According to a recent LinkedIn poll that I organised, at least 70% of companies are unsure about doing business in China. Julia Bingel and I discussed our top tips for entering China as well as the top mistakes when entering the Chinese market.
This interview was originally streamed live to LinkedIn and YouTube.
Table of Contents
Julia Bingel spent about 15 years in purchasing and sales before she founded her own company in 2013. Now with agency Ginius Partner, which is powered by Beautiful Products, Julia specialises in enabling brands and companies to enter the Chinese market in a relatively uncomplicated manner. And at the same time, she’s advising companies on their way into China, in order to make them a significant brand. She’s been able to build up a strong network in that time, so that she can help almost any brand and company entering China.
How did Julia start out in international business, especially China?
Well, it was a little bit by accident. Julia was always interested in other countries and cultures as well as in travelling. Due to her long experience in purchasing, she was able to build up many good relationships to reasonable manufacturers in the beauty sector, in the food sector and also other industries.
She helped companies to build up their purchasing departments in a corporate role until the day came where she decided to do this for herself. A friend asked if she knew some good manufacturers for selling to China in the food supplement category, and the rest is history…
At that time, cross border ecommerce was becoming more and more established in China. This friend connected Julia with some other friends in China, they started to talk and then to work together. From that day, Julia was constantly learning and reading about the challenges and possibilities in China as well as how to build strong relationships.
In 2014/2014 starting in cross-border ecommerce China was easier
At that time when cross border ecommerce was just starting out, it was really an exciting time to be doing business in China, because there were so many opportunities, and everything was so new, so there was this feeling of energy. You could even say it was almost easy, at least by China standards, and certainly compared to starting out now. The competition was already intense, but not as extreme as it is now.
Which questions about Chinese business culture need to be considered?
Compared to other markets China can seem very exotic, or very different. There are a lot of cliches out there about China: people have a lot of ideas that are maybe not quite true, but they don’t really know how the real situation is on the ground.
Don’t assume that China is some kind of Eldorado
Even now, a lot of companies really assume that for China you just need to offer a product and people will buy. Many people assume that China is an easy way to earn money. They think that they just sell to a Chinese partner and the Chinese partner is then selling to the end-consumers. They are looking for low effort solutions but for sure these don’t work in China. It’s completely wrong to assume that I will be able to find somebody who is doing my brand building.
It’s not really realistic to expect business in China to be easy. If you really want to build up a sustainable business, there are always some challenges you have to face. And especially in China, you have cultural questions as well as the distance from Europe, so “easy” is not the right word for the market.
Many brands still naively say “I just want to have a distributor and the distributor should do all the branding” however this isn’t a great foundation. Of course, it’s possible to work like that but then you only ship maybe one container and that’s it. The business might be over, and you have no idea why because you didn’t build in any transparency mechanisms. If you do not get the feedback from your distributor, you will never figure out what has happened. This is so important that you really build up step by step a trustful and good relationship in China so that you keep the transparency as well.
The challenges often begin with seemingly simple topics such as contracts. Yes, a contract can be simple. But here in our European “world”, we want to have the facts on the table. We want to arrange the contract before the business is going to start and everything has to be clear and agreed. Once the contract is signed, then that is how we expect to work for the next years.
So this is the first challenge actually, for the Western companies, when they go to China. In China, it’s different. Chinese people like to first create an equal ground for everybody, where we can start out with negotiations. This is an essential part of Chinese business culture.
We do not have really have black and white in China, we have grey, and we always need an area where we can come back to other discussions or maybe change something. So actually, everything is changing all the time. The contract really just forms a basis for further negotiations.
Flexibility is needed & an open-minded approach
That means we have to be flexible in these things as well, & it’s something that can be very difficult for companies in the western world to really accept. They don’t understand it. Because when they come to this point, people in the Western world always think that somebody is trying to cheat on them. Or somebody is not keeping their word or whatever.
Relationships and saving face are key
It’s not really like this at all though. It’s a different approach as to how you start a business relationship. You need to learn how you can keep your face & trust is a huge factor.
In Europe we also need to have a certain kind of trust as well, but in China, this goes even deeper. You get the impression that the contract itself is not so important, but the trust it symbolises is the most important. Building this trust and maintaining it over a sustained period of time takes energy and effort. Both parties usually will want to have quite a lot of visits together to build the relationship and feel that they can rely on one another.
Contracts are almost a synonym for relationships in China
When you sign a contract with a Chinese company, first of all, you need to understand that you probably should spend a lot of time investing into that relationship to build that trust before you even start talking about the contract.
Starting to work in China you need to spend a lot of time.
You also have to understand that the contract is not the end of a chapter (like you often assume it would be in in Germany), but it’s just the beginning of your relationship.
Often your Chinese partner is going to come back to you and he will want to renegotiate some parts of it, because he just sees it as a basis for discussion rather than absolute black or white working roadmap for the next five years.
Mindset and Cultural Knowledge is Necessary to Succeed
You need to have the right mindset in the company when you want enter China.
It’s not like Europe, and if you’re not open to learn about the culture, to learn about the behaviour and what you do in China, (or what you’d better not do in China) it’s even more difficult.
There are some markets out there where you can just sell to them without investing as much time and energy in learning about the culture. But China certainly isn’t that kind of a market. You can just pick it up and drop your product in: It’s not a kind of plug and play market. You have to really invest your energy into China.
Being open for the culture can compensate a lot for lack of language skills
Language is a great asset to have but the right personal attitude is almost more important as well. If you don’t have the right attitude, then you don’t need to learn the language as language alone won’t make you successful in China.
First of all consumers in China don’t buy products, they buy brands.
When they look for products or for brands, they ask themselves,
- what is my friend doing?
- What is my family doing?
- How do they talk about this brand?
They want to learn about the brands, they want to understand the brand, and most of all they need many, many touch points before they think about buying a product.
Customer Service is an important part of the customer journey
In our Western world, we have a lot of post customer service. In China though, we see a lot of pre-customer service because before a customer is deciding to buy something, they ask a million questions. They want to understand everything about this product.
When they then make the final decision to buy a product/brand they really identify with it. Chinese consumers are more challenging for Western brands because customers in the western world are not so difficult. They are not so extremely picky with these things.
Chinese customers have extremely high expectations
In Europe for example on the online product description, we have short bullet points where we mention what is this product.
In China, it’s different: products are promoted with keywords as well as well as a huge amount of additional information and photos. So it’s deeper, the customer is more demanding. Brands therefore have to understand, that when they want to be attractive to Chinese customers, they have to fulfil all these needs and all this information as well, because it’s not just a “here’s a product and now you buy it”. It’s much more than that.
Many companies underestimate why they actually need to supply all of that information.
They often believe that it’s enough to just say, “we’re a market leader in Germany, (or we are market leader in the UK or somewhere else in Europe). So this fact alone is enough. The Chinese should respect this and they have to accept that that we are the kings of this kind of product.” This kind of arrogance doesn’t work though.
In actual fact, for listing online, you probably need three pages of product information, including a picture of your factory and the picture of where your raw materials are coming from for a simple product.
If you’re talking about food, you also need all of your certifications and your safety procedures.
Whereas if you’re talking about a European market, you can just put, “innovative product for health-conscious consumers. No sugar.” and that’s probably enough.
Consumers purchase on the basis of research
The customer is more eager and insists to really understand everything that they are buying. This is a huge difference here.
In Europe we do not do so much research, when we buy something small we don’t talk to friends, to family. It’s a different approach and this is more challenging for companies, because they are not used to this.
Trends in China evolve at lightning speed (so-called China speed)
Trends in China are changing so fast. European brands are not used to that speed. They need to adapt fast and customers want to experiment with new products, they want to see new ideas. This is challenging for companies.
In Germany a company may have a certain product range and think “Oh, I have this product range. And maybe I introduce 2 or 3 new products every year”. This is not enough for China. Chinese customers want to see more new products. They want to test new things & have new experiences.
There is no such person as “the Chinese consumer”
We always talk about the Chinese customer BUT “the Chinese customer” doesn’t really exist. Nobody in Europe expects the Greek consumers to be exactly like the Norwegians, or for New York and LA to be 100% on the same wavelength.
When we talk about our own countries, we accept that there are differences even within a few hundred km so just think about the size of China in comparison! If we’re looking at top tips for entering China then we have to remind you to keep learning on this point. China isn’t as simple as a north-south divide or even a Tier 1 vs the rest, it’s far more nuanced, geographically and demographically.
Focus on target groups
For example the “silver surfers” are an underestimated and underserved target group in China. These are the seniors. All the brands, target Gen. Z, young people, everything needs to be for young consumers. Yet few are thinking about this huge older target group. China has a really rapidly aging population, who also have disposable income.
Consequently, there’s a market for good senior products with reasonable prices and good quality. Alibaba for example started to offer a tailored shopping experience for seniors, but there’s huge potential for products in this space.
Do Branding Activities from the start
For a brand who is just starting out, it’s worth extending the branding into China as well. If you are working with influencers in other markets, look for influencers that are able to reach out to Chinese clients as well. In that way you can create some awareness already from outside China.
Starting the business with cross-border ecommerce is easier
In China, social media is very important. When you start out choosing to sell cross border keeps life easier. You do not have to do all the complicated registration procedures, together with labelling, not to mention all the other aspects of starting with China general trading (=regular imports).
Look for partners in China that can offer you all these touch points that you need. Just having one touch point doesn’t make you a credible brand. As the Chinese customer wants to figure out if you are really a real brand, they will look on different platforms, not just on one.
This is a challenge for companies to figure out where exactly they need to be and who can help them obtain the necessary visibility.
Do a deep market analysis to establish your China strategy
Many companies don’t give much thought to developing a great strategy when they want to enter China. They don’t take the time to figure out what is the best way to enter this country.
They don’t take the time to figure out:
- what is the best product?
- what is the best pricing?
- what is the best packaging for my product, for my brand when I want to enter this country?
- what are the right platforms to use?
It’s important to do a deep market analyse strategy to figure out the right entry strategy into the market. This approach will help to avoid disappointment, because choosing the wrong strategy will cost you far more money than just the market analysis.
Don’t assume that Chinese consumers know your brand
Often a brand assumes that because they’re quite well known in the home market, that the Chinese are going to recognise that they’re a famous brand.
But they don’t.
This doesn’t only belong to the top tips for entering China, it’s a motto to live by as an exporter: NEVER ASSUME!!
It’s quite hard to accept sometimes that you start from zero in a market or from near zero, in a market like China. You have to spend all of your time to be present on these multiple channels in order to prove that you’re really a proper brand and not a fake. There have been so many scandals in China, especially in the food space, that people are concerned to make sure that they actually buying a genuine product from a trustworthy company. And this is why they do a lot of this research in the beginning.
Building a brand from 0 is a different skill set to growing an existing market
Many companies in Europe are not used to build up their brand from scratch. Why? Because the company has been there for 100 years or 50 years, so they don’t know what their grandfathers did when they first started out. For sure it was also challenging at that time too to build a brand in Germany or the UK.
Starting out from zero in China, you need to build the brand step by step. That requires patience. You shouldn’t expect to go there and make 10 million in the first year and then the second year 50 Million etc, without huge efforts and investments from the company side. This is the completely wrong approach to this market.
Be patient – brands need time to get established
If you go into any new projects, then realistically speaking, you’re looking at (best case) a three year return on investment for new markets. China is no different. Of course, everybody likes to hear about those kinds of outlier stories where somebody goes from rags to riches and that they have this very fast success with huge breakthroughs on the market.
Yes, those cases exist. But for most people, they have to assume that it’s going to be much slower and you have to build up step by step. Building up word of mouth is also becoming more and more important. You need to build this route of fighting for each consumer because you’re waiting for each person to tell five friends and lead expense like that, but it’s not an overnight success.
Companies don’t give the product enough time to really let it grow and to get a reasonable result. There are extremely few brands who are really an overnight success in China – the market is simply too crowded for that to happen.
You have to be willing to take this time and you have to give that time to your brand. Don’t give up after two years or three years because the development of sales is slower than expected – persist and you will gain traction. The market is large enough that with patience you can grow and earn solid results. For most producers, becoming a huge hit in China would mean that they couldn’t satisfy demand anyway…?
Think strategically how to achieve flexibility before entering the market
Things change so fast in China, that you have to be very flexible as a brand. You have to also think about it strategically before you enter into the market. That could perhaps mean that you hold back some of your products so that you can drip new products in over the next few years. You bring something new every three months without driving your back office crazy by having to continuously redevelop everything for the market.
Register the Brand up Front!!!
It’s shocking how many brands fail to register their trademarks for China – this is a false economy! On the one hand, many companies will tell you that they don’t want to enter into China because their IP will just be stolen, on the other hand though, companies often don’t take the most basic of steps to protect their brands.
China is a so-called “first to file market”. That means that the first person who files your brand name has the rights to it. And if that’s not you, then you have a problem.
Then you start in the country with the first legal issue which is not ideal at all. (In fact, there are a number of unscrupulous companies in China who specialise in registering brand names & web domains, only to sell them back to the companies who “own” them when they decide to enter the market.)
Don’t underestimate the investments required in time, energy and money
Most companies want to take shortcuts and think that it will be easy to make huge profits in China. They will be disappointed.
The investment needed to enter China has changed a lot as well in the last few years. When Julia and I started out in China business, it was much lower than it is now.
Now for sure you need to be prepared to invest when you really want to enter China and when you want to set up a good business there. Realistically speaking, if you want to enter into the North American market, you wouldn’t expect to be able to do this for free. So why do companies expect to be able to do it in China for almost nothing?
Attitudes towards sustainability are changing
Slowly but surely, with baby steps…
Sustainability is still not completely mainstream in China but is certainly growing, driven by the government plans (see also my article about the Winter Olympics).
In the last year organic products have become more popular, although they are still quite a niche area, outside of things like baby food.
To obtain organic certification in in China is actually a bit harder than Mission Impossible, because it’s really expensive and it’s extremely, extremely complicated, much more so than pretty much any other major market.
Last year, the Chinese brought in regulations about recycling. Consequently, in larger cities at least things started to change, & consumer attitudes started to evolve.
The attitudes of consumers are changing, and they’re changing quite fast because, well, things do change fast in China. People in China are being educated how to do recycling. They learn what to put in which container, but it still needs time.
This isn’t really a topic in China yet. Nobody is really talking about vegan food much. It’s not so hot as it is in Europe or the US. “Plant based” has been included in a lot of “trends lists” but in actual sales terms it still hasn’t quite taken off.
China still has a long way to go when it comes to sustainability here. It’s popular to have everything packed in nice gift boxes and so there is a lot of potential for improvement. The government needs to invest in educating consumers how to avoid excessive waste, including for packaging, before their recycling schemes can truly make an impact.
The pandemic has probably exacerbated this situation with the amount of take out packaging from delivery companies.
For things like packaged goods, then the Chinese like to have this very elaborate packaging and if you come with just very simple, eco-friendly packaging, then they look at you like you’re trying to charge them a high price but you’re not actually providing the value that they’re paying for.
For example, German products are often regarded as not having nice packaging in China. It’s kept to a minimum because in Germany awareness of green issues is far higher and also companies have to pay a recycling tax based on the amount of packaging of their products. In this aspect Europe is far ahead in their thinking.
There are however some areas like electric vehicles where China is moving ahead really quickly, far more so than Europe.
Chinese consumers are open for trying something new, whilst European consumers are not always so open for technologies that didn’t develop in Europe. Europeans are definitely more conservative in this way.
Julia’s Top Tips for Entering China
- Be prepared to learn continuously and educate yourself about what is going on in China
- Try to build up relationships
- Go to China as often as possible.
- Learn the language.
- Be open for cultural things
- If you don’t like it, don’t do it.
To Avoid the Top Mistakes when Entering the Chinese market
- Learn about the culture
- Invest the time to build the necessary relationships
- Prepare a strategy
- Be patient
- Invest in the market
You can find the full interview with Julia here (please don’t forget to subscribe to my YouTube channel whilst you’re there!):
For anybody who is looking to expand into the Chinese market, you can reach out to Julia or myself to learn more about how to do that. You can contact Julia via her company page here: https://ginius-partner.com/
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If you are interested in selling in China, you might also find these posts interesting:
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- China Challenges Part 1: Underestimating China
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- China Challenges Part 3: Keeping up with “China Speed”
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