China, com­ing ready or not

Our new-and-per­fectly-formed Agony Un­cle, David Downs, pon­ders the many things that can go wrong when you want to sell to the big­gest mar­ket in the world

Idealog - - FORWARD -

Dear David, I’ve got a great prod­uct and I want to sell it in China. I fig­ured out that I only need 0.01% of the mar­ket to buy it and I will make a killing. I’m on a plane next week - please set me up to meet the head of Alibaba.

Ah, the clas­sic mar­ket en­try busi­ness model for China. Un­for­tu­nately, we see this ap­proach all too of­ten at NZTE, and vari­a­tions on the er­ro­neous as­sump­tions and flawed logic show up again and again. Let’s un­pick some of the is­sues with your plan… “I’ve got a great prod­uct…” While it’s im­por­tant that you feel pos­i­tively about what you are mak­ing and sell­ing, that doesn’t mean it’s the right prod­uct for the mar­ket, or that your po­ten­tial con­sumers will like it. Prod­ucts that ap­peal to Ki­wis don’t nec­es­sar­ily trans­fer across bor­ders – many com­pa­nies need to change their prod­ucts to meet the mar­ket needs, in both pack­ag­ing and prod­uct de­sign.

Food com­pa­nies here aren’t in the habit of mak­ing red bean flavoured drinks, or sweet­corn ice cream, but th­ese would be more pop­u­lar in most of Asia than our own hokey pokey ice cream or Black For­est choco­late.

Re­cently we went with a dairy com­pany to China, where they proudly showed Chi­nese con­sumers their pack­ag­ing – bu­colic scenes of serene cows, peace­fully chew­ing in early morn­ing Waikato, the mist ris­ing gen­tly from the dewy ground. The Chi­nese hated it – they thought the cows looked cold out­side and that the mist was smog. “I want to sell it in China” Ex­cel­lent - but which of the Chi­nas do you want to sell it into? It’s a clas­sic er­ror to think there is only one, ho­moge­nous place called China. In re­al­ity China is 31 prov­inces, all very dif­fer­ent – cul­tur­ally, de­mo­graph­i­cally and phys­i­cally.

For ex­am­ple, Yun­nan in the south­west is sub­trop­i­cal; Hei­longjiang in the north­east is subarc­tic and very dif­fer­ent con­sumers live in each. Hav­ing the same strat­egy for both would be flawed. The key thing is not to go to ‘China’, but to one bit of it. One re­gion. One city, heck, even one sub­urb, is prob­a­bly a big enough mar­ket for most Kiwi busi­nesses. “I only need 0.01% of the mar­ket” One of the most al­lur­ing facts about China is that there are 1.3 bil­lion peo­ple. 1.3 bil­lion! That’s like, 260 New Zealands! When you do your busi­ness mod­el­ling in Ex­cel all those peo­ple make it easy for your busi­ness plan to pop up huge profit pro­jec­tions.

As my first sales man­ager taught me - don’t be­lieve your own bull­shit. Your mar­ket isn’t 1.3 bil­lion peo­ple; it’s the pop­u­la­tion of the lo­cal­ity you are sell­ing to. In fact, it’s only a pro­por­tion of them – the ones with enough wealth to buy your prod­uct.

Don’t be dis­mayed by the smaller num­bers; there is plenty of de­mand in China. The ‘rise of the mid­dle class’ is demon­stra­ble – the fastest grow­ing food & bev­er­age sec­tors at the mo­ment in­clude pet food (66% growth in the past two years), bot­tled wa­ter ( 35% growth) and snack bars ( 33%). Clearly, Chi­nese con­sumers as­pire to be like Pon­sonby res­i­dents. “I’m on a plane next week” Oh dear – com­ments like this smack of be­ing un­der pre­pared. It’s im­por­tant to spend time in any off­shore mar­ket you are tar­get­ing, but to do real busi­ness, you need to be ready. “Please set me up to meet the head of Alibaba” Well, con­grat­u­la­tions, you’ve recog­nised the rad­i­cal im­pact of on­line sell­ing in China. China passed 300m on­line shop­pers in 2013, and to­tal on­line re­tail in 2014 was 40 times the value for 2009. But you aren’t go­ing to meet the head of Alibaba, T-Mall, Taobao, or any of the oth­ers. China doesn’t work like that. In­vest in some Chi­nese lan­guage skills in your team, learn more about the on­line sales chan­nels, try some­thing small to start, and make sure you can meet the de­mand you might cre­ate.

Re­cently a Kiwi com­pany launched a new prod­uct on a Chi­nese re­tail site on Sin­gles Day (Novem­ber 11 – 11/11, get it?) and was im­me­di­ately swamped. Sin­gles Day is where young, un­at­tached Chi­nese are en­cour­aged to spoil them­selves on­line – Alibaba did $9.1 bil­lion of busi­ness on Sin­gles Day 2014.

If you find that state­ment con­tra­dicts my pre­vi­ous points, then you’re be­gin­ning to get it; China is con­fus­ing, con­tra­dic­tory and frus­trat­ing. Last piece of ad­vice - don’t con­fuse the un­in­tel­li­gi­ble with the un­in­tel­li­gent.

——— Food com­pa­nies here aren’t in the habit of mak­ing red bean flavoured drinks, or sweet­corn ice cream, but th­ese would be more pop­u­lar in most of Asia than our own hokey pokey ice cream or Black For­est choco­late

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