Things to avoid when selling to China

Woman considers product in a Hong Kong store

TEXT OF STORY

Scott Jagow: The Beijing Summer Olympics are just 10 days away. For some American companies, this is the marketing opportunity of a lifetime. The Olympics plus a host country of 1.3 billion people.

But selling to China is by no means easy. Recent history is filled with stories of American failures in the Chinese market. Our reporter in Shanghai, Scott Tong, has a few lessons.


Scott Tong: Lesson one in what not to do in China: Build it the American way and assume they will come.

China Market Research founder Shaun Rein says take Ebay. He says it assumed incorrectly a big hand-me-down market.

Shaun Rein: There's an aversion in China to buying used products. People think, you know, old is old. It's not antique. And they don't think it's a good deal, it means that you're poor.

They key, in consultant speak, is to "localize." Make your product relevant. Rein thinks the world's top brands don't do it very well.

Rein: They were so successful in their home markets and they know the secret sauce in America, but they're not willing to change. You know Wal-Mart, Google, McDonald's.

All right, Shaun, let's just cross off those potential clients from your list. Anyway, back to localizing.

Paul French: On the other hand, you can take it too far.

Here's Paul French of consultancy Access Asia.

French: The Kit Kat brand of chocolate did a watermelon flavored Kit kat. Chinese people, although they love watermelon, decided that watermelon-flavored chocolate was actually a pretty disgusting, and so they rejected that.

French says multinationals have also tripped over themselves figuring out how much to charge. If you go bargain basement, you're dead.

French: Don't get into a fight with the Chinese on price, because you cannot win. General Electric, when they first came into China try to sell light bulbs -- why on Earth would you try to compete with China on light bulbs? Chinese can own the light bulb market -- it's generic, it's nonbranded, it's cheap as chips.

And then there's timing -- when to land in China. Come too late, and the market's saturated. But John Chan of China Street Smarts says don't come too early, either. You might want to let the competition move in first and botch things on their dime.

John Chan: If you take german beers, and Dutch beers and Japanese beers, a lot of them tend also to be a little bit heavier. Now a lot of them figured out about five to six years into it that Chinese generally like lighter-tasting beers.

Enter lighter-tasting Budweiser, which he says hopped in, if you will, at the right time.

In general, Chan thinks the major multinationals committed the biggest errors all the way back in the 90's. In other words, they've cleared the hazardous minefield for new entrants. At least those smart enough to watch where they step.

In Shanghai, I'm Scott Tong for Marketplace.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.

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