8 TIPS FOR CRACKING CHINESE MARKETS
- Sophia Zhao, Australia China Business Review
When doing business with China and targeting Chinese consumers, it is essential to understand not only China’s business culture, but what drives its people towards Australian made products and services. With its population of over 1.3 billion, China has become one of the largest and most lucrative consumer markets in the world. Add in the fact Australian products are in high demand from Chinese consumers, China is clearly an attractive country to do business with.
However, numerous local and international brands still fail to crack the market.
Ridesharing giant Uber tried penetrating the Chinese market in 2016 and failed miserably. Why? Due to its disregard for China’s rideshare regulations and a lack of understanding of the existing rideshare market. A targeted and well researched approach is required to achieve the best market penetration.
Here are 8 tips for doing business with China:
1. Build trust
Trust is the cornerstone of conducting business in China. While China is going through enormous social and economic change, their business values are still very traditional.
When doing business in China, it is important for Australian businesses to first build rapport and credibility. Chinese business culture is more about building long-term relationships than quickly signing contractual agreements.
2. Be Patient
Patience is a virtue. Like any long-lasting relationship, building trust can take a great deal of time. Expecting to be an overnight success in China is unrealistic.
If the Chinese see you are genuine and not out to take advantage of them commercially, then they are more likely to be open to doing business with you.
Take for example, Coca Cola. It took Coca Cola almost 40 years to establish trust and credibility in the Chinese market.
In 1979, it was only selling 20,000 cases to China, but today China has become Coca-Cola’s 3rd largest market in the world, after the U.S. and Mexico.
3. Turn local Australian Chinese into your biggest fans
There is nothing more powerful than word of mouth advertising. For the Chinese, this is especially true when sourcing overseas products.
Thanks to social media and instant messaging platforms like WeChat, overseas brands have gained more visibility in mainland China as consumers are now able to interact with these brands in real time.
Therefore, Australian-based Chinese consumers play a vital role in influencing their family and friends back home in mainland China about a brand’s credibility.
Depending on their local Chinese counterpart’s experiences, that product’s entry into the Chinese market can either scale at an unprecedented rate, or fail to enter the market completely. For this reason, it is very important to appeal to local Chinese consumers who can then influence your consumers in China.
4. Get market validation through local press
Equally as important as having local Chinese Australians vouch for your product, is establishing a presence in local Chinese press.
Chinese people believe foreign brands, particularly Australian ones, play an important role in improving their quality of life. By having your product not only talked about by friends and relatives, but also covered in local Chinese-Australian newspapers, can really propel your brand’s credibility within the Chinese market.
5. Cultural context
Australian businesses need to respect the Chinese view of the world and understand that the Chinese may not hold the same values as the West.
Brands need to be considerate of sensitive issues such as animal cruelty, human rights, its environmental state, and China’s territorial borders i.e. Taiwan and Tibet.
In China, business and politics are interconnected. The government influences almost all areas of life. It is therefore crucial to study the political landscape of the area in which you will be operating and learn how to navigate your business within it.
When selling to consumers, Australian businesses need to understand that China has about 56 ethnic groups, which bring with them huge diversity, different dialects, local customs and a significant discrepancy in living standards.
Megacities like Beijing, Shanghai, and Guangzhou will have a very different consumer culture to regional areas in China, which can be 20 to 30 years behind. Therefore, aligning your brand’s strategy to enter those different submarkets needs to be adjusted accordingly.
6. Work with E-commerce platforms
There are many e-commerce platforms that brands can leverage off to enter the Chinese Market. The two giant e-commerce players are Alibaba and JD.com, followed by Tmall and a number of other smaller players such as Kaola, VIP.com, YangMaTou and XiaoHongShu .
Before listing on these platforms, it is important to know the differences between how Chinese consumers use them. Alibaba and JD.com are mostly used for home appliances and electronic equipment. Tmall is generally used for buying clothes and cosmetics. Koala is used to predominantly sell Australian brands to Chinese consumers.
7. Have an offline strategy
While there are many benefits of doing business online, there are equally as many benefits conducting offline business activities. In China, one effective offline marketing strategy is the use of sponsorship.
Event sponsorship provides international companies with a viable alternative to mass media. It is a particularly effective strategy to help resonate with your target audience as it establishes favourable links between an audience and a sponsor’s brand image.
Another offline strategy is linking up with Chinese business associations and government trade chambers. These organisations have extensive networks and being referred by these organisations holds a lot of clout. Their referrals could assist you in establishing relationships faster and in a less costly manner.
8. Partner with a local Chinese business
As previously discussed, the barriers to entry in China are quite difficult. That is why having a local Chinese partner can be beneficial to your business and help you tackle these barriers more easily.
Using the example of Uber again, despite being a huge company in its own right, its downfall in cracking the Chinese market came from deciding to enter the market alone. Had it partnered with China’s largest rideshare company, Didi Chuxing, it would have seen more success.
Again, this example shows the lack of understanding Uber had of Chinese culture. For the Chinese, Uber’s attempt to tap into its market was seen as a Western company trying to take advantage of China’s huge market potential.
To succeed in China, businesses need to take a more collective and social approach. Having a local partner will not only assist you with navigating cross-cultural barriers, but shows you are willing to collaborate.