Have you ever wondered about the feasibility of distributing your new idea in China, tapping into the populace that pervades each news hour with its vastness? What a dream it would be to somehow capture 1.6 billion customers with a well thought out marketing plan and distribution channel!
Usually when clients discuss the option of China distribution, I discourage them. The reasons?:
1) You give factories easy access to reverse engineer your product.
2) Competition is fierce with locals in distribution. It’s their world, their relationships, their stores, their customers.
3) Pricing is competitive due to the supply provided by domestic factories.
4) Most Chinese can’t afford products of western quality.
5) Transportation can be complicated.
Don’t get Knocked Off!
As you can see in the list above, the risk is in being knocked off.
The other factors can limit your sales abilities, but aren’t inherently risky in themselves. As the world has gotten flatter, this risk is being minimized simply because factories that are interested in knocking off your product have more and more opportunities to get their hands on samples before you start selling in China.
Avenues like Ebay, Amazon, trade shows, networking events, western retail stores…are being scoured daily by factory owners and their relatives looking for the next best product to copy, so, while you may be increasing your exposure some by selling in China, it’s likely that if you have decent international sales, a good numbers of factories have already had the opportunity to knock off your product if they chose.
Use your Domestic Protection
Other assurances can be had by the protection that laws in western countries provide for their own markets. If you have patent or other IP protection it can be very difficult for a Chinese company to effectively infiltrate your western markets and most Chinese factories don’t have the marketing and international distribution channels to make it happen anyway. Most Chinese factories that are going to copy your product are going to be selling to the Chinese market (which isn’t much of a loss if you never go there anyway).
When it’s right
So, does that mean it’s ok to try to sell my product in China now? My suggestion is that if you are pretty well seeded in the countries you are first targeting (usually: North America and Europe), it might be time to develop your sales in China. The reasons?:
1) Although the volume of your sales probably won’t be that great to start with (since there aren’t that many middle and upper class in total numbers), the economy in general and middle class in particular are growing fast and establishing brand identity in a growth market is a powerful thing.2) The distribution channels are opening up to foreign companies if you know where to look.
3) The Chinese government is making a big push to encourage domestic consumption.
4) What have you got to lose?! (see the part about the fact that factories probably have access to your product/idea if you are already well seeded in other countries!)
Let us Help!
We are currently offering distribution to some of our clients, so call us if you’d like to sell in China or have general questions about it. On a final note, if you do decide to sell in China, make sure your wholesale price is not much lower than your wholesale price elsewhere as you may find your “customers” in China selling your product to your distributors elsewhere and capturing that small difference!