Entering China Market is on the agenda of many companies for it is large and growing. However, choosing an appropriate market entry strategy for China is not an easy decision.
There are quite a few channels and each of them has advantages and disadvantages. This article will introduce fundamental three, 1) find a distributor; 2) choose an e-commerce platform; 3) invest an enterprise in China. These three methods will be compared so that you will know what suits your business best.
FIND A DISTRIBUTOR
Cooperating with a distributor may be the easiest and quickest strategy of entering China. By shipping your products to the distributor, you will effectively pass the risk onto them which will motivate them to actively try to sell your goods.
Though it’s the most effective way to export to China in a short run, there are some disadvantages.
For instance, some distributors are based on Hong Kong or Taiwan, they are not that closely connected to Chinese market, and some are even not allowed to sell to end-users by law. Therefore, they must cooperate with another company authorized to cross-border trade, making the distributor an additional middleman. That means the price of the product will increase and it is not good for margin effect to attract more customers.
Besides, this kind of distributors are far away from end-users, and they have little direct dialogue with customers, thus they cannot hear the opinion about the products from users, which is not good for product improvement.
In this circumstance, choose a distributor based on Chinese mainland may be better, no middleman price, connect directly to end-users. However, there are several kinds of Chinese distributor, Foreign Trading Corporations (FTCs), Industrial Trading Companies (ITCs), and independent trading companies for example.
The FTCs and ITCs, such as China Shenzhen Foreign Trade Group and China Shipbuilding Trading Co., Ltd. are established by government to assist domestic companies in export and import. Nowadays, these groups primarily focus on exports, which usually accounts for most of their turnover, but they are also increasing their efforts for needed imports.
What appeals most is they are authorized, experienced organization that has an established infrastructure to deal with foreign trade. However, most of these groups are not knowledgeable about your specific product area, and oftentimes function as “order takers” for end users, and they may not be very interested in actively marketing your products. Otherwise, ITCs mainly owned by local government, thus they can focus only 1 to 3 provinces, make your products limited only in these areas.
As the government are encouraging cross-border trade, lots of independent cross-border trade companies established those years. Compared to FTCs and ITCs, those independent companies are more aggressive to seek interest. They will work hard to promote your products and react more quickly to enhance the sell.
But be careful when choosing such company, for some are not authorized for foreign trade, thus you must check their qualification.
In a summary, find a distributor is an easy and quick way to enter China market in a short time run, but it’s not help in build brand and earn product reputation.
CHOOSE AN E-COMMERCE PLATFORM
According to a report released by China Internet Network Information Center, there are about 1.1 billion internet users and 0.79 billion online shoppers in China. It is obvious that Chinese online market is a great cake, thus this article lists e-commerce platform a special part.
When comes to cross-border e-commerce trade, Tmall International, JD International, Kaola and a lot of other platforms are available in China. All the have their own followers.
From the perspective of business owner, this article will divide those platforms into 2 categories. One is collective platform with a lot of individual stores and brands, another is platform helps business owners to develop their independent online store App or Mini Program.
Collective platform like Tmall, JD and Kaola will charge business owner for registration, technology fee per year, and service fee per order. These platforms are large, with a lot of users. At the same time, there are also a lot of stores and brands, the customers may skip your stores. So, to increase visibility, one must buy recommendation service, that is advertisement, so the stores and goods could be seen on the banner or the top of the search list. then there comes to another problem, all store owners buy ads, so one by one, the price goes up.
If you want to join a big platform mentioned upward, you of course could have a lot of potential customers, but the cost is expensive unless your products is special in this platform.
To solve this problem, some brands choose other platform, like LinkieBuy, to develop their own Mini Program based on WeChat and Alipay, two social and payment applications used by billions of people every day.
By choosing a cross-border e-commerce service provider, LinkieBuy for example. You will get a dependent online-store Mini Program in a short time. This Mini Program is based on social media like WeChat, where are a lot of potential customers could be found.
But due to the culture differences, how to attract those potential customers is a big challenge. It’s a common problem, so platform like LinkieBuy developed their own management team, they will seek customers from WeChat and other social media to increase the turnover of the store. And by customer management, the store will build its reputation to attract more followers.
Cross border E-commerce is a kind of direct exportation, business owner can have direct dialogue with customers, it’s good for the update of the products. And through direct connect, the store may find a new demand.
Of course, some stores, especially big chains, choose to have stores in all kinds of platforms. But small or new-to-China store could choose one at first.
By the way, shipment of goods from the manufacturer directly to the end customer is relatively easy in times of e-commerce.
All in all, e-commerce is recommended to export, but business owner should choose suitable platform according to the budget and products.
INVEST AN ENTERPRISE IN CHINA
Foreign investors could set up a joint venture in China to entering Chinese market. A joint venture helps a lot in cross border trade.
Most importantly, joint ventures help foreign companies gain access to China’s domestic market while maintaining control over their activities. Second, joint ventures help many foreign investors take advantage of China’s relatively well-educated, low-cost labor force to produce their product. Other advantages include improving access to local resources, favorable treatment from the Chinese government, for example, the tax exemption, obtaining financing, securing direct and indirect support. In addition, a joint venture helps foreign exchange.
At the past, foreign investors have to set up joint ventures in China. But nowadays, Chinese government encourages foreign investors and cross-border trade, making some changes in foreign investment, which allowing foreign investors to set up company independently in China. So, if necessary, a company could set up an independent company to explore the Chinese market.
This is the end of the Channel introduction, all export strategies have their own pros and cons, the most significant thing is to choose one based on your budget and your product.
Hope this article can help you in entering Chinese market, if you have any questions, please let me know in the comment area.