THE NON-ENTRY PUZZLE: CAPABLE CHINESE OEM/ODM FRAGRANCE AND COSMETICS MANUFACTURERS AND THEIR ABSENCE FROM THE KAZAKHSTAN MARKET

ПАРАДОКС ОТСУТСТВИЯ ВЫХОДА НА РЫНОК: КОНТРАКТНЫЕ ПРОИЗВОДИТЕЛИ ПАРФЮМЕРИИ И КОСМЕТИКИ КИТАЯ (OEM/ODM) И ИХ ОТСУТСТВИЕ НА РЫНКЕ КАЗАХСТАНА

Ань Сыцян

докторант (DBA), Международная бизнес-школа «Фараби», Казахский национальный университет имени аль-Фараби,

Казахстан, г. Алматы

ABSTRACT

China’s fragrance and cosmetics OEM/ODM manufacturing base is large, well-resourced, and internationally experienced, yet there is almost no documented trace of its engagement with Kazakhstan, a geographically proximate and rapidly growing Central Asian e-commerce market. This paper examines that puzzle through a desk-based case analysis of four major Chinese OEM/ODM manufacturers, formal Kazakhstani import channels, and informal cross-border e-commerce evidence. None of the manufacturers considered here discloses Kazakhstan or Central Asia in its stated export markets; customs-recorded imports from China remain a minority relative to other origin countries despite geographic proximity; and informal demand-fulfillment through marketplace resale and cross-border e-commerce is substantial and growing. Drawing on the Uppsala internationalization model and institutional-voids theory, the paper attributes the puzzle not to missing capability or missing demand, but to an institutional-infrastructure gap — the absence of reliable distribution intermediaries, brand-authorization mechanisms, and market-intelligence channels — which keeps formal entry economically unattractive even as informal channels already serve the market. Implications are discussed for manufacturers considering Central Asian expansion, for market intermediaries positioned to bridge this institutional void, and for internationalization research, which has focused predominantly on successful entry rather than persistent, capability-inconsistent non-entry.

АННОТАЦИЯ

Китайская контрактная (OEM/ODM) производственная база в сфере парфюмерии и косметики отличается крупным масштабом, значительными ресурсами и богатым международным опытом, однако практически не имеет задокументированного присутствия на рынке Казахстана — географически близкого и быстрорастущего рынка электронной коммерции Центральной Азии. В статье исследуется этот парадокс отсутствия выхода на рынок на основе кабинетного анализа случаев четырёх крупных китайских OEM/ODM производителей, официальных казахстанских импортных каналов и данных о неформальной трансграничной электронной коммерции. Установлено, что ни один из рассмотренных производителей не указывает Казахстан или Центральную Азию среди заявленных экспортных рынков; официальный таможенный импорт из Китая остаётся в меньшинстве по сравнению с другими странами происхождения, несмотря на географическую близость; при этом неформальное удовлетворение спроса через перепродажу на маркетплейсах и трансграничную электронную коммерцию уже достигает значительных и растущих масштабов. Опираясь на Уппсальскую модель интернационализации и теорию институциональных пустот, мы утверждаем, что данный парадокс объясняется не отсутствием возможностей или спроса, а институциональным инфраструктурным разрывом — отсутствием надёжных посредников по дистрибуции, механизмов авторизации бренда и каналов рыночной информации, — который делает формальный выход на рынок экономически непривлекательным, даже когда неформальные каналы уже обслуживают этот рынок. Обсуждаются последствия для китайских производителей, рассматривающих экспансию в Центральную Азию, для рыночных посредников, способных преодолеть этот институциональный разрыв, и для исследований интернационализации, которые преимущественно фокусировались на успешном выходе на рынок, а не на устойчивом отсутствии выхода при наличии соответствующих возможностей.

Keywords: internationalization, market entry, institutional voids, psychic distance, OEM/ODM manufacturing, Kazakhstan, cross-border e-commerce, fragrance and cosmetics industry.

Ключевые слова: интернационализация, выход на рынок, институциональные пустоты, психическая дистанция, контрактное производство (OEM/ODM), Казахстан, трансграничная электронная торговля, индустрия парфюмерии и косметики.

1. Introduction

China’s fragrance and cosmetics industry contains a large, technically sophisticated OEM/ODM manufacturing base. Individual producers report hundreds of patents, export revenues in the hundreds of millions of dollars, and blue-chip international client rosters. Central Asia — and Kazakhstan in particular — has meanwhile become one of the fastest-growing cross-border e-commerce corridors for Chinese consumer goods. Ozon.kz alone reported the addition of roughly five million China-sourced listings in a single week in August 2024. By the logic of conventional internationalization theory, this should be an unusually favorable setting for formal market entry: geographic proximity, an existing Belt-and-Road-era trade corridor, and evident end-consumer demand. Yet a systematic search for documented engagement finds none. The object of this paper is precisely this absence, rather than any documented presence.

We call this the non-entry puzzle: a configuration in which manufacturing capability, geographic proximity, and observable consumer demand all point toward market entry, yet no formal engagement is observed. The puzzle matters because internationalization research has been built almost entirely around cases of entry — modeling how firms choose entry modes, sequence markets, or overcome liability of foreignness — while offering little theoretical traction on why an apparently favorable market is left unaddressed by firms that plainly have the capacity to serve it. This paper asks: why do capable Chinese OEM/ODM fragrance and cosmetics manufacturers show no documented formal engagement with the Kazakhstan market, despite geographic proximity and evident consumer demand?

2. Theoretical Framework

2.1 The Uppsala model and psychic distance

The Uppsala internationalization model treats market entry as a gradual, experiential-learning process. Firms are expected to enter psychically close markets — similar in language, culture, business practice, and institutional environment — before venturing into more distant ones [2, 3]. Psychic distance, not physical distance, is the operative variable, but the two are conventionally expected to correlate: neighboring, historically connected markets are assumed to be easier to enter than distant ones. On this logic, Kazakhstan, linked to China by an established overland trade corridor and a fast-growing shared e-commerce infrastructure, should plausibly rank among the more accessible markets for Chinese consumer-goods exporters, arguably more so than the North American and Middle Eastern markets some of the manufacturers examined here explicitly claim to serve.

2.2 Institutional voids

Institutional-voids theory provides a complementary explanation for market absence in emerging economies. Where intermediaries — reliable distributors, credible brand-authorization and enforcement mechanisms, trustworthy market-information channels — are weak or missing, the effective transaction costs of formal entry rise, even when consumer demand and manufacturing capability are both present [4, 5]. A critical point is that institutional voids do not prevent a market from being served altogether; they typically shift fulfillment toward informal, lower-trust channels that substitute for the missing formal infrastructure. This distinguishes an institutional-voids explanation from a simple demand-absence explanation, and it is the mechanism this paper tests against the Kazakhstan evidence, consistent with the broader emerging-market business research tradition that treats institutional context as a first-order determinant of firm strategy [9].

3. Data and Method

The analysis is desk-based and multi-source, with data compiled in September 2026. It examines four major Chinese OEM/ODM fragrance and cosmetics manufacturers, selected for documented scale and technical capability — Noscibell, Bawei Biotech, Cosmax Guangzhou, and Guangzhou Xuefei — alongside customs-based import-composition records for Kazakhstan-registered distributors and platform-level evidence on informal cross-border e-commerce. For each manufacturer, company disclosures and export-market statements were searched for any reference to Kazakhstan or Central Asia. Import-composition and platform data come from the same verified source base used in a companion study of this market [6, 7].

4. Findings

4.1 Capability without disclosed market presence

All four manufacturers report substantial scale and international client relationships. Noscibell reports roughly RMB 3.57 billion in 2024 export revenue and 132 patents; Bawei Biotech reported RMB 371 million in first-half-2025 revenue, up 39.3% year-on-year, with 138 patents; Cosmax Guangzhou operates a color-cosmetics facility with more than 2,500 employees, supplying major domestic brands; Guangzhou Xuefei maintains dedicated overseas offices in Dubai and Brazil. None of the four discloses Kazakhstan or Central Asia among its stated export markets; where markets are named at all, the Middle East, Southeast Asia, and North America dominate. Given the scale of capability involved, the absence is striking.

4.2 A formal channel that remains marginal despite proximity

Formal imports of perfume and cosmetics into Kazakhstan are governed by the Eurasian Economic Union's technical regulation on product safety, which applies uniformly across member states regardless of origin country [1]. Within this common regulatory regime, Kazakhstan-based customs-registered importers provide the clearest formal counterfactual to manufacturer-level disclosure, and here China’s share is smaller than proximity would predict. Oriental Beauty Trade LLP, an Almaty-based perfume importer, sourced only 18.9% of its trailing-twelve-month import value from China, second to France’s 61.2%, despite China’s far shorter logistics distance. Yabloko Beauty Market Kz LLP, a larger importer by volume, sources overwhelmingly from France, roughly 76%, with China outside its top five origin countries altogether. Two direct China-to-Kazakhstan cosmetics export transactions are independently confirmed in customs records, but at a scale far below what the manufacturers’ stated capacity, or the informal channel described below, would suggest is possible.

4.3 Substantial informal demand-fulfillment

The absence of formal engagement does not reflect an absence of demand. Ozon.kz reported uploading approximately five million China-sourced listings in a single week in August 2024, explicitly including beauty products, drawing on more than 100,000 Chinese sellers already active on its platform. Wildberries maintains a dedicated “Chinese cosmetics” product classification. Kaspi.kz — Kazakhstan’s dominant domestic marketplace — carries verifiable listings for several Chinese own-brand cosmetics companies, including Flower Knows, Judydoll, and Florasis [8], though exclusively through generic third-party seller accounts rather than any brand-authorized storefront. Taken together, this is clear evidence that end-consumer demand for Chinese fragrance and cosmetics products is already being met, just not through any channel connected to the manufacturers examined in Section 4.1.

5. Discussion: An Institutional-Voids Explanation

The pattern across Sections 4.1–4.3 does not fit a simple capability-absence or demand-absence explanation. Manufacturers have the scale and technical capacity to serve Kazakhstan; consumers already receive a substantial and growing volume of Chinese fragrance and cosmetics products. What is missing is the institutional connective tissue between the two. No manufacturer-level export-market disclosure references Kazakhstan; no case in our sample shows a brand-authorized storefront; and the formal, customs-recorded channel remains a minority relative to more distant origin countries with more established distribution relationships. This pattern points toward an institutional-voids explanation. The absence of reliable distribution intermediaries, brand-authorization and enforcement mechanisms, and structured market-intelligence channels raises the effective cost of formal entry high enough that manufacturers do not observe, or do not act on, a demand signal that is nonetheless real and already being served informally. A self-reinforcing lock-in plausibly follows: because informal resale already satisfies visible demand, the market-intelligence signal that might otherwise prompt formal entry is itself routed through channels invisible to the manufacturers’ own sales data.

6. Implications and Future Research

For Chinese OEM/ODM manufacturers and brand owners, these findings suggest that Kazakhstan is an underserved formal-entry opportunity rather than an unattractive one. Informal channels are already validating demand at scale, and the institutional gap identified here — rather than any inherent market unattractiveness — is the more plausible barrier. Market intermediaries in Kazakhstan, such as distributors, trade-fair organizers, and e-commerce platforms, have a clear first-mover opening in bridging this institutional void with credible brand-authorization and distribution services. The case also speaks to internationalization research more broadly, illustrating the value of studying non-entry as a distinct empirical phenomenon. Psychic-distance and institutional-voids frameworks, developed primarily to explain patterns of entry, appear equally capable of explaining persistent, capability-inconsistent absence, and that deserves more systematic attention as an object of study in its own right. This exploratory study rests on public secondary data at a single time point rather than manufacturer interviews. Interviews would be needed to establish whether the absence reflects genuine unawareness of Kazakhstan demand or a deliberate risk-averse choice; this is left to future research.

7. Conclusion

This paper set out to explain why capable Chinese OEM/ODM fragrance and cosmetics manufacturers show no documented formal engagement with the Kazakhstan market despite geographic proximity and evident consumer demand. The evidence does not support capability-absence or demand-absence readings. It supports an institutional-voids account: the absence of reliable distribution, brand-authorization, and market-intelligence infrastructure keeps formal entry economically unattractive even as informal channels already serve the market at scale. The non-entry puzzle examined here carries practical implications for manufacturers, market intermediaries, and future internationalization research alike.

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