If you really want to make a success of your product and turn it into something huge, then you need to think big and that means going international. While you can make a lot of money and achieve success selling in the US, the big money comes when breaking into foreign markets.
How to Crack China
Just as the Chinese enjoy Western products, they also like shopping online. 193 million Chinese citizens shop online regularly and this number is expected to almost double by 2015. The most prominent site to sell into China is www.taobao.com. It is dominant in the Chinese online market and kind of like a strong mix of Amazon and Ebay all wrapped up in one. You are sure to get some eyeballs on your product by putting it on Tao Bao.
Going Through a Distributor:
As with breaking into any market, a distributor can go a long way. They help handle the difficulties you might have with the language and cultural barriers and the different ways of doing business, but it does come at the cost of giving up a hefty part of the profit margin. It’s important to ask lots of questions and make sure you are happy with the nature of your agreement and the reliability of the company. You want to make sure that you retain all rights. If you go with a distributor, do your research, talk with references, find the right fit. The best fit might not necessarily mean the biggest and most reputable company. Some distributors with particular skills, relationships, or old-fashion work ethic can sometimes outperform their larger competitors.
Like a distributor is a sales representative, although this time the agreement is different. While distributors will be entering into an agreement with you, a sales representative works for you and thus, you won’t be getting into as much complicated legal territory. Again, whoever speaks to the stores on your behalf, you need to make sure that you’ve considered pricing and distribution going in, and be ready to make specific packaging to cater to a Chinese audience. In general, I would recommend against using a sales rep alone as the market is too complicated and they will generally over-promise and under-deliver. China is a big country for one person to tackle unless they are truly connected and unique.
Approaching Sellers Yourself:
Similarly, approaching sellers yourself is very daunting. There are tremendous differences in the market, language, business and customer expectations and any misstep could create a big loss. Where this may work is if your product is very unique, sells itself, and the technology can be protected so that it can’t be copied. In this case you have a lot more leverage and it may not take significant relationships to break-in. If not, get local professionals to guide you. You may be giving up a lot of profit, but you’ll easily make up for it through wise business decisions and volume.
Word of Caution:
When you go to the Chinese market, if your product sells, it will most likely be copied. By the the time you are going to China, you will likely already be selling your product well in your local market, so, if it can be copied, it probably already has been, either by a US company or others. Selling in the US though, your patent and other IP will protect you. In China, it won’t. If you don’t have any extra value to offer (quality, “secret sauce”, a strong brand…) then it will be very difficult to compete in the Chinese market and it may not be worth going at all.
If you can do it, there are big rewards to be had, but, be cautious, make sure you know what you are doing or partner with folks that do, figure out how you will handle copycats, then go, go, go!!! Being first to market is your main advantage, so make the most of it!