5 Questions You Must Ask Before Exporting to China

5 Questions You Must Ask Before Exporting to China
  • China is a lucrative export market for premium goods, education and tech sectors if you plan extensively and adapt accordingly.
  • You must understand why you are entering the China market and figure out your brand story.
  • Your business must move at a faster speed in China and be willing to face and manage risks.

The statistic on the size of our export market to China for “high demand” sectors such as premium food & beverage, fast-moving consumer goods (FMCG), agribusiness, education, health & wellness and technology (edtech, biotech & medtech) is remarkable.  Australia currently exports $200 billion of goods and services to China, which is three times the value of exports from the US to China.

However, the decision to enter any new export market shouldn’t be taken lightly. It is doubly true when that new market is China. Asking the right questions, and the process undertaken to answer them honestly, can help to sharpen the focus and provide a solid foundation upon which future success is built.

 

1. Why China?

As Simon Sinek says, it’s important to start with “Why?”.  The opportunity in China is well known and proven. However, that doesn’t mean exporting to China is like shooting fish in a barrel.  In fact, even with solid advice and careful planning, you will still need to negotiate what can at times feel like a 100m hurdle race run over a marathon distance.

Every Asian market has its own characteristics, import requirements and demand curve.  China is many markets within a big market, and it is certainly not a one-size-fits-all proposition.  Early stage planning in terms of assessment and familiarisation with the market in China should include careful and detailed questions about the specifics of your product or service and the exact market dynamics at play in China in terms of geography, GDP distribution, and demography. 

There are points in every China export market journey where you will need to be crystal clear about why you chose to chart a course for your product or service in the first place. This clarity will provide fuel for the commitment and resilience that will be required to reap the significant rewards that are on offer for those who seek – and follow – the right advice to stay the course.

 

2. What is unique about my brand story?

You must be able to share the story of your brand in China and seek to genuinely resonate with your target market. This means knowing your product story and being able to clearly articulate its unique selling points. As much as the possibilities are enormous in China, the noise from competing brands in the most competitive market on the planet can be almost deafening and cannot be underestimated.

There is no doubt that technology is providing an unprecedented platform in China, however, the product narrative and an ability to resonate with consumers, is still at the heart of every success story. As a result, it is very important that you can identify and identify with your potential customers in China.  How will your product be received by the different age groups and in different regions? Now more than ever, brands must be able to cut through the noise and create an authentic story to connect with consumers in order to be successful.   

As part of the initial market assessment phase of the export journey, prospective exporters really need to put careful thought into crafting their brand story in a way that will make their offering desirable and attract attention in China.  This means seeking and accepting advice from experts who live and work in China as they are best able to keep pace with the rate of change and the development of the trends in China that drive consumer engagement and spending behaviour.

 

3. Can my business move at “China speed”?

In China, one business’s hesitation is another’s opportunity and as a result, business in China moves at a breathtaking pace. It can be quite overwhelming at first and those exporting to China need to commit to becoming “match fit”. 

One of the key elements driving the market speed in China is the almost universal adoption of mobile platforms and associated mobile payment systems. This has now enabled brands to reach hundreds of millions of Chinese consumers quickly and directly. This also means consumers can move with an agility almost unimaginable only five years ago. This speed is now permeating every area of the supply chain in China from purchasing decisions through to promises of delivery within 30 minutes of placing an order.

For most Western businesses, entering the China market will usually mean operating at a much higher tempo than they are used to. Everything from the speed at which decisions are made to the time it takes to turn marketing material around will be tested.

Being successful in China means a commitment to being "China fit" and operating at a pace that most western businesses simply don’t. As a result, decision making and approval processes will be tested to their limits.  This is not a bad thing as it inevitably forces a review of bottlenecks and inefficient processes in your business. It should be embraced and seen as an opportunity rather than a threat.   

 

4. What is my appetite for risk?

Every new market brings with it a certain level of inherent risk and China is no exception. Just like crossing the street or riding a bike, risks cannot be completely removed but they can be effectively managed. Asking important questions will assist you to develop a plan for diminishing your exposure to risk:

 

  • Who am I going to partner with in China and how should I select them? 
  • What critical advice do I need to underpin success?
  • How do I make sure I keep up to date with regulatory changes?
  • How do I design a successful business model to take account of local conditions?
  • How do I protect critical information such as branding, IP or customer data?

Operating in China requires a commitment to risk mastery, not risk avoidance. It is essential that you design your business model from the onset to cater for local conditions and the regulatory framework that you will be operating in. Having established successful start-ups in China and India, I know that you can't spend money on everything.  It is therefore crucial to understand the key elements on which your business plan will succeed or fail.  Getting the right expert advice in these critical areas will be another important plank in the foundation of success for your business in China.

 

5. Are you prepared for success? 

This may sound a little like getting ahead of yourself, but it is a crucial question to ask before entering a large and rapidly expanding market like China. In answering this question, you will need to ask several fundamental questions such as:

 

  • What does success look like for your brand or service in China?
  • Can you produce and deliver enough to meet demand with your current production processes?
  • What are the potential pinch points in being able to scale?
  • How do you eliminate supply risk by taking local conditions or regulatory processes into account?   

Generally speaking, brands that win in China, win big. Whilst this will mean different things to different businesses, it is crucial to plan early, and strategically, for success. For some naturally supply constrained products such as wine or honey, this will need to be considered during the market assessment and planning phase.  Do you need to look at niche or boutique distribution channels in China where huge demand is not a factor?  Do you need to consider third party processing or supply arrangements to buttress your ability to supply once demand outstrips your current capacity to produce?

One of the best ways to damage your brand in China is to be caught out by your success, struggle to supply, and then fail to meet demand. This is a difficult position to recover from once your brand has lost the trust and confidence of your distribution channels and more importantly, your once loyal customers.

Doing business in China is exciting and can be enormously rewarding but it does require careful planning and a commitment to going the journey.  Expert advice from experienced advisors with a presence in China and a successful track record of delivery is vital.

Trade wars and other risk factors will come and go, but with consumer spending now more than 60% of Chinese GDP, economic momentum in China is unstoppable.  Every export focussed business should at least be thinking about how they can take part in the incredible growth story that is China.  Asking the right questions and being able to answer them as part of a careful planning process will take you a long way towards a successful outcome in the most dynamic marketplace on the planet.


Iain Langridge

Managing Director at


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