ACCESSING THE CHINESE MARKET

 

A growth opportunity

The continuing growth and increasing market development in China represent an exciting expansion opportunity. To make the most of this opportunity, it’s important for your company to understand the differences China presents as an export market.

In other Asian markets, some cultural understanding and a translator can go far. In China, political, financial and cultural differences present greater obstacles to success. For your company to succeed in that market, it’s a good idea to gen up on local knowledge of your market and consumer demographic as well as understanding the different approaches needed on account of restrictions or different web infrastructure.

 

Are you unique?

Well, many companies think their idea for China is. ‘We’ll take this fantastic new concept to the Chinese and we’ll clean up’. The reality is there are virtually always competitors domestically and if not, then you’ve got a lot of trust building and educating to do!

So, bearing in mind your company is smarter than most, where should you invest your time (and money) at the outset to help ensure you'll be focusing on the right routes to sustainability and profitability?

In considering when and how to take your business into this new territory, here is a breakdown of some of the factors particular to the Chinese market which would be a good starting point. Ask yourself if your company knows the answers already. If ‘Yes’, then your firm is already forming a sound China market entry strategy.

For example:

 

How does the market operate?

However groundbreaking your service or product is, there is already someone selling it – or something similar – to your potential customer base in China.

For example, take English learning. Your English courses may be delivered in a new and ground-breaking way, but there are already thousands of opportunities for people to learn English in China- and they are already doing it. So, for these wannabe Anglophiles who are your potential customers, what is their motivation, what routes do they use currently to get this service, how much do they pay (do they pay?), what’s most popular service model, are there drawbacks in the market your service will solve?

The questions are similar if your company sells high-tech industrial fire retardant material, legal services, wind turbines or software etc…..

People and businesses are likely already engaging in China with your sector, so it’s really important to get a handle on this. It may be similar to the West, but it’s usually noticeably different.

 

Who is the competition?

Even if you have no direct competition, there are always similar services and products tapping into a similar customer demographic.

Find out who the key competition is, how established they are and what kind of market share they have. Is the market increasing or pretty saturated?

If you know Chinese people or have Chinese business partners, ask them. Ask open questions to make sure you don’t just get the answers you want to hear. If you don’t have Chinese partners - and you’re not thinking of contacting us to use our services yet - then at least a search on Baidu.com, armed with Google translate to get the gist of what you see, is better than going in totally blind.

 

How are they operating in the market?

Your potential customers will usually be used to doing business in a certain way for your sector. You should follow. Introducing some new requirement to buy from you is a no-no. In general, Chinese like trusted, familiar routes to purchase. They are not trailblazers.

Forget Amazon and Ebay. Online retailers use the plethora of trusted China-specific platforms such as Taobao and TMall.

These guys were the holy grail for Western businesses just a couple of years ago, but in China, nothing stands still. The social media app WeChat is offering viable payment and marketing alternatives, both online and through QR codes offline. If you can only conceive of the world of Facebook and Twitter, there’s so much more going on in China, so many opportunities and so much to learn.

Conversely, large companies in established industries work using a level of personal contacts, commonly known as Quanxi. If your company is the new kid on the block, you need to consider how to build up your contacts and networks.

 

What is the best route to market? Where are your customers/clients to be found?

For example, you’re found on Google in the UK. Does that mean that Chinese people search in the same way for your products on the main Chinese search engine Baidu? Maybe, maybe not. For this example, a search for your perceived Chinese keyphrases will soon show if your competitors in China are ranking or spending pay-per-click (PPC) money in this area.

If they are, great! PPC on Baidu can be a great way to gather initial important website conversion rate data If not, it could be an opportunity. More likely, you’re wide of the mark so how are other companies reaching their target audience.

Looking at your competitor's routes to markets gives valuable insights for your company to know if your chosen marketing is likely to give good results. Be sure to check this out.

 

Is your product or service going to be viable there?

A quick story to illustrate the point: We once had an enquiry regarding top-of-the-range shoe-horns, real luxury executive items. They were looking at replicating the association with gentry, gentlemen and those with money to appeal in the luxury goods escort to an increasingly affluent Chinese audience, including the well-established gift-giving market. Which is all fine, until you learn that ‘Shoe’-related items are seen as bad luck as gifts in China. Shoe sounds like the word for ‘evil’ or ‘bad luck’. So to the unassuming Westerner hatching business plans in their Western board room, this seems like an opportunity to sell to an increasingly affluent market on 1.3 billion people. But now you see it’s a non-starter, be sure to check out there’s a proven need in China for what your company is selling.

 

Is there regulation to comply with?

There can be, but not always. It depends on your model, online or offline, inside China or outside.

Selling retail online depends on whether you are selling ‘outside’ China from a website hosted elsewhere to individuals in China or whether your business is looking to sell from within on domestic e-commerce portals or using domestic means of promotion, like Baidu PPC.

Selling ‘outside’ means, as far as your business is concerned, your sale has been made in your country, not China. You need to be aware of any restriction on your goods coming through customs. Assuming none, then it’s your customer’s issue regarding any hold up in your package coming through customs.

Selling inside China is different. This can also include selling from outside but using local services (like Baidu Pay-per-click) to promote. Pharmaceuticals, cosmetics, food and beverages are just a few of the categories where legislation abounds. There’s generally no easy way out. If this sounds like you, and you don’t know where to start, then organisations such as the EU SME Centre (for businesses based in the EU) offer good initial advice and guides at no cost.

Selling business-to-business on invoice in China usually needs you to be able to accept Chinese RMB by having your own company or partner in China. You can also deal with companies who have the correct Chinese approval to pay foreign-raised invoices. Not all do, so it’s worth checking you can get paid. The RMB is not freely tradable, so it’s not as straightforward as other markets.

 

Where is the growth opportunity most concentrated?

Yes, it’s obvious, but China is big. Massive. Before embarking on marketing and promotional activity, it is vital to understand how the market for your products or services is distributed and how your company will best reach that market.

Is it a ‘Tier One’ consumer opportunity, so just the biggest most affluent urban centres such as Beijing, Guangzhou and Shanghai. Does your sector have a geographical focus, with many potential client businesses located in the same province? If it’s an online opportunity, bear in mind the censorship issues of serving content from outside China, which can slow websites down. Poorly coded or hosted websites within China can still be slow as internet providers compete geographically and speeds vary dramatically from on province to another.

Knowing where your efforts will need to be focused provides a solid foundation fro actually reaching the market you seek.

 

To support your future development, Backbone IT Group has a track record in various forms of market entry research. These include website hosting and delivery audits, customer market research, retail consumer trials and website localisation, among other services. Get in touch now and we’ll look forward to helping your team.

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