Exporting to China – our 6 top tips
China is full of opportunities for British SMEs. Before you go any further, read our top 6 tips for exporting to China. They're not just for beginners!
RESEARCH is essential before entering any new market, but China's distance from the UK, it's complexity and sheer size make it a unique challenge. Imagine a country as large and diverse as Europe, and you begin to get the picture. The opportunities are too great to ignore, but the risk and price of a failed market entry can be especially high. At the same time, quality market research for China is not something that the average SME (or even the average market research company) can do – specialist help is needed. As a result, some companies actually do less advance research than they would when launching their products into UK or EU markets, and get burned. Don't be one of them!
Take DIY stores for example. Companies like B&Q and Wickes have both encouraged and tapped into a "DIY culture" that is now so established in the UK that we can easily forget it’s a relatively recent phenomena. So why not develop into that market in China? Well, here's how the Wall Street Journal described one such experiment: "Home Depot Inc. joins a growing list of retailers who have stumbled in China by failing to grasp the local culture and importing alien business models that are better suited to the U.S. or other countries." What Home Depot hadn't grasped is that China really has no appetite for DIY, and strongly prefers "DIFM" (paying others to Do-It-For-Me) instead.
Of course there are different people offering good research services for China , but they vary significantly in what they are offering. Some are sector or regional specialists, others are generalists. Some focus in on first-hand market research (surveys, questionnaires), others will give a more standardised "big picture" report. You can also get some great free reports and information from CBBC, McKinsey and others. At Chamber International, we can help you look at the options available, give you independent guidance, and commission focused research so that you make the right decisions for your business.
REGISTRATION of your Intellectual Property in China should be done as early as possible. China has a "first to file" system, so if someone else registers your trade names or trademarks before you do, they have the legal right to them. Make sure that you get help from an IP law specialist who has good experience in China – some suggestions can be found on our IPR Strategy page here.
Now is also the right time to ask – are our current names and logos suitable for China or not? What should they be? Some English words and names are hard to write and even pronounce in Chinese, or may carry an unintended meaning because of their sound. Chamber International can help you with these things, and find suitable in-China experts to assist with name choices and logo designs.
RETHINK both your product and marketing in the light of your market research. No matter how your product is viewed elsewhere in the world, don't assume that you'll get the same reception in China (or any new market, for that matter).
A couple of examples will illustrate. Recent market research in the home decorations sector showed that household names like Conran and Laura Ashley have almost no brand awareness in Beijing. However, Bradford-based cleaning products manufacturer Astonish is viewed as a premium brand in East Asia, though it's considered by many to be a value brand in the UK. Astonish has also learned the value of "Brand Britain" for its sector; in an interview with the Telegraph & Argus, founder Alan Moss commented “We had the Union Jack put [our packaging] on 30 years ago. It’s been a key marketing tool that we’ve used for our export market”.
RESILIENCE will be needed if you’re to tackle China well. Building business there takes time, and setbacks are to be expected. Despite China having a strong infrastructure and a stable political system, The Economist Intelligent Unit rated China "high" for legal/regulatory risk and "high" for labour market risk in 2015. Both of these can hurt pretty hard in the first couple of years of market entry, as you might be trying to deal with import licenses, an unfamiliar tax system, business registration and remote employees.
You can prepare for these by getting good advice upfront, which will help you to set expectations and budgets wisely. And if you're planning to register and entity in China, there are some good "toe in the water" options available, including those provided by CBBC's Launchpad scheme, and LNP China. Once again, Chamber International can give you impartial advice to help you make the right choices at the outset.
RELATIONSHIPS are crucial when doing business with China. Take note of this - China prefers to do business with trusted friends, and this important fact has many implications for business strategy. As a simple example, you should budget for senior managers to visit potential partners/clients in China more than once before any significant sales are expected to be made. But that's just scratching the surface.
You may want to find an agent or distributor – getting the right one(s) for your particular product and target market could be the difference between sales generation and sales frustration. Once again there are many options available. Chamber International can help you find suitable candidates, build connections and set up quality distributor arrangements.
Our Associate for China Affairs, Matthew Grandage, has many years of experience operating in China and training others to thrive in the Chinese environment. We can provide on-site workshops to help you build relationships, develop strategy, and even prepare for events such as business trips and hosting delegations. You can read more about understanding Chinese business friendships here, and some examples of good relationship-building in the case studies in this Key Markets section.
Finally, be READY – it may well be that China comes looking for you before you are prepared. Base Formula Ltd, an aromatherapy and essential oils business in Melton Mowbray, Leicestershire, saw a significant increase in online orders from Chinese customers and have had to respond to a whole new market. How did this happen? Chinese students found their products while studying in the UK. Chinese culture is heavily orientated around word of mouth (WOM) recommendations and these young students used social media platforms such as Weibo and WeChat to tell friends and family in China about the brand.
Base Formula Ltd has risen to this challenge and now sells its products in China through Jumei.com an online retailer with 13% of the Chinese online cosmetics market and also through TMall Global (TMall has 34% market share).