With more than 10 years of doing business in China, helping hundreds of clients build their brands in this market, we never stop reflecting on our journey and constantly consolidate our learnings. Once in a while, we make an article on what we have learned from working with companies in China as well as mistakes to avoid for anyone who is or will be attempting this market. This article is one of the kind. Doing Business in China can be really profitable… but most foreign Companies are doing the same mistakes year after year
1. Localize your products for China market, but keep your DNA
This is repeatedly mentioned, but still worth mentioning again. Understanding culture and its people is easier said than done. When it comes to execution, in reality, you will realize your understanding of China is properly just at the surface level.
Chinese people have different values, different ways of living – thinking – shopping – dealing with problems… Their demands are also not the same as those of your western customers, as well as the way they perceive your products and how they shop for you. The level of difference from the West is astonishing! Therefore, your products and services, positioning, prices, promotion, and marketing approaches need tailoring specifically for this market.
For example, Chinese customers want the best services but most of the time will buy the cheapest. They like to show off their expensive way of living but paradoxically purchase cheap products at home when nobody sees them. Chinese people are also profoundly influenced by their social circle. This is why word-of-mouth marketing is so important. Another strong trend is the “Pay for safety” notion. Parents will pay as much as possible for baby milk formula and food in the maternity industry.
2. Adapt or die
While adapting, your brand has to keep your western identity as Chinese people value overseas quality and reputation. People with a fixed mindset will usually fail in China. Successful ex-pats know this. They invest an immense amount of time on a daily basis to understand Chinese culture, their mindset, acquire Mandarin knowledge and learn communication skills to perform in China.
In the past, Unilever tried to introduce Rexona deodorant but unsuccessfully. It was lured by 2,6 billion potential customers; however, Chinese consumers mostly ignored it because they don’t have Westerners’ body odor issues, and don’t perceive sweating as something bad: it cleanses the body. Neither did tampons become a success in China, despite Proctor & Gamble’s attempt to introduce Tampax in 2000 — because, unlike sanitary pads, tampons are considered invasive. Neither could Weetabix get Chinese to choose cereal for breakfast.
Slow reaction – in China, it’s not the biggest fish that survives but the fastest
In China, everything is moving so fast. Decisions are made fast and their execution is also fast. Society is changing dramatically and trends are moving at a breakneck speed. Chinese companies are investing heavily and expanding quickly at a fast pace.
- In less than 6 months, Alibaba, the largest digital player in China, set up Alipay (a mobile payment service) in every major shop across the country.
- Within one night, China can put 100.000 bikes in Shanghai.
- In 1 night they can copy the latest iPhone model.
In China, you need to think fast, make fast decisions, and move fast. If you wait too long, the market will change, the competitors will become stronger, the consumers will change their minds, and you will miss the opportunity.
Business in China is about speed and flexibility. It is not the largest fish that survives but the fastest and most adaptable one.
Perfectionism is one reason for your delay. However, perfectionism will rarely equal success. Nothing will ever be perfect in China no matter how much you try and how much money you invest. Accept that imperfection can allow you to move and develop. If you have a project, product, or service for China market and enough initial investment, launch it! It will not be perfect but it will be your first try, a good way to get a feel for the market and understand how you need to change to improve.
Work on online reputation
Communicating in China today is the key to success because Chinese people trust brands.
Chinese middle-class consumers are getting richer with higher disposable incomes. They get bored of cheap, bad quality locally made products and increasingly want international foreign brands because they desire safety and quality in the market traditionally dominated by fakes and lower quality products. Furthermore, Chinese consumers buy branded products to show off to their friends.
If you are a new brand, it is even more critical to invest in branding.
China is the most connected country in the world, and “you have to go digital or go home”.
In China, people consume media in different ways from the West. They are extremely glued to their mobile phones, checking WeChat, using Baidu ( search engine), playing games, watching live-stream… China’s internet users grew last year to approximately 731 million people, yet China’s cable TV subscription base, by comparison, has grown to only 313 million as of 2016.
International companies or brands should seriously think about digital when in China. In fact, Digital in China is already more advanced than in many western countries. Moreover, Chinese consumers are enthusiastically embracing new digital technologies. Some digital tools can easily boost top-line growth while others reduce costs.
This is both a significant opportunity and challenge for companies to utilize the strength of the Chinese digital ecosystem to build brands and make sales.
Be overconfident (China is not an easy market)
Years ago, Western brands were assured that in China, the sky was the limit – they simply had to set up shop and, then, instant success. However now, China is an entirely different landscape. It’s become harder – not easier – for many Western businesses and brands to do business in China.
Chinese brands are making headway in several categories; they are even going internationally aggressively. Look at Xiaomi. The company redefined the Chinese smartphone market and has been referred to as China’s Apple equivalent. Other companies, like consumer electronics and home appliance company Haier and technology company Lenovo, are enjoying not only a large market share in their home market but also an ever-increasing international presence.
Furthermore, over the years of economic development, Chinese consumers have become more knowledgeable and confident about themselves and their choices in life. They are also more demanding. They want something that is genuinely better, and right for them. Foreign identity is still a plus, but not a decisive factor.
Be pragmatic and not based on artificial figures
You may have read a lot of marketing theories and expert opinions about China; however, regarding doing business in China, you have to start from the ground up. No matter how much you think you have been prepared for this market, it will never fail to surprise you.
Stay pragmatic and don’t be lured by artificial figures. Instead, patiently learn from the consumers, your suppliers, your partners, your Chinese colleagues, and your friends. Then, adapt. Be as pragmatic as Chinese people. Do not think too much. Do not come in with too many Cliché, pre-perceived ideas of how things should be. Instead, focus on what works and avoid what does not work.
Invest big at the beginning and not invest enough for long term
Success is a long-term process. In China, it takes time to understand the market, the culture, and the people; and above all, it takes time to gain the trust of Chinese consumers. Many companies are willing to invest a great deal during the launching phase without proper financial planning for the longer run.
Besides, foreign exchange control in China is limiting loans from mother companies overseas. Local and foreign banks are quite reluctant to lend to new companies without a high level of securities. From the origin, allow generous financing to be available for the project, yet be aware of potential cash demand for long-term plans.
Over trust the local team or not listen to them at all
It’s not strange to believe that Chinese people know Chinese people the best. That’s why we have the local team who help us with many issues such as language, permits, and government regulations, networking, navigating the particulars of Chinese culture…
However, neither over-trusting the local team nor not listening to them at all is good. Treat their opinions as a great source of information and perspectives, but also consult experts in the field as well as trust your own instinct and experience.
Marketing mistakes happen in China regularly, even to well-known global brands. The team – both local members and ex-pats should always cooperate together, learn and adapt to the market. Ideas can be wrong but the market is always right.
Choose the wrong partner
You have 2 types of the wrong partner:
scammers (a lot in China)
And incompetent agencies /distributors etc
It may happen even to big firms (credit local Agency in China)
Finding the right partner—whether that is a co-owner of your business, a manufacturer or a distributor in China is a real challenge. It’s not easy to find such partners, even when you are both in the same country. Language barriers and cultural differences can require extra effort.
In China, building a relationship with your partners is critical since business in China is pretty much based on relationships. Besides, you should always double-check on a potential partner. Background checks are not a substitute for meeting in person or hiring a trusted agent to do so. When doing business in any unfamiliar cultural environment, consider asking for help from experts who know the water better than you.
Result-oriented partners who can deliver sound and clear results should be valued the most!
Thanks for your advice, I’m sure it will help lots of young businesses to avoid doing mistakes.