What's the right way to sell in China?
As we visited Chinese companies, spoke with Chinese managers, and with other experts, two things became clear: the potential of this enormous country is huge, and so are the difficulties in making money here. Here are a few principles explained to us by experts who have learned China the hard way.
1. Nothing is easy; everything is possible. The head of Deloitte Consulting here in Shanghai, Tony Cotterell, a veteran Asia expert, told us that there are two key principles. First, nothing is easy. Second, everything is possible. If things are too easy, remember principle 1. If you encounter difficulties, remember principle 2.
Tony told me, do not come into China with the view of investing for the long term, planning to make money only five or ten years down the road. If you do not have a plan to become profitable within two years, do not come here. China can be a black hole absorbing huge amounts of capital unless investment here is focused and well-planned. Do your homework, he counsels.
2. China is 30 countries. There are 30 Chinese provinces, each with a governor, language, ethnicity and culture. They are very different one from another. Treat China as 30 separate countries, and tailor and strategize your activities according to each.
3. China’s middle class is booming; aim for it if you can. China, I was told, now has over 60 million people with annual incomes of over $20,000. We saw them everywhere, eager to buy Western branded goods. This group is growing rapidly, as China’s 9.5 % annual economic growth builds their wealth. They are professionals, managers, engineers, many working for Western firms or global Chinese firms. They have money and are eager to show their prosperity with conspicuous consumption. Shanghai’s Nanjing Road is a blizzard of global high-end brands, beloved among this group. At the same time, wise marketers customize their products. The Chinese have tastes that differ from those in the West. Learn their culture and preferences, and adapt your products accordingly. Do not try to sell products that have not been “glocalized”, in Tom Friedman’s phrase.
4. Use sales persons, not engineers. I spoke with Eli Goren, an Israeli who studied Mandarin at Chinese universities and now runs Asticit East Asian Business Development Ltd. He claims Israeli companies often make the mistake of appointing Chinese engineers as their sales representatives here. This is an error, he believes. The CEOs who heads Chinese firms largely lack technical training. They do not want or expect a flurry of technical information when they meet with a sales representative. They have experts to whom they delegate for that purpose.
Appoint experienced salesmen instead, people who know how to approach CEO’s and purchasing managers. This is what the Chinese expect and want. We saw this in action. A leading Israeli company that sells optical inspection equipment successfully in China has a dynamic woman as its regional head; she is trained in accountancy, not engineering, even though the product she sells is very high-tech. She knows how to sell to the Chinese, and when technical issues arise, can easily call on engineers for answers.
5. Build long-term relationships: In one sense, selling here is no different from selling elsewhere. Building long-term relationships and trust is crucial. The first sale may be hard; but if you deliver on your promises, in general your buyers will be loyal. The Chinese bargain very, very hard. They seek low prices, to maintain their cost advantage in competitive markets. Once a deal is struck that they perceive as win-win, they are fair, and understand their suppliers need to make profit, too.
6. You CAN protect your intellectual property. Many companies fear that if they locate here, their key intellectual property will be stolen. An expert lawyer here told us that increasingly it is possible to defend trademarks and protect patents, as China itself develops IP, and thus finds it in its own interest to avoid theft of knowledge.
We visited a pharmaceutical company that had a small operation here, mainly repackaging, because it feared its IP would be stolen. I think this is an error. Either come to China or stay away. If you come, come here seriously, and massively. There is no half way. China is building its legal infrastructure; get top legal advice and move forward. Generally the risk is worth the reward.
Prof. Shlomo Maital is Academic Director of TIM-Tel Aviv.
Published by Globes [online], Israel business news - www.globes.co.il - on August 3, 2005