International business expert David Nicholls takes a look at doing business in China and explains why research, good partners and a bit of patience go a long way towards making the move a success.
China is one of the great economic success stories of the past 30 years. It’s now the world’s largest economy and is an increasingly attractive market for UK businesses looking to reach a huge new audience. Gone are the days where goods were just “made in China” – now they are “consumed in China” too, in a market with more than 600m middle-class consumers.
The country accounts for a staggering 40 per cent of the global ecommerce market, with online sales more than twice those in the US. With Alibaba’s Taobao and Tmall making it ever easier for UK businesses to start selling products into the Chinese market, there’s a huge opportunity here for online sellers.
No matter if you’ve successfully taken your business global in other markets, China is by no means an easy market to enter, and there’s no such thing as a quick buck to be made here. To succeed, businesses must make a long-term commitment to their Chinese strategy, and stick to some basic principles for it to pay off.
Do your research and keep learning
China is an incredibly fast-moving market, so you need to be on the ball if you want to succeed here. New technology is adopted far quicker in China than it is in the UK and US, and the landscape is always evolving – just look at the number of Chinese consumers that pay their rent and utilities using Alibaba’s mobile payment platform, Alipay. The key is to test, learn, and move quickly, or you’ll soon be left behind.
Tencent and Alibaba, the country’s twin tech giants, do provide advice to UK businesses looking to enter the Chinese market, so keep an eye out for guides and events where you can learn more about their new products and services. Of course, third-party consultants can also advise you on how best to navigate the world of Chinese ecommerce if you need a helping hand.
Find a trusted partner
China is simply too big a market to try and crack on your own. Working with local partners who have an intimate knowledge of the market, such as the China Britain Business Council’s “Launchpad” service, can help you to test your product in the market before committing to a permanent presence – a smart way forward if you want to avoid filling a Hong Kong warehouse with product you can’t shift, and that’s more expensive to ship home than it is to leave in situ.
Once you’re in the market, it’s crucial to put in the hard yards and further develop your network of local contacts. Chinese business relies on relationships, so this is something that will be important to maintain on an ongoing basis. If your language skills aren’t so hot, hiring a native speaker can be a great solution.
Be patient and persistent
China is a very nuanced market and there is no “one-size-fits-all” approach to it. The chances are you’re going to make some mistakes along the way, but it’s important to be patient. Show a commitment to the market through trial and error, and the potential rewards are huge.
For example, Single’s Day on 11 November is China’s (and the world’s) largest retail event, with $44bn being spent last year. Last year, Alibaba took $25bn in just 24 hours – more than on Black Friday or Cyber Monday in the UK combined. Last year’s records are likely to be smashed again this year, so if you’re willing to put up with a few bumps in the road, the rewards can be significant.
Tap into the special appeal of Brand Britain
A common mistake for British businesses is to dramatically change the look and feel of their products to better suit Chinese consumers, and to update their labelling for the local language. In fact, the vast majority of young Chinese consumers can read English to a high level and are attracted to British products, whose cachet is undermined when labels are translated into Chinese. Chinese consumers also show great interest in company founders and their stories, so don’t be afraid to draw this into your marketing to boost your sense of authenticity and prestige.
Don’t lose out when bringing your revenues home
China strictly controls conversion of the Chinese renminbi (RMB) to foreign currency, but many Chinese companies prefer to be invoiced in US dollars anyway. However you bill your customers, having a virtual currency account, which allows you to hold multiple currencies in one place, is a particularly valuable tool when doing business in China. It allows you to pay overseas suppliers directly from your international revenues, saving you the need to transfer to and from sterling, dollars and renminbi needlessly losing money on the way. Look out for a provider who can advise you on the best currency strategy to protect your business from volatility, and who can provide round-the-clock customer service so you have someone to speak to, whether in the UK or China.
China is an extremely attractive market to export to if you are a British business, but you must undertake the right level of preparation to really reap the rewards.
David Nicholls is director of enterprise development at OFX, an international payments company.