First, China is by far the biggest developing economy in the world. It is big enough to let firms attain huge scale. It has over 800 large cities, 200 of them with a population of over 1 million.
Second, Chinese language and culture are more homogeneous compared with Europe; Chinese physical infrastructures such as transportation and wireless broadband are new and excellent compared to developed countries such as the United States. For entrepreneurs, it is much cheaper to reach huge number of consumers in China.
Third, the bulk of Chinese consumers are young and eager to try new clever products, no matter if the brands are familiar or not. They adopt new technology quickly. For example, after mobile payment came, it became quickly very popular and now China is becoming a cashless economy. When ride-hailing services started – business idea likes Uber’s – the number of users increased 17-fold from 2014 to 2016. The amount of money young consumers in China spent on travelling last year is almost equal to the amount they spent on food.
Finally, many areas — especially many state-owned industries — are not efficient. So much so they are even be painful to consumers. Almost every aspect needs to be improved. For instances, parents and children suffer pains from rigid education system and outdated traditions. Pollution makes citizens spend more and more on clean-tech products. According young consumer trends’ report, expenses on anti-smog product increased almost nine percent from 2015 to 2016. Companies who put customers first and deploy the latest technologies have the upper hand and can easily develop fast.
What should you do?
Find a region of China which your business suits best. Neighbouring cities are likely to be similar in industry composition, government policy, and consumer preferences. For example, if your business is better-suited for developed cities – just like European cities – you might consider megacities like Beijing, Shanghai, Guangzhou and Shenzhen. For example, what kind of city Shenzhen is? More than 80 percent of Shenzhen’s residents are young migrants, from all across the country. They mainly speak Mandarin and spend most of their time away from their homes. People in the Shenzhen area are already active consumers of many categories.
Try to understand consumer’ preferences and trends in different areas. You know there are big cities and smaller ones. Some are rich, some poor. But what kind of cities they are? It might not be right to use a couple of words to describe a big city, but from those keywords, you can get some ideas. For example, the keywords are “house loan pressure” for Beijing, “entertainment” for Shanghai, and “food” for Guangzhou. If you want to develop tourism business, Shanghai might be a good place to start in. If you are food and beverage company, Guangzhou might be the first place to consider.
Select a proper way to enter the market. Your choice may be influenced by the resources you commit and the extent you wish to be involved. There are a couple of options companies can adopt; these include export, licensing, acquisition, and joint venture. Many companies are using a combination of these. You can for instance start with exporting. As the local demand increases and gains better understanding of the market, you can decide to shift to branching, licensing.
As the Chinese saying goes: It is better to travel ten thousand miles than to read ten thousand books. Take a flight to China and see and feel it by yourself. It will definitely be a fruitful experience.
The text has been written by Xiaohua Zhu.