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How to break into the Chinese Market

When you are considering any investment by your company into the Chinese market the following considerations are worth considering.

The consumer tends to seriously browse as this is seen as a treat and not a chore.  Most households find new products more interesting than the cinema, so you have a greater opportunity than 3 seconds to attract the consumer. GUO QING or ‘special needs of the Chinese’ are the key to buying impulses.

Shelf space and glossy free-standing still have less effect than advertising in media such as radio, newspapers, and television and indeed promotional advertising by major actors works quite well. The media remains a significant way to promote acceptance in the eyes of the public. Consumers believe what the newspapers, radio and TV tells them, being state controlled, they also believe that advertisement is validated and authorised by the State.

Provide Complete Information
They want complete information and even specification details about it. They are known to read this information to improve their knowledge and pass it on to help their community.
If in a prominent space consumers tend to wonder what is wrong with it. If they heard of it, they will look for it so bottom shelf is equally as good as eye level. Promotion cheapens the product and gives an indication of low quality, as they believe cheap products are no good.

Suspicion of something for nothing dates back to the 14th century when the Huns launched a rebellion against the Mongolian Yuans by giving away special cakes, inside of which were slips of paper carrying messages to the Hans about the planned rebellion.

Value Hunters Not Bargain Hunters
Many of the people who are in the stores are not necessarily buyers;
‘Never make a purchase until you have visited 3 shops’ is an extract from a Chinese proverb so footfall is not always a good indication of buying capability within a store. There is a high regard for foreign quality and technology that is appealing, as they are wary of low-quality home grown products.

Who Controls the Purse Strings?
Chinese marriages are sometimes made up of a State Worker and a Private Sector worker and the State Worker is the one who shops. This affords certain subsidies for the household from the State Worker. The Private Sector worker earns more and it is not always the male.

There are 5 cities that have greater than 10 million people in each (Shanghai has 13 million) and about 15-20 cities that have 5 million and above, so regions are worth exploring rather than every outlet.
The average consumer spends less than $500 USD per year, so the 1.2 billion population is an aspiration and not an immediate target.

The ratio of premium products in some cities supermarkets like Guandong and Shenzhen account for 50:50 and 60:40 respectively. As an example of how the population demographics pan out.
One food product in 19 key cities, accounting for 15% of the total population and 22% of GNP, had 40% of unit product sales and 90% of the potential profit pool.

Choice of Presence
It is possible to be a ‘Wholly Owned Foreign Entity’. ‘Equity Joint Ventures’ are dropping off, but if your partner has a good level of distribution nationwide they may worth considering. Chinese EJV’s tend to look for short term profits, so you should also be seen to focus on short term returns on your Chinese venture or you are likely to be met by levels of discontent with your local partner who wants to see returns and not long term growth.

The idea that the Chinese market is so big and growing so fast that it is worth the short term loss to break the market is not a viable consideration. Coca-Cola didn’t have to, but Pepsi-Cola are still a long way behind. Pepsi still seem to have a second class citizen about their attitude. Volkswagon made a great profit and control the market, but Peugeot pulled out after 12 years of making a loss. Fuji film made the entrance first but Kodak learned quickly and dominated the film and photo-lab market. Of course that is all changed with digital but it serves to illustrate the point that first in is not always best.
Sometimes it is just bad local knowledge and distribution. Look at what and how Coke did it from the outset.

Branding in China
Find out what the sound of your brand means in Chinese. You might find that the pronunciation may be insulting and needs to be adjust edto sound positive. The original sound of Coca-Cola was kou-ke-kou-la which meant ‘a thirsty mouth and a mouth of candle wax’ .It was changed to sound like ke-kou-ke-le which means ‘a joyful taste and happiness’ which amounted to a subtle change in promotion and significant alteration of consumption in volumes.

Chinese are not renowned as pioneers and word of mouth in China is by far the greatest means of selling. For instance Coke only recently made it 50:50 Sprite:Coke, as the black liquid was not very well received and did not look as good as Sprite…

In personal care and clothing only soaps in foreign brands have succeeded along with shampoos and shoes. In food only Coke and Pepsi have achieved a strong position. All the rest of the food brands are domestic. Toothpaste for instance is dominated by domestic brands cosmetics foreign brands account for about 25%. Health Drinks are purely Domestic Brands.

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