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How & What to Sell to China
Selling to China can be a difficult task requiring patience, costly resources but most of all commitment. As such, businesses should make an informed decision on whether to sell to China as it may take years before turning profits. CPS is currently assisting business to sell to China through our easy payment solutions and Chinese partnerships.
Before your business begins to sell to China, you will need to do your research and consider a few things such as:
Chinese Consumer Behavior
In China, the country with the largest population in the world, the "one size fits all" model does not apply since the Chinese range from poor rural farmers to urban billionaires.
Overall, most Chinese consumers are highly sensitive to price and are inclined to purchase products which are less expensive. However, in a Confucian society where social status is an investment, some buyers are willing to pay a premium for items that will be seen by others such as clothes, mobile phones or cars.
The Chinese evaluate products very differently from Westerners. First, Chinese customers on average are looking for inexpensive products that are of good quality materials. Second, they look for companies that offer post sales support and / or a guarantee. When buying online, China’s shoppers expect items to be shipped quickly and packaged properly. Since all of these factors are not readily found in one product, it is very common for Chinese consumers to compare prices and value from as many as seven stores (or websites) before making a purchase.
In order to compete with domestic businesses in terms of post sales support and shipping, many foreign companies have established a local presence in China.
What to Sell?
Before selling to China, it is important you segment the Chinese population as it varies greatly in taste, income and purchasing behavior. Before firms can answer "What do we sell to China?" they need to decide who and where they are selling to.
Currently, China’s middle class is booming! This growing segment makes up 25% of the population, have an income between $7,250 and $62,500 a year and hold post secondary degrees (National Bureau of Statistics.) These informed potential consumers are looking for value at a bargain price except when it comes to their children’s education and health. After recent health risk scandals related to baby formulas and toys produced in China, parents have become highly concerned about product safety and are willing to spend 20% more on products they felt were safe for their children (Forbes 2009.) Thus, in a country where couples are only allowed to have one child, Chinese parents spend a substantial amount of their income on their children’s education and products with high safety standards with hopes of giving them a head start.
New to wealth and the consumer market, the growing affluent class offers vast opportunities for luxury brands looking to sell to China. Unlike the middle class who spend their income on their child’s future, the wealthy spend much of their discretionary income on premium products that will help them rise in stature when compared to others. China is arguably the second largest consumer of luxury goods where there is an untapped demand for high end cars, real estate and designer clothes which will be worn as a badge by China’s elite. As new spending habits are formed, foreign luxury brands such as Louis Vuitton, Rolex and Giorgio Armani are taking notice and high end luxury brand stores are already doing well in Beijing, Shanghai and Guangzhou.
Importing and distributing products into China remains one of the biggest challenges companies face as they try to expand their target market. Recommended proven strategies for businesses in need of a distribution solution include building your own networks, outsourcing to third party providers and forming partnerships or acquiring existing firms. Please contact CPS for assistance in establishing ecommerce distribution channels in China.
Foreign companies looking to establish sales, marketing and distribution channels need to be aware of some key cultural differences when doing business in China. Unlike Westerners who develop a business relationship whilst a commercial arrangement proceeds, the Chinese establish a personal relationship first, followed by the completion of business agreements. Patience and time to forge these long term relationships is crucial.
To read more on China market entry strategies, advertising and tariffs, please continue reading here.
China Payment Services helps you with your first steps to marketing and selling to China with free market advice and suggested preferred suppliers for a range of business areas including translation, marketing and distribution.