Throughout the years Alliance experts specialists have consulted many companies on their market entry into China. We have seen what works, and what goes wrong. Especially for export directors and international sales managers we have compiled our most important lessons for entering the Chinese market.
China is more complicated than people expect, you should not go there without a proper plan. You need maturity, budget and a structured approached. It’s not just multiplying your marketshare with the number of people in China, but on the other hand, there are chances in many sectors.
Even with a simple and cheap product you may have a seat at the table in China. Competition is fierce, and if you have a simple cheap product and you will be completing with 100’s or 1000’s brandless products. More common for Western is to position yourself in the mid-segment or higher.
1. You already need to have success before you start
Chinese people don’t like to take risks and stand out with a product nobody else has. They go for certainty, proven quality and first of all, what is being recommended by people they trust. Chinese do like to pick winners, so be a winner already before you enter the market.
So if you don’t have a clear success story in any other country, don’t go to China. It’s as clear and simple as that. China is a market with winners and losers, and not that much in between. So if you are not a clear winner in another country, both in B2B or B2C, then you most likely won’t win in China, where competition is even fiercer.
So you need a narrative that people can check: ‘We are the market leader in Germany’. ‘Our sales has grown consistently 200% every year’. ‘Every 5th household in Singapore uses our knives’. ‘Queen Elisabeth is one of our frequent clients’.
How to get to such a narrative? For example for a technical product, you can describe how it is developed and by whom, what is the innovation. Also share where outside of China you have been successful.
Or you should have something that can just not be produced in China. Something which has a clear country denomination, such as Champagne, Swiss Cheese, any perfume from France, any design from Italy. Often this will be luxury products. And at this moment some food products may be in demand, where food safety is an issue in China. Then your success story is how special or how safe it is.
2. It’s the story that counts, more than the product
You have to think where your product fits in the Chinese market. Whatever your product is, you should know which market segment you target, what customer behaviour you make use of. But the key differentiator is the positioning of the brand, especially where it comes to history of the brand, sustainability and quality, and the Chinese are then willing to spend more money on it.
There is no such thing as a product from abroad that can just be dropped on the Chinese market. There are some Chinese who purchase branded items from abroad and bring it on the e-commerce platforms. But in general you need a good narrative and communicate that broadly.
When it comes to communication, the big question is how to get your narrative across to 1,5 billion people. For most Western brands you will be first focusing on middle class people in the Coastal cities. And even that is a big group. So you will need to focus further. The overall purchase behavior has gone to online and e-commerce much stronger than in Europe and the United States. Even older people are fluent in e-commerce. And they all compare products, based on the narrative.
In terms of more B2B products, one of the best ways is to work with commission agents in the market. This can be companies or individuals. But they also should have confidence in the product before they start working with you. That is where is comes back again to the brand story.
3. Everything is connected
How is communication different in China? The e-commerce universe is perhaps the biggest surprise for foreign companies in China. Working with influencers, video bloggers and recommendations are tightly connected with the e-commerce platforms. You need to orientate yourself into that galaxy.
Influencer recommendations, information on platforms, additional questions, the whole ordering process, delivery and returns need to be a seamless process. Because if the process goes well, this leads to recommendations, and you need these recommendations to sell. Money is needed in the beginning to get this process going, but eventually there is no cheating with it. If you product quality or delivery sucks, it will go out in the market.
4. Middlemen are easily cut out
More than in other countries Chinese will try to get past your middle man directly to you, to get better prices, faster services, better conditions.
Is there room for middle man in China? Yes, especially if you have multiple distribution channels it is wise to have a central point, like a main distributor or importer. But a middle men can only exist if there is added value and you need to manage them in a certain way to keep the relationships in the value chain healthy. You need to stay in close connection, discuss the difficulties in the market and provide dedicated support. You should not give up on controlling you brand in China, because you own the brand story.
One option to start with for keeping control is to focus on setting up a distribution network without having a company in China, and overseeing your distributors with a commercial service provider in China like Alliance experts, to settle payment issues etc. But your distributors will also want to see you and have you explain your products and your brand story.
Another option is working with a sales incubator. They will help you hire local staff that works for you, provide them with an office and logistics. This way you don’t have to support and chase after your Chinese staff on a daily basis, and especially with a few employees this is much cheaper than setting up your own office.
The third option is set up a branch in China. But this is difficult without being present in China yourself or at least employing a company director who can independently represent the company, e.g. for opening a bank account.
5. Even online sales is personal
Google is blocked in China and the same applies for all the standard internet platforms and China is becoming an ‘bubble’ with it own tooling. In China WeChat is a tool to browsing products, making payments and transferring money. Baidu is the equivalent of Google in China
Do you need a Chinese website in China? At least you need to have all your basic materials in Chinese and pricing in Renminbi. Your story needs to be told in Chinese, and beyond a website you need to provide content on apps or platforms. In B2C the focus is much more on platforms because these have tools ordering functionality and like influencer marketing with small commissions. You don’t need your own website.
For B2B it’s a bit more traditional and your website can be the basis to display your materials and content. But the personal sales is much more important. This is knocking on doors, going to conferences and making calls.
And if you have your presence online, it is also extremely important to be personal and responsive. The chat should preferably be on and answered quickly 24 hours a day. In B2B, first make contact through WeChat before you call and have your WeChat QR code on the website or at least in your email.
So it’s not an easy story, but how do do it?
In general entering the China market takes more effort than most companies think. It requires continuous involvement and you need to stay on top of it. It should be on top of your agenda for the next 5 years.
As business in China is still highly personal, you need to be there yourself or you need to have a trusted person on the ground. Even if you are famous in other countries, in China you will mostly have to start from scratch, so take a good budget with you for being there, exhibiting at trade shows, to have proper sales materials in Chinese and to build a relationship with your distributors.
The five big cities are natural starting points for most Western brands, because there is better infrastructure to set up your company, you can hire the right talent and your middle class target group is already there.
You can start small, by doing research and having your products presented to potential distributors or end customers. Alliance experts is fully equipped to do this and get you clear feedback on your fit with the Chinese market. But more than that we can help you develop your brand story that fits in the Chinese market and enhance it, with every small success that you have.
Do you want a clear strategy to enter the China market? Just contact one of our team members or click below.