Alibaba’s first U.S. conference, Gateway ’17, came to a close last week. Three thousand attendees were present at the conference signalling that U.S. small and medium sized businesses are interested in selling to Chinese consumers. The curiosity is mutual from Chinese consumers looking to buy their wares.
China Skinny was on the ground at the conference and below are our top takeaways.
Tmall partners (TPs) on the floor of Gateway ’17
The Chinese Opportunity Extends to Small and Medium Sized Businesses
The conference didn’t fail to deliver a slew of astonishing stats: A middle class larger than the population of America. 454 million shoppers on just Alibaba’s platforms. $485 billion in top line gross merchandise value. The astounding rise of the Chinese consumer and Alibaba – highlighted throughout the conference – left many enthusiastic over the growth and subsequent opportunities in China.
Alibaba’s Roland Palmer talking about fresh food in China
Small U.S. brands that have found success in China shared their stories throughout the conference. Brands such as California’s 100% Pure and online brand LuckyVitamin.com among others shared how they entered the China market. 100% Pure began by sourcing from China and is now selling to China, growing revenues 20-30% yearly in the market. LuckyVitamin.com did their homework on potential markets and saw the opportunity to sell to Chinese consumers. The company now offers 10,500 products to Chinese customers.
Using case studies from smaller brands demonstrated that one does not have to be a powerhouse brand to enter the China market. Alibaba’s UK Managing Director, Amee Chande, advised that whilst brands don’t need to be well-known to be successful, they need to be the right kind of brand. Brands entering China must be:
Agile – China is fast moving and requires flexibility
Ambitious – China is tough, and is why entrepreneurial SMEs can be the right fit for China
Patient – China is not an easy market, and
Work with the right partners –which leads to the next point.
Find the Right Partner
Key Alibaba figures from Jack Ma and Amee Chande to individual proprietors and industry experts repeatedly stressed the importance of finding the right partners in China.
China is too complicated, dynamic and large to take on alone. From the contracts and legal requirements, rules and regulations, setting up a store, distributing product, customer service, marketing assistance, on-the-ground know-how and more, the right partners are a must when selling in China. Navigating the cultural differences, language barriers, and geographic distances require due diligence when choosing your partners. Partners should work with you while keeping you up-to-date on the China market.
On the ground at Gateway ’17
The necessity of the right partners is a story we hear time and time again. Australia’s Bundaberg Ginger Beer is a prime example of problems that arise when the wrong partner is picked. Bundaberg entered China in the early 2000’s and took on a local partner with little research and preparation. They quickly found the relationship to be one-sided, with the partner’s lack of transparency on sales, distribution and customer details causing issues. Additional complications arose from different values, business ethics and a lack of control. After recovering and pivoting from the first China phase, Bundaberg is taking it slow and learning along the way.
Localise for China
Beyond choosing the right partners, tweaking your brand and product offerings for your Chinese target market is a must. Chinese consumers are curious about smaller brands outside of the well-known established brands because they want options. New-to-Chinese brands give consumers novel experiences, but those brands must be tailored to the ever-pickier Chinese shopper.
“Brand USA” is strong in China as consumers know that America produces quality goods. Use “Brand USA” but do not rely solely on this. Investigate and understand how your story will resonate with Chinese consumers and what your hierarchy of messaging should be. China’s complex culture and language leaves room for many mistakes to be inadvertently made – even big brands such as Nike and Louis Vuitton have experienced this. Spend ample time and effort on due diligence to make sure this doesn’t happen to you.
As mentioned at the beginning of the article, China’s growth is phenomenal. This growth coupled with Alibaba’s vision to be the 5th largest economy by 2036, means that Alibaba’s and China’s growth is set to change the world.
Alibaba aims to be inclusive of American businesses and becoming a part of this growth story takes a lot of time. As China’s middle class grows and more foreign businesses learn about the opportunities in China, the market is only going to get more crowded. An average of 160 products launch daily in China, making it a hard market to enter. Take it slowly by learning about your potential customer, the wider opportunities for your specific products in China and the different modes of entry and platforms available. How to build awareness is an important consideration. These are all things China Skinny can assist with. Understanding and fine tuning to the market will take time and if you intend to ride the China wave now is a great time to establish your brand. The market will only become more competitive.