Difficult enough to use this sales tool in America, minus a language barrier—never mind the challenge of overcoming a cultural reaction that rejects this form of communication as intrusive and impolite—unserious.

ADDED TO OTHER MISSTEPS, EMAIL TO CHINA FIRMS WORKS AGAINST MARKETING OBJECTIVES FOR MISTAKEN ASSUMPTIONS.

For Instance:

1.  Wrong Product

Products that sell successfully in the U. S. may not be acceptable for marketing in China.

Either engage a company in the U. S. that knows how to apply a list of China-appropriate marketable products, or prepare to invest a substantial amount of time and resources to first research the market.

2.  Wrong Approach

Chinese culture includes a proscription against saying “No.”  Therefore it becomes awkward for them to say “No” without really saying it,  tending to lead American companies astray without the means to rectify the situation.  Even  if there is some part of your offer they might accept, it’s the “No” on the remainder that derails the whole arrangement.

3.  Wrong Partner

Trying to partner with a business in China, without a local guide, ends up resembling an astronaut crew featuring a movie star pilot only because he “looks” good.

Engaging a professional gateway guide, who knows how to navigate China’s business terrain, is the wisest decision.

We offer a strong recommendation to allow the professional intermediary to find the right distributor for your product, who has the privilege of unfettered access throughout China, and is able to put your product in the most advantageous venue.

4.  If you choose to operate on your own, the need to understand how business works in China can amount to an undertaking of years in the effort, only to encounter frustration and failure without the broad and deep knowledge and expertise of a professional gateway agent.  Because:

• like us, the Chinese prefer to work with familiar people who they can rely on to act in a predictable way.
• and taking the matter to a larger point, they will not begin a meaningful business arrangement without an in-person introduction from a known intermediary.

Consequently, in accounting for these cultural business issues, peculiar to the Chinese marketplace, doesn’t it make sense to use a professional agency that can move forward, in front of your objectives, to pave the way for your success?

Why the online approach is the best way to enter China’s market:

Getting a foreign product into the brick and mortar retail channel in China is an expensive and lengthy endeavor. The initial investment is large in order to do business with conventional retail chain stores such as Metro Cash & Carry, Carrefour and others. Many companies that are new to China’s market are having a hard time justifying associated up front costs.

Expanding to have a nationwide business presence in China is extremely difficult as well because of the complex geography and intercultural differences cross China.

The two main barriers preventing US companies from succeeding in China can be eliminated if products are introduced online to consumers in hundred of cities simultaneously.

How to build your online presence to reach 500 million Chinese consumers:

The bigger question here is not why you should do it, but how you should do it. Do you launch your own ecommerce site to sell as you do in the US? How do you get orders delivered? Let us take a look at some of the largest ecommerce players in order to help familiarize you with a possible approach.

The number one online retailer today in China is Jingdong Mall. Jingdong Mall is a business that has only been around for eight years but has grown rapidly for six consecutive years at a rate of over 200% each year. Current sales are approximately $6 billion USD per month. Over the past eight years it has built formidable trust with 25 million registered buyers and utilizes a state of the art logistics delivery network covering more than 200 cities throughout China. Home Depot is reporting that they plan to close down all physical stores in China and launch their products via Jingdong Mall.

Another significant online retailer is Su Ning Mall at www.suning.com. It once operated as a home appliance retailer with over 700 locations. In the past few years, this public-traded company has strategically closed down stores and transformed itself into an ecommerce retail business. At present time, it not only sells home appliances but also just about every kind of consumer good you can think of. The sales are approximately $3 billion USD monthly and increasing exponentially year after year.

Another player worth of mentioning is Taobao. It is modeled after the ebay business model, but without the bidding option. Taobao allows vendors and suppliers to set up their own stores on the platform. It is ideal for those companies who would like to be in control of market their own development.

In closing, Jingdong Mall, SuNing and Taobao have been some of the best-kept secrets to many foreign companies. For more information on how to capitalize on the second largest consumer market in the world through the ecommerce market, please contact Casey Xiao-Morris, at 310-920-4580 or cxmorris@LeverageChina.com.

The primary obstacle is that China does not recognize any foreign organic certifications. You, as a foreign company, are required to get certified by any of 23 China certifying institutes prior to selling. Otherwise, you may not use the word “organic” anywhere on the product.

Obviously these regulations have stopped many motivated foreign suppliers from approaching China’s market, whose Chinese distributors have found creative ways around the regulations.

Let me share a few useful tips:

1. Modify label to read “No preservatives, No addictive, No chemicals used”.
Organic products with labels like these are often seen in the stores. Consumers seem to understand what it means and are willing to pay a higher price for these products.
It is quite common for organic fresh vegetables to be priced 4-5 times higher than conventional ones at the supermarkets.

2. Do not state organic in either Chinese or English, but leave organic logo on the package. Some Chinese consumers are able to recognize foreign organic certification logos from the US, Canada and UK. A Chengdu-based distributor, that delivers only organic groceries to 50, 000 families in the area, advised that they will point out the logo to their customers.

3. The distributor often brings a copy of foreign organic certificates with them when promoting organic products in person and shows it to buyers. Showing a copy of the certificate is working quite well since Chinese consumers have a lot of trust in foreign institutions and imported products.

These tips will help you enter China’s market quickly, but only offer a short-term solution. For your long-term success, you may want to work with your distributor to become certified in China. Best of Luck!

The dragon is symbolic of Chinese emperors. Any child born during the year of the dragon will have every good trait that the legendary dragon has—smart, leadership qualities, and a bright future. This is Chinese astrology that the Chinese swear by. Apparently, Chinese couples plan ahead to have a dragon baby since they can have only one child under China’s “one child” policy. The birth rate in China this year has been projected to be 13 per 1,000 people, which is at least a 5% surge from
last year.

Let’s take a look at what happened in the last year of the dragon, which occurred 12 years ago. The birth rate jumped to 16.9 per 1,000 people, while the average birth rate around that time was in the range of 15 per 1,000 people. Other reasons may explain this noticeable increase in the birth rate, but having a dragon baby is certainly the main motive.

History is most likely to repeat itself. If my mathematics is correct, conservatively, over ten million new babies will be born in China this year, which will drive up the demand for maternity products, baby products, products for preschoolers in 2–3 years, then products for high school students in about 13 years, and the list will go on.

I wonder if some parents would think it might not be such a good idea to have a dragon baby, which has nothing to do with a belief in Chinese astrology. My concern is that hospitals may be so busy that mothers will not be able to get enough attention from nurses. When the baby is ready for preschool, there may be a longer waiting list for a better school. I have not mentioned that Chinese students have to take an annual college entrance examination that is similar to the SAT. In 18 years, all dragon babies will have a harder time competing to get into the elite colleges.

While Chinese astrology has been only a myth for centuries to most people, one thing is absolutely certain—the year of the dragon is the luckiest year for those businesses that have products to sell to new parents and babies.

For instance, health food products, such as nutritional supplements and pharmaceutical products, or cosmetic products, such as antiaging cream and lip gloss, are all subject to import regulation by the Chinese Food and Drug Administration. Application is lengthy and costly, and many US companies are unwilling to invest in regulatory compliance before being able to sell.

Is there an alternative for US companies to achieve fast growth in this highly regulated industry? Yes. The secret is selling as a private label business to Chinese buyers.

Characteristics of Chinese buyers:
1. They have a very strong brand in China
2. Their main business is selling their products domestically
3. Their business grows rapidly, and they regularly launch new products
4. They have the know-how to deal with regulation compliance of China’s FDA
5. Their research and development performance cannot keep up with market demand
6. They buy market-tested products and formulation as private label from such developed countries as the USA and Canada
7. Their staff does not always speak English well or know how to reach out to companies with leading products in North America

Private label business is a best-kept secret. From our point of view, many Western companies have ignored this type of business as a way to capture market opportunities in China.

There is nothing wrong with this request, but few companies understand what it takes to get someone to buy your product. I often find that companies looking for an export opportunity to China tend to focus on getting someone to buy in the short term, while Chinese distributors tend to think long term, asking if you are a good partner for them.

Let’s take a look at what a Chinese distributor is thinking about. Understanding their thought process will help you determine ways to approach and engage them.

When a Chinese distributor is presented with a brand and product line from a foreign country, the following questions are likely to be asked:

1. How well do you do in the domestic market?
2. Do you have brand recognition in the domestic market, and what markets are you selling to?
3. What is your market share?
4. Who are your customers and main distribution channels?
5. Do you sell to other countries, and how well do you do?
6. Has your business been growing?
7. What makes your product different from others seen in China?
8. Are you visible online?
9. What kind of initial and ongoing support can you provide?
10. Most importantly, is your company committed to doing business in China? For instance, are you able to customize your product to suit Chinese consumers? Are you able to respond to any unique Chinese demands? and more.

These preliminary questions have to be addressed quickly before both parties can decide if they can form a partnership. Distinguished Chinese distributors today have the opportunity to see many products presented to them by manufacturers from all over the world. You must be very well prepared and at the top of your game, from initial contact to each step of negotiation with your potential partner.

Although Chinese distributors are interested in established brands and market-tested products, this does not mean you won’t be able to attract viable Chinese distributors if you are not Coca-Cola. You may want to differentiate yourself in such areas as product innovation, company history, and flexibility in product customization.

Now you know what is on the mind of a Chinese distributor. In my next blog post, I will shed light on how to find and qualify a Chinese distributor. Please come back.

Export Strategy 1: Sell through third-party distribution companies

This strategy is the most cost-effective way to enter a foreign market that you know little about. The distribution company is supposed to know about the marketplace and how to get customers. The strategy works very well when doing business is based solely on existing relationships, such as selling to government agencies and large state-owned corporations. A local company has a clear advantage.

The downside of this strategy is that a distribution company may represent many companies and products at the same time. Their focus on your product is not 100 percent. Communication between you and your distribution company can also be an issue from time to time and finding a viable distribution company is often a challenge.

Export Strategy 2: Set up your own sales office

Setting up your own operation in a foreign market gives you 100 percent control of sales and marketing, customer support, and more. It can be costly however. It works well for companies with financial strength and for those that are committed to the markets. Such a strategy also undeniably avoids potential issues when working with a third-party distribution partner. Companies that are considering this strategy have to establish a management structure for managing overseas offices from the head office.

Export Strategy 3: Set up your own representative office and sell through third-party distribution companies

This strategy has worked well in minimizing the downside of working with a third-party company and offers a desirable customer and product support for local customers. The distribution company is involved in selling, while the representative office acts as a support office in such areas as logistics, communication, and collaboration on strategic issues.

A proper strategy is possible for everyone, depending on your strengths and weaknesses, your expectations, and your specific industry. It helps you determine the best course of action when you know your competitors and what they have done to succeed in that market. Be mindful, though, that your competitors in the domestic market may not be the same ones you compete against in a foreign market. Accordingly, there is no cookie-cutter strategy for doing business in every market. For instance, your export strategy for the European market may not succeed in the Chinese market.

The weather was hot and humid as we walked out of the airport and jumped into an air-conditioned cab. During the 45-minute ride to the hotel, Bill and I had a lot to catch up on. I recapped our itinerary for the next day and a half while we were in the city.

13th – Dinner with Joanna, the Merchandising Director, and Desmond, General Manager of S&G
14th – Meeting in the office of S&G in the morning
A quick lunch in the afternoon
Store visits in the afternoon
Dinner with Desmond and Eli, the Sales Manager
15th – Leave Taipei for Shanghai in the morning

Having dinner with potential business partners just a short time after first meeting them is not what a business owner like Bill is used to in Canada. In China, however, businesspeople often do this to get to know each other. Bill followed the advice.

Joanna suggested a local restaurant. The food was naturally delicious, and the beer was freshly brewed right there. Over a couple of drinks, we talked about our favorite movies, TV shows, and travel experiences. I could not help but realize how connected our lives were in today’s world.

We did not forget our objective of this trip, though, which was qualifying S&G as a distributor for China and Taiwan. We introduced our companies, our industries, and our business goals over dinner, and communication was natural and spontaneous in a relaxed atmosphere.

Business is handled differently from country to country, and this is a story of how Chinese conduct business over dinner. Would you prefer doing business the Chinese way or through PowerPoint presentations in an office?

Western companies that have dealt with China understand that it offers tremendous opportunities but also presents many challenges.

If you feel the Chinese marketplace is too big to conquer, would you consider Hong Kong? Although Hong Kong is part of China, it is a special administrative region under the principle of “one country, two systems.”

What makes Hong Kong an ideal gateway to the Chinese market for Western companies?

Hong Kong is the world’s 11th largest trading economy and has a close and unique relationship with Mainland China, its most significant trading partner. Hong Kong’s business influence across China is extensive and deep, and more than 16 million tourists from Mainland China shop and dine in Hong Kong every year, presenting an excellent opportunity to reach Chinese consumers.

Hong Kong itself is also a great consumer goods market, depending on imports more than many other regions in the world for such goods as drinking water, food products, medical equipment, construction material, and more.

Hong Kong offers other advantages as well, including low taxation and minimal government intervention. It is worth noting that Hong Kong features high transparency in laws and regulations, especially import regulations on certain goods, such as health food, pharmaceutical products, medical equipment, and more. These particular products are facing rather stringent regulations in Mainland China.

So, is Hong Kong an ideal gateway for Western companies to enter the Chinese market? YES!

In the 1980s, the Chinese were regarded as being among the most fittest people in the world in terms of body mass. Today, they face serious health issues due to a high-calorie, high-cholesterol diet over the past twenty years. Unfortunately, this condition is a by-product of increasing Chinese economic development and a vastly improved quality of life. A recent study revealed that 92 million Chinese adults have diabetes, and nearly 150 million show early symptoms of the disease. Between 70 and 90 million Chinese are actually clinically obese (mostly in urban areas), and between 6 and 10 million adults become obese each year. Most alarming is that as many as 200 million Chinese are predicted to become morbidly obese by 2015.

Obesity is also a major problem for Chinese children. In a city in southern China, more than 12.5 percent of the city’s 350,000 students in primary school and high school are obese. This situation has resulted from eating Western-style fast food and getting very little exercise.

So, is there really a demand for health food in China?
In 2009, China imported US$110 million in health food products, and some analysts predict that over the next five years China will become the top-ranked country in the world, followed by the US, for offering the greatest opportunities for companies that sell natural health products. The Chinese health food market is projected to reach US$19 billion by 2010 and US$65.9 billion by 2020.

What challenges do Western companies face when trying to sell their products in China?

Import registration documents are required before health products can be brought into China, and the country’s laws often tend to be obscure, inconsistent, and arbitrary. This confusion may actually prevent Western companies that are unfamiliar with such laws from doing business in China. At present, the import registration process takes as long as two and a half years and usually costs at least $100,000, depending on the products.

To understand what is required to pass import registration, you are advised to do two things before making a major investment: 1) work with a specialist who will handle application paperwork and 2) do research to determine if your product and its ingredients are currently approved by the SFDA (State Food and Drug Administration of China).

What is necessary for success in the Chinese market?

Your approach to selling in China should be a long-term effort, not a shortcut, such as hoping someone will buy your products and that everything else will somehow be OK.

Companies that take time to learn about the marketplace and focus on building partnerships with local Chinese companies are those that will be successful.