China is an attractive country for many start-ups wishing to expand their activities abroad. Indeed, with an annual growth rate of 7%, more than 1.3 billion chinese and more than 730 million connected individuals, the Middle Kingdom has become, over the years, a niche market for foreign actors and is undoubtedly a partner of choice in trade with the West.
However, considering the size of the market and the strong competition from local players, it is easier for this type of players to redefine a more appropriate strategy than a small foreign company that does not have as much knowledge Of the Chinese market. And this is where the failure of at least 99% of foreign start-ups lies.
We will therefore present some tips that will allow you to have an overview of the Chinese market and to acquire some knowledge to implant yourself there.
Reasons for these many failures
The rapidly changing market
Indeed, China as a great emerging power, is a country in perpetual evolution. Given the speed of the market and its strong competitive structure, foreign players are struggling to be responsive and adapt to it.
Lack of Chinese consumer understanding
Foreign brands do not realize, before implantation, the differences present in the Chinese market, in term of cultural, social or consumer differences. Moreover, the error often made by these companies is to analyze and draw up a Chinese consumer profile as a whole, while there are large differences between the different zones and regions of the country.
Difficulty finding a distributor
If your start-up does not have the necessary funds to open an on-site store or you want in your Business strategy, go through an intermediary to make your sales you will have to find a distributor. However, distributors in China generally do not trust new foreign brands and refuse to cooperate.
China remains a relevant market for those who give themselves the means
Although integrating the market seems complex, as a foreign brand you will find many development opportunities if you give yourself the means to review your Business Model.
Indeed, as a foreign company, we have very good competitive advantages allowing the development of a good growth strategy on the market. Moreover, in industries such as education, pharmaceuticals, fashion or food, being a foreign brand can become an asset because of the experience and know-how that we have.
In addition, the reputation of foreign brands as quality brands, makes it easier to develop your company’s reputation in the market. Indeed, the Chinese live in an environment where counterfeit products are strongly present, which justifies their lack of confidence and their mistrust towards the brands.
Strengths and weaknesses of the market
To get back to the momentum of Chinese growth, here are some key points to remember to capture the full value of this economy.
– The Middle Kingdom receives many foreign direct investments
– The image and positive reputation of French brands in China
– The diversity of markets by sector
– Society that is more likely to consume at the “western”
Disadvantages of the market:
– Strengthening of sectoral controls in order to avoid the monopoly of foreign brands
– A country far too dependent on the United States
– Social instabilities
In this first part, we explain the reasons for the failure of foreign brands in terms of their development in China as well as the possible opportunities.
In the second part of the article, we will present some tips and solutions that allow you to get the most out of the Chinese market.
Tips for starting your business
More than anything else, it is good to remind you to take your time to develop your business on Chinese territory. China is a buoyant market, but that is not to say that your sales will explode in a quarter. The return on investment takes time and does not happen overnight. A comprehensive analysis of the Chinese market and environment is more than required for your success.
Understanding the Chinese market
At the risk of repeating itself, the Chinese market is in perpetual development, as are the individuals who compose it. Indeed, the rise of the Chinese middle class allows individuals to aspire to a better quality of life. These new aspirations create new needs, expectations, and new behaviors on the market.
Analyzing the consumer
The Chinese have a strong relationship between them and brands. In China, appearance is everything. Buying branded goods is a social distinction for individuals who see in them values of quality, prestige, and authenticity.
Moreover, price is an indicator of quality for consumers. If we were to summarize the decisive criteria for buying a product by this type of consumer this would be the price and the services provided during the purchase.
Chinese society is a collectivist society where the community takes precedence over individuals. Complying with the rules and standards of society is in the habits of individuals. The Chinese consumer, always in this respect of conformity, usually takes into account the general opinion of his peers. Membership in a group and social status are important elements in their behavior.
As we mentioned earlier, the Chinese market is surrounded by counterfeit products, which makes consumers more and more suspicious. This item has made Chinese consumers aware of their consuming and demanding environment in their purchases. The search for information upstream of any purchase, takes an important place in the decision-making process of the consumer. Word of mouth and social networks are two sources of information commonly used by individuals.
Arm yourself with quality distributors
Finding a quality distributor in China is a notoriously difficult task, especially for a brand-new brand with low reputation and low brand awareness. Distributors will be incredibly selective and want to see products and brands that have already had an impact.
In negotiations with suppliers as a new brand, you are unfortunately not the one who holds the power in his hands. However, the way you will support your argument and your communication strategy will help you make a difference.
Two solutions are available:
Nothing like branding to improve your brand image in China. In general, the criterion for selecting distributors is the visibility and presence that you can have in the Chinese market.
Branding for products in China should always be considered as the priority for B2C sales and B2B distribution networks.
Build your e-reputation
The first thing a Chinese distributor does after any contact is to conduct research on Baidu (the equivalent of Google in China) to assess your reputation.
Building your e-reputation is the foundation of any marketing campaign. First, you need a Chinese website optimized on Baidu and make yourself visible through SEO techniques.
Developing a positive reputation on your brand and your business here is therefore vital.
Appropriate the Chinese digital sphere
Investing in digital marketing and communication helps support your sales strategy and prove the potential of your offering by generating a good “online reputation”, absolutely necessary in a digital culture driven society.
There are about 900 million Chinese connected and 400 million purchases made over the internet. The share of online shopping accounts for 25% of Chinese consumption. China has thrown itself into the digital era and is probably developing the most developed digital infrastructure.
To ensure a better reputation and a better brand image communication is your main asset. Make them believe that you already have a strong presence in the territory which will encourage the product trial.
Encourage, encourage consumers to try the product, offer samples, discounts, anything that will get feedback from them and information dissemination.
A brand is essentially a “way of life”, through which the Chinese desire to build their identity and be respected in their social circle.
Having a presence in China
As far as possible, a direct presence on Chinese territory is recommended. Your presence remains one of the best ways to control your operations, control your distribution and your customer relationship. Being present in the country will also allow you to analyze the evolution of consumer behavior, the emergence of the key trend of the market and its evolution.
- If, however, you are unable to be present directly on the market, we advise you to call on a local partner, who will be your intermediary in the field.
- In China, foreign companies need to understand the importance of adapting to the Chinese consumer system if they want to develop their business and become sustainable.
In order to do this, it is a question of “asking for help” from an expert company with regard to the mutual development of a strategy for setting up in the market.
In short: in China, it is not the biggest fish that survives. It is the fastest and most intelligent.