Credit: Esparta Palma/Flickr

How to crack the Chinese market

There's still scope to make inroads in the Middle Kingdom, but you'll need more than just a checklist to succeed.

by Rebecca Smith
Last Updated: 05 Feb 2016

Many recent headlines have told the tales of China's economic woes and the stock market turmoil that has sent aftershocks around the world. Now more than ever, it might seem a daunting prospect for British businesses but there's still a ripe competitive consumer market.

‘China is a significant growth opportunity for UK small businesses to target,’ says Mark Lindsay, MD of Trade and International Finance at Bibby Financial Services. ‘Since 2010 the UK’s total exports to China have doubled and are expected to double again by 2020 if growth continues at its current rate.’

As a starting point, information-gathering and early support is crucial for small businesses. Get all the advice you can from the likes of UKTI, which has just launched a new exporting initiative and the China-Britain Business Council, which can offer up initial market information.

You can’t just uproot an alien business model, whack it in China and expect it to be a success, no matter how well it may be doing in Europe or the US (as B&Q knows all too well). Will Butler-Adams is an ambassador for the International Festival for Business and the CEO of Brompton Bicycle, which started exporting to China five years ago. Exports now account for 80% of its sales and Butler-Adams says he carried out extensive planning beforehand. ‘Too often China is all about scale,’ he says. ‘Our approach has been to take our time, make mistakes on a small scale. Our focus was to build up the brand and secure a sustainable following.’

Don’t bite off more than you can chew

The size and complexity of the market is substantial. China is larger than the US and yet most of the population is squeezed into an area around the size of western Europe. As well as that logistical concern, different regions have very different habits – you need to view China as a series of regional markets rather than one national one. Pete Read, director of West of England China Bureau and CEO of market information firm Global Growth Markets, says, ‘The available addressable market for most foreign companies entering China is much smaller than the total market and it is essential to identify the market segments that hold real potential for your product or service, and understand your potential customers and competitors.’

Dr Catherine Raines, UKTI's chief executive, points out that while China's "first tier" cities are Beijing (North), Shanghai (East), Guangzhou and Shenzhen (South), 'they are highly saturated and competitive markets'. So instead, 'think about targeting a second or third tier city'.

Confidence is key

If you’re looking to set up shop, placement is important. ‘You need to be in a shopping mall,’ Butler-Adams advises. ‘This obviously delivers a high footfall but more importantly consumers are given confidence in the new brand by the fact that it is surrounded by other brands they are familiar with.’

Building up trust is something many businesses, eager to enter a new market, can neglect. ‘For a firm that is just starting out in the market, loyalty is a key factor,’ Lindsay says. ‘It pays dividends for businesses to take the time to visit China and the customers that they will be working with.’ The value of established, mutually beneficial relationships – known as guanxi in Mandarin – is hugely important and that will likely involve time spent with Chinese counterparts outside formal meetings.

Cultural clashes

A simple yet easy to forget consideration is just how extensive cultural differences can be – take for example seasons. Read says, ‘The Christmas season is massive for many UK businesses but Chinese New Year and the Mid-Autumn Festival are far more important holidays in China.’ Then of course there’s Singles Day – this year Chinese consumers spent a record 91.2bn yuan (£9.4bn) online during the 24 hours.

And don’t forget to consider fundamentals of marketing, such as the use of colour. ‘Red and yellow signify good fortune and prosperity, whereas in the UK they tend to signal "sale", "cheap", or "fast"’, Read points out.

Speaking the language

Cultural differences are aplenty, but firms can also stumble over the language barrier. Engineering firm Grainger & Worrall has been increasing its focus on the Chinese market over the past couple of years. Overseas development manager, Charlie Bamber, says, ‘We’ve learned some tricks along the way – such as ensuring that written and spoken communications are clear; we’ve expanded our export project team to include native language speakers.’ If you don’t have the means for that, you may at least want to use a translator for negotiating and finalising contracts.

Raines says there are many UKTI officials based in China who also 'speak fluent Mandarin or Cantonese, so can help with language difficulties'.

Switch up social

Then there’s the case of search engines and social media. When focusing on SEO in Western countries you’ll likely be preoccupied with Google ranking, but in China it’s all about Baidu. You need to establish a web presence in China, which will mean registering a site there and hosting it within the Chinese governmental firewall.

While your current approach to social may well have been bashing the keyboard to churn out witty tweet after tweet or meticulously scheduling Facebook posts, other platforms rule the roost when it comes to China. Messaging app WeChat has over 500m monthly active users, while Weibo is fairly similar to Twitter. It’s worth scoping these out as you would other forms of social media, as the user demographics vary and you’ll need to tailor your approach to both.

The urban population of China alone is around ten times the size of the whole UK population. That means there’s a huge amount of challenges, but also huge potential demand and profits too. As Read notes, ‘Business moves fast in China, so it is possible to build a big business there very rapidly – if you get the formula right.’

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