When talking about selling in China, the Chinese regional polarization becomes a relevant frame of reference. How to deal with such a vast country which could be considered a continent in itself?
In any process of business development in the Chinese territory, companies face the same fundamental problem. Even if there is not a single answer, these three below are constantly repeated.
First, the Company lacks totally of any real knowledge about China. Intuition is not a pray and you would be wrong.
Doing business in China by making a North-South East-West division is not useful, neither the best solution. Split the territory geographically will drive you towards more inaccuracies. To give you an idea, Guangzhou and Shenzhen belong both the south but they barely share any similarity.
Guangzhou is traditional Cantonese speaking city with a strong rooted culture. Meanwhile, Shenzen is more cosmopolitan mandarin speaking city populated in its vast majority by immigrants from all over the country and overseas. There is a Chinese common say about Shenzhen, “Once you get to Shenzhen, you become <<Shenzhenese>>”.
Secondly, once we realized that geographical distribution might not be the best option dividing by tiers could seem quite reasonable.
As you probably already know, in China cities are classified in 5 ranges, from Tier 1 to Tier 5, so dividing by tiers is again a mistake.
The example just exposed would serve also as explanation. Another example would be Beijing and Shanghai. Both belong to Tier 1 cities; nonetheless there is no possible comparison between Beijing and Shanghai, despite of the fact that both are super cold in the winter, although they tried to sell us that Shanghai belongs to the south…!
Beijing, capital of the People’s Republic of China, has been the capital of the country for much of the past eight centuries. Beijing is the cultural and political core of the Chinese nation. Tradition is venerated and could be observed in every place of the city.
Shanghai on the other hand, is the largest city in the world and the financial center of China. Luxury, skyscrapers and mix of cultures are some of the characteristics of the city. In Shanghai is common to find a huge number of expats and western style neighbors due to existence of the old French concession. So, there is no point to focus on city size.
Third and yes, Chinese people share several distinctive characteristics which are markedly different from any other culture, but Chinese are still Earthmen.
So please, do not fall into generalizations but neither forget a main description of the modern Chinese consumer:
- First, the Chinese remain best disciplined savers. The Chinese saving is not only driven by culture but also due to its lack of a real social care system
- Second, the Chinese are not loyal to brands, and they love experimenting trends, products and services
- Third, Chinese are savvy consumers, based on the price variable
- Fourth, Chinese shoppers have begun to understand the gap between price and value
Therefore, which would the best way to segment China?
Recently, Mckinsey studied which would be the best way to segment China into reasonable pieces. After reviewing many indicators, experts concluded that it was reasonable to cluster the Chinese territory.
It is helpful to focus on cluster size and much more effective. China is huge and Cities can be very far from one to another, so you better bear in mind that distance is a key point when doing business. We also must add that areas can be much attractive to business than cities, due to its bigger GDP and incomes, larger population and better facilities.
In the meantime, take a look beyond historical growth rates can help you to extrapolate future trends and discover if your product or service is going to last. Remember Clusters share trends and determine their evolving. For example, milk was slowly introduced in the country, first in the Shanghai area, to gradually spread.
Landing in China is never easy
In 2 Open we hope you enjoyed the reading but especially, that these tips have helped you know better the Chinese business reality.
Keep in mind that it would be much better if your arrival occurs by the hand of a consulting agency specializing in Chinese business, Ecommerce and Digital Marketing.
Need help to sell online in China?
This article was edited by Paula Vicuña from 2 Open.
The Canton Fair, held since 1957 in the city of Guangzhou, is currently the largest International Trade gathering in China, and the most successful one in the country. In Spring and Autumn, and for fifteen days, the city brings together importers and exporters from all over the world.
Its 2016 Spring celebration, divided into three sessions of five days each, aims to meet the demands of any business person: Electronics and Household Electrical Appliances; Lighting Equipment; Vehicles and Spare Parts; Machinery, Hardware and Tools; Building Materials; Chemical Products, Energy Resources; Consumer Goods; Gifts; Home Decorations; Textiles and Garments; Shoes; Office Supplies, Cases and Bags; Recreation Products; Medicines, Medical Devices and Health Products; and also Food.
But why exactly is this event so appealing?
Well, with 15,000 manufacturers and fabricants, and over 60,000 stands, it’s not a surprise that it has gained such popularity, besides, its ability to accommodate all of them and generate new trade flows makes it the largest fair in China, and probably in Asia.
Those who attend The Canton Fair can find answers to all of their business needs: economic, technical and human cooperation; logistics, transportation and distribution; insurance and commodity inspection; advertising, public relations and contacts with some of the most buoyant businesses today, you name it.
Its attractiveness is also equal to its capacity to generate wealth among its members: only in 2015, commercial exchanges reached 55.066 million USD.
Who attends to the Canton Fair?
Despite the uncertainty in the global economy and after a slight decline in the last two years, 2016 has been considered a good year to participate in the Canton fair. With more than 24,000 companies confirmed, optimism among the organizers and participants has returned to stay and strengthen the fair’s position as an already global event.
Although the event’s main target group were Asian buyers, in recent years, the presence of Westerners has grown significantly becoming a meeting of international nature in which the presence of developing regions such as India, Latin America and Africa has also increased. Curiously enough, the presence of participants from Hong Kong and Taiwan has been reduced each year.
What are the benefits of the Canton Fair?
Firstly, the continuous and growing exchange of goods between participant countries facilitates the development of the Chinese trade, and consequently, strengthens the Chinese economy.
Secondly, the Canton Fair celebration generates high-level synergies, not only among the participants but also among outside companies. The fair generates quality information on the future of the economy, the most demanded products, leading companies and, goods and services.
Finally, due to its attraction capacity and longevity, the fair has contributed to develop a wide range of alternatives for visiting and enjoying the tour: visas, tickets, hotels and translators are easy to obtain through specialised agencies.
2Open attends every year to both the Autumn and Spring Canton Fairs, being up to date with what is happening in China is a challenge even for our dedicated team who are constantly on the scout for new trends in the industry. We strongly advice anyone who is intending to engage in any business related activities with China to attend this event, it is a great opportunity to grow any business, however, if you want to really turn your business around you should contact 2Open.
Our goal is to understand our clients business needs in order to provide the best possible services. If you have any questions or require any information about our services, please do not hesitate in contacting us, our group of specialists will happily assist you.
This article was edited by Andres Arroyo Olson from 2Open.
On March 24, 2016, the Ministry of Finance of the People’s Republic of China released an article on its website to finally put an end to the on-going rumours. Turns out that all the gossips were right all along, so brace yourselves because the taxation reform for imported retail products through cross-border e-commerce is coming.
According to the article approved by the State Council, starting on the 8th of April 2016, China will implement the import tax policy for cross-border e-commerce retail sales (business to consumer, or B2C), and also adjust the tax policy on personal postal articles.
Currently, items for personal use are considered to be personal postal articles, these types of items represent a reasonable number of cross-border imported goods and will be taxed according to the new tax policy on personal postal articles. The new personal postal article tax is targeted on non-trade imported goods; it combines tariffs, import VAT and consumption tax. Generally speaking, the tax rates of personal postal article tax will be lower than those of imported goods for trade.
Products for cross-border e-commerce retail sales are imported through postal channels and these work differently than the traditional trade of files and correspondences, this is the main reason why unfair competition exists between cross-border e-commerce retail imports and general trade imports within the same category. This is the main reason why cross-border e-commerce imported goods will be considered as merchandise and charged with tariffs, import VAT and consumption taxes.
As a response to consumer’s reasonable demand, the single transaction limit for cross-border e-commerce retail goods will be increased from 1000 RMB to 2000 RMB, furthermore, the annual limit will also be increased to 20000 RMB. For cross-border e-commerce retail goods within the 2000 RMB price limit the tariff will be 0% with an import VAT and consumption tax of 70 % of the current statutory tax. As for the goods that surpass the single transaction or annual limit, they will be charged with full taxation under the general trade model.
Taking into account current regulatory conditions, for the moment, only cross-border e-commerce retail imports that can successfully provide trading, payment, logistics and other related electronic information, will be taken under the scope of the new policy. Personal belongings and imported goods that are unable to provide related electronic information will remain subjects to current regulations. Meanwhile, to optimize the taxation structure, simplify customs declaration and tax payments, and improve customs clearance efficiently for passengers and customers, China will adjust tax policies on personal postal articles. The changes include a reduction from the current four tax items (tax rates: 10%, 20%, 30% and 50%) to three. Under the new policy, tax item 1 is mainly for commodity from MFN with zero tariffs; tax item 3 is mainly for high-end commodity with consumption tax; the rest will be subject to tax item 2. Tax rates for the three new tax items will be 15%, 30% and 60% respectively.
We will have to wait and see how this affects cross-border e-commerce in the following years. Any enquiries you may have about how to increase sales and manage a successful ecommerce business model do not hesitate in contacting us. Our group of specialist will be more than happy to assist you.
This article was edited by Andres Arroyo Olson from 2Open.