Entering China’s Domestic Market.

Yesterday I posted a section on when to enter China’s market. Today I’m going to post an overview on how to do it.

There are a number of ways one can get into this market. You can form a partnership with someone over here who will help you set up shop and sell your wares, you can find a local PR company to help you display your brand appropriately, you can start your own independent shop and go it alone, you can find a distributor and simply export your product to someone who will put it on shelves for you, you can find an exporter in your home country who has experience sending products similar to yours over to China, or you can even find some people who will start out just selling your stuff on taobao.com (picture the giant child of ebay and amazon).

The steps to market entry in China are similar to what they would be in any other market:

1. Market research. Know what the market looks like. Is there competition locally? Is there competition from abroad already? Is there a demand for your product? What is the potential size of your customer base here? What do the demographics of your customer base look like? (Chengdu is famous for people relaxing with a hot beverage. Starbucks, to a foreigner, looked like an easy slam dunk in this market). Does another product different from yours exist that replaces the need for your product? (Chengdu has a lot of tea houses. It’s famous for it. I’m pretty sure the number of Starbucks drinkers is affected by this). Does the customer have any need for your product? (Nobody in China, except for the few “Sea Turtles” who got their degrees in the west, feels a dire need to start their day with a cup of joe). Will customers need to be taught to use your product? (The only way to increase dairy sales in China is to actually convince people to start eating western food at home from time to time).

2. Market entry vehicle. How are you going to get here? Should you go it alone and open your shop? Should you find a professional retailer? Should you go with a distributor? An exporter from your home territory?

3. Branding strategy. How are you going to present your brand in this market? Should you do things largely the same? (McDonald’s) Or should you completely change around your product design and presentation to meet the needs of your new market demographic? (KFC’s menu is at least 50% different from its menu selections in the States). Are you a luxury item in China where you’re a commodity in the US? (Harley Davidson) How are you going to market yourself? Traditionally? Online? Guerrilla? What will hit your target market most effectively?

4. Pricing. You may be manufacturing your goods in China already. This doesn’t mean you need to pass the savings on to your customer. If you price your goods too low it is possible they will be perceived as “for the lower-income buyer” when you’re targeting your product to a higher, more visible and savvy customer. The customer you’re chasing may not pay $50USD for a pair of shoes if the other shoes targeting your customers are selling for $250USD, even if you could easily make a profit at that level. Ironically, if you hit the luxury market or semi-luxury market here you’ll sell more of your product than you could at a much lower price, because at $50USD per

5. Find the process. How are you going to enter? What steps do you need to take? How much are you willing to risk up front?

6. Find the people. Who are you going to partner with? How will you develop a relationship and monitor progression of your business?

7. Pull the trigger.

Depending on your business, these may not be all of the steps. Different actions needd to be taken for different businesses. I also haven’t gotten into the regulatory side of things, since that varies drastically by what you’re selling and how you’re selling it. But basically, the structure and process are similar to anywhere else. Is there a market? What does it look like? How do I get in? How do I sell? Can I make a profit? Who do I work with? What are the taxes? Are there any major road blocks that will prevent this from happening?

The next post will be on high level business meetings in Private Chinese corporations.

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