• China’s customers are increasingly concerned with the
ingredients of VDS products, many VDS brands are selling
products with all-natural ingredients and less processing.
Natural ingredients

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Chinese market demands.
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sharing economy in China,
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The VDS market in China by Daxue consulting

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The VDS market in China by Daxue consulting