Export guru Stanley Chao shares 4 tips for getting your business underway in China
With the internet, cashless payments, instant messaging (WeChat), a growing middle class, and a younger Chinese consumer population, another Chinese revolution has come upon us.
This revolution however, is not spurred on by industrial companies, but rather the Chinese consumer, who seeks better-quality, homemade, foreign and personalised products. This consumer revolution is what now allows foreign small and medium-sized businesses (SMEs) and home businesses to enter the second largest market in the world.
I recently attended an SME convention in New York where I was approached by a group of American homemakers who made and sold chocolate fudge. They told me that over half their sales are coming from Chinese consumers. I heard similar stories from a wildlife artist and painter, a woman who made quilts and blankets, and an Oregon fisherman who crafted fly-fishing rods.
But small businesses often lack the expertise, experience, and money to export to China. How do we even start the process? What products should we sell? Do I need to speak Chinese? These are the types of questions I get from dozens of SMEs looking to China. It definitely can be a daunting task, but with a little elbow grease and some expert direction, you too can partake in the world’s fastest growing market.
Here are four tips to get your started.
Don’t let your stuff be copied…
The first thing I always tell SMBs is to determine whether your product can easily be pirated or copied. If it can, don’t even consider going to China as you’ll not only fail in China but potentially create a competitor that can sell into your own domestic market, putting you out of business. I’ve personally witnessed this with such products as boogie boards (foam surf boards), children’s specialty clothing, and electronics equipment. You see, although China has laws on the books that protect trademarks, copyrights, and intellectual property, the country still lacks enforcement capabilities. China’s court system isn’t yet set up to handle the myriad of business-related lawsuits. Further, as an SME, you certainly don’t have the time, energy, and money to deal with a headache halfway around the world.
…Or try to compete with existing products
Don’t ever think you can undercut a Chinese competitor in China. Many of my consulting clients have tried — all have failed. Chinese companies share the same advantages (and more) you have in your domestic market: they don’t pay shipping charges of tariffs, have better market and customer information, speak the local language, and in many cases don’t pay taxes on their profits. So, it’s definitely a show-stopper once you’ve discovered Chinese manufacturers making products similar to yours. You’ll face an uphill battle competing with locals willing to do anything to protect their home base.
For most consumer products, it’s fairly easy to do a product search on many of the Chinese online retailers’ websites, like Alibaba, Tencent, NetEast, Taobao, JD.com, and Tmall. Some sites are actually in English, but most are in Chinese, so ask a Chinese-speaking friend to assist you in the search. There are also various online English tutorials and how-to books that will guide you through the Chinese-language websites page by page. Besides the large online players, seek out the smaller, niche online retailers which cater to industry-specific products, such as sites which only sell car accessories or beauty products.
Translate your paperwork
Once you’re certain that you won’t be creating any Chinese counterfeiters, take some of your more important documents —product descriptions, instructions, price sheets, regulatory certificates — and have them translated into Chinese. This will serve as a simple market tool for you to give to potential distributors and partners as most Chinese, especially other SME owners, cannot speak or write English. You can easily find translation services online or even find a Chinese-speaking friend to do the work. Don’t spend a lot of money and don’t make it elaborate. You just need something basic that provides information on the four Ps: Product, Price, Promotion, and Place.
Visit China in person
After having taken the first three steps with success, you are now ready to spend some money and actually visit China to do a more detailed market study. Plan to travel for about a week, and do try to bring along that Chinese-speaking friend who helped you with translating documents and viewing Chinese websites. She will be needed to assist in further translations and general logistics associated with business travel. Your market study should include the following:
- A trade show – align the trip with a trade show associated with your product. This is where you can find partners, distributors, competitors, customers, logistics providers and just about anything you need related to your industry.
- Retailers – schedule visits with the big online retailers and with the smaller, regional players. This will probably entail traveling to several cities, but it’ll be well worth the time and money.
- British Chamber of Commerce – there are British Chambers of Commerce in Beijing, Shanghai and Chengdu. They are a source for a myriad of information and can steer you in the right direction, provide contacts, and, most importantly, give insight on China’s general business climate related to your product or industry. This is a must visit.
- Related companies – lastly, meet with companies which manufacture complementary products to yours as you may find licensing or OEM (original equipment manufacturer) opportunities with them.
Products that do well in China
I always like to find indigenous products that are uniquely in-country. These cannot be copied or pirated, have no or few existing competitors and are always popular with Chinese consumers. Examples of consumer-related products include Scottish wool sweaters, British teas and deserts, or English hand-made leather belts and Oxford shoes. On the industrial side, stick with products or services that offer a distinct technological advantage or serve the present policies of China’s government. For example, China’s state-owned enterprises are actively seeking products and services in waste management, aviation, automotive, environmental engineering, pharmaceutical, bioengineering, artificial intelligence and clean air/water industries.
Get ready for phase two
After having completed your evaluation and market study, based on the tips above, you should come back with a definitive answer as to whether your product stands a chance in China. If yes, then move on to the set-up phase, which I discuss in detail in the second edition of my book, Selling to China. At the same time, read other business books about China, and talk to consultants as well as other companies already doing business in China. I wish you the best of luck.
Stanley Chao is the author of Selling to China: A Guide for Small for Medium-Sized Businesses, which has recently been fully revised and updated. He is currently managing director of All In Consulting, a Los Angeles-based consulting firm helping Western businesses grow throughout China and Asia.