Not sold in China

Not sold in China

Press Release: Merkina.com

27 September 2007

Much is written about China these days, and many unscrupulous businesses outside China are taking advantage of the broad lack of knowledge among the New Zealand general public how China and the Chinese actually work.

Consumer spending is increasing rapidly in China, in Chongqing in western China it is said to have increased 43% last year as a young and increasingly affluent generation grow and are hungry for foreign products, and New Zealand is, as so often before, missing the boat. But the Chinese has a different mind on how to spend and what to spend on than western people.

A student recently showed off his imported MP3 player to me, and I asked why he spent so much money on an imported player when he could have bought a better locally made one for 20% of the price. His answer is typical. "Yes but this one is not made in China."

China has one of the highest internet usages per person in the world, but one thing the Chinese do not do is shopping over the internet. Most people do not have a credit card to pay with, as credit cards are almost never used in China anyway. It is a cash only society. Most Chinese put more trust in the share market than the bank. Internet scams are very common, and the Chinese have learned how to smell a rat.

The worst thing any New Zealand business can ado is to get a Chinese domain name and present New Zealand products. That is exactly what a Chinese scammer would do, selling counterfeit Kiwi products, maybe fronted by a unscrupulous Kiwi. The best is to get a New Zealand domain name, and a bilingual site that will show up in major Chinese search engines as Baidu. Paramount is to observe the Chinese way of seeing and perceiving things.

One example. Most people know that 8 means luck in Chinese, but I was driving through Chongqing behind a bus last week with a Chinese friend in the passenger seat. Suddenly he said, "That is really a horrible number", pointing at the bus registration plate in front of us. It took me a few seconds to twig. The number was 4-1-8, and just slightly carelessly read out in Chinese it could mean, "I killed my father".

Besides, I just registered some internet domains with a major Chinese provider, and it was NZ$13 per year as I paid three years in advance. Renewal would be a bout the same. Scam operators outside China easily load this price with a factor tree to five and with a lock-in clause in the contract so the scammed buyer has to continue to pay for years to come, if he wants to keep the domain name of course.

Foreign products fly off the shelves in today's China, but you have to be locally present in some form, have a local 'foreign face', and you have to get access to the local distribution channels. That is not complicated or difficult, it is like everything in China, just go and do it, but remember that business in China is done face to face and person to person. Internet faceless sales do not work.

Do not expect to get a couple of introductions or contacts from a trade agency, make a couple of trips with brochures and samples, and then see the orders starting to flow in. That is not the way China works. Equally disastrous are local Chinese middle men and agents. They will make sure the real profit will stay with them.

Relationships trust, and a long term view are paramount. A local 'foreign face' and continuous presence is a must, and Chinese love to do business with foreigners. There is an initial cost to build the relationships, to set up the systems, and an ongoing cost to maintain them, and there is a timeframe to observe before business starts to flow, but the profit margins are very good in China. 80% of Chinese businesses are SME's, small family companies, just like in New Zealand, and easy to work with. The network is the key, but there are no credits or free lunches.

New Zealand companies have much to offer, and it is so puzzling why they just stay home moaning at each other over a high dollar, as if a discounted product would be the solution. It is not. The high Kiwi dollar provides a discount go out and sell. It is an opportunity.

I received a figure from China statistic bureau recently that the import of New Zealand dairy products had dropped nearly 25%, while New Zealand has the one of the worst trade deficits in the world, and it is increasing.

The sale of dairy products in China is increasing rapidly, and the qualities of the local Chinese products are increasing dramatically. Soon we may see Chinese dairy products on the New Zealand shop shelves that are superior in quality and sell below the price of local products.

Wake up to reality Kiwis.

Bert Felt Chongqing China

Bert felt is a Kiwi living in Chongqing in western China. He is CEO of a local consulting and service company Merkina Ltd. Merkina's website www.merkina.com provides free information on doing business in China.

ENDS

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