China Market Entry: Key Factors and Strategies
Breaking into the Chinese market is an appealing prospect for any brand. As the world's most populated country, China has become a lucrative destination for selling products. However, entering and thriving in China’s incredibly competitive marketplace can pose unique challenges. Let's dig a little deeper into the frameworks, strategies, and considerations crucial for any brand that contemplates setting up shop in China.
Market Entry: Distributors at your Disposal
Understanding different market entry models is crucial. One of the most common channels to start selling in China is through a distributor. This approach can relieve brands of the burdens associated with marketing, order fulfilment, and constantly worrying about the brand's performance in an unfamiliar market.
Distributors carry the risk and shoulder the responsibility, which is magnificent on the surface. However, keep in mind that finding a distributor willing to take on that risk might be a herculean task unless your brand is distinct, highly desirable or you are offering something extremely unique.
Considering the enormous size of the Chinese market, and the wave of international brands trying to penetrate it, distributors have become spoilt for choice. They can afford to be selective and may not be attracted to your brand since they already deal with a plethora of others.
Therefore, enticing a distributor may require more than just lowering your product's purchase price. Brands might need to offer additional support or incentives such as funding for opening shops, running campaigns etc to appear appealing to potential distributors.
Starting Small: Initial Steps in a Gigantic Market
Brands often start their journey with small distributors or modest online shops, where people run the store as a side venture or sell multiple brands. Though these entities may not provide substantial value or significantly impact your brand's image in China, they serve as a stepping-stone, testing the market waters or capturing initial sales.
This strategy isn't designed for long-term growth. Since these small vendors concentrate more on increasing their own brand's footprint, there's little likelihood of your brand gaining traction solely through them. However, it can provide initial momentum and crucial data about the market's response to your products.
Finding a Distributor: Setting the Groundwork
To find a suitable distributor, you could attend exhibitions either domestically or in China. Exhibitions can provide a platform to meet potential partners interested in distributing your brand in China.
Approaches from distributors can also be a route to engage, but a word of caution - just because a distributor approached you first doesn’t automatically make them the best fit.
Case Studies
When it comes to doing business in China, working with local distributors can sometimes be a rollercoaster ride. Let us share four different stories about how things can turn out for brands.
The Sneak Attack: One time, a brand from America jumped into the Chinese market in 2015. They trusted a distributor, who bought many of their products. But as time passed, the distributor started to act sneaky. They registered the brand’s trademark under their own name in China, without the brand’s permission! As if this wasn’t bad enough, they even started making fake versions of the brand's product! When the brand found out, they tried to sue the distributor, but unfortunately, they lost the case. Also, due to a messy contract, the brand had to wait a long time to properly start selling in China again. So, they not only lost time but also spent a lot of money they didn’t get back.
The Dream Team: Now, here's a happier tale! A small company from Europe once got lucky. They were approached by a huge distributor from China at a business event. This turned out to be the perfect match! The brand’s products got into many wonderful shops in China in no time - and all without much work from their side. This is a great success story, but bear in mind, it also involved a good bit of luck.
The Case of High Hopes: Moving on, there was a brand from Finland that put their hopes into a Chinese distributor. That person promised big sales, but they never really delivered. In fact, the distributor stopped selling the products after a few months. It turns out, the distributor was just a student selling the products in a small online shop! This bad experience left the brand feeling cheated, and they stopped doing business in China.
The Small Steps to Success: Finally, we have a Japanese brand’s journey. They started slow with a distributor who ran an online shop. Sales were slow at first, but over time, the brand noticed a steady increase in sales. This convinced them that there was potential in the Chinese market, and they decided to invest more in it.
So, there you have it — four different tales of brands working with distributors in China. These examples show it can be a bit of a gamble. It’s always important to do your homework when choosing a local partner in China, to enjoy a positive and profitable business experience.
The Do-It-Yourself Approach: Taking Control
Should you not find a distributor willing to invest in your promotion, you may want to pivot and consider executing operations directly. This could involve opening your own company and hiring a local workforce. However, this approach demands a substantial commitment and may be more suitable for larger enterprises with extensive resources.
For smaller brands, the right alternative might be collaborating with an experienced partner in China who can serve as a marketing agency, legal advisor, designer, and more, all rolled into one. Attempting to juggle multiple partners for different tasks can be challenging and an integrated solution can streamline operations while offering control over brand identity and messaging.
Such partnerships might involve a fixed monthly fee, a commission-based approach or a combination of the two. While this gives you some control, it also transfers most of the risks to you if things don't sell. On the other hand, if the agency works purely on a commission basis, they will have a vested interest in your brand's success.
Agency or Distributor?
When deciding between a full-service agency and a distributor, consider what each offers.
Agencies give you full control over how your brand looks and sounds. They share data that helps you know your customers better and discuss any necessary changes. They also show you where your money is going and give you the option to modify their services based on your needs. Plus, they can market your brand both online and offline. Agencies usually work with fewer brands, meaning they can focus more on you.
On the other hand, distributors can do all that without your support, at least in theory.
In short, if you want to control every detail of your brand and have a hands-on approach, then an agency might be right for you. But if you don’t require control over how your brand is presented, and have full trust in your distributor, a distributor could be a good fit.
Remember, the best partner is the one that prioritizes your brand and meets its unique needs.
Remember, breaking into the Chinese market might require a handful of strategies, and choosing the most effective one depends on your intentions, product, resources, and resilience. Patience, hustle and flexibility will be necessary to navigate the vibrant and challenging Chinese marketplace. Establishing a strong presence in the market won't happen quickly, but it's achievable with a well-planned and flexible strategy.