Crossing the China Border: No Magic Rides
- October 7th, 2015
- in Best Practice
The bad news: there is no magical set-it-and-forget-it cross border solution.
There are, however, new companies coming out of the woodwork every week, promising to have what the vast majority of SMEs so desperately want – an easy, set it and forget it approach to the China market. A magic bullet.
Or, if you will, a magic diet pill that lets you effortlessly shed pounds while you idle in the Krispy Kreme drive-thru. There’s a massive industry for those magic solutions that dwarfs what’s happening in the China cross border space.
But the principle remains the same. Surrendering to a magic Chinese partner who promises to take all your troubles away is going to be either risky, ineffective, or ultimately expensive. Or a blend of all three.
Which is not to say that such platforms are useless. Most of the magic solution providers flogging to the West nowadays are evolved logistics firms. Logistics is critical! They have the warehouses and fulfillment centers (hopefully on your side of the ocean, as well as in China), customs clearance efficiencies, and last-mile delivery.
It only makes sense that these logistics providers would eventually put a front end on these services, a Tmall-esque website where Chinese consumers will (theoretically) go, see your product, and order.
But where is the marketing? Where is the brand development? What differentiator do these websites have to contend with the mighty BAT (Baidu, Alibaba, Tencent), which spends millions daily to drive the vast majority of online shoppers to their properties?
Without multi-channel options for driving focused traffic to your product, these sites are like the millions of fancy display cases in deserted department stores across China, the odd punter wandering by to take a casual glance at the goods, before moving on to the food court, where the action is.
Before explaining the good news in depth, it is necessary to have a grounding in what cross border is largely about.
The vast majority of Chinese cross border shoppers are seeking global brand products, with a dual motive of authenticity and saving on VAT. That majority of cross border shoppers therefore largely use the following models:
1. Going to a foreign website, like Amazon or TopShop, and forwarding the goods to a daigou (smuggler) who will deliver as part of a partial container. These daigou are found through referral. Many rival logistics firms in their ability to get goods through customs and delivered without undue waiting and expense. They beat most logistics firms in being willing to ship small batches.
2. Going to a Chinese site that deals exclusively in global-branded goods (Fendi bags, Estee cosmetics, and related frippery) delivered by a jumped up Chinese logistics firm that buys and resells cross border, for tiny margins, or else delivered by a daigou of your choosing, listed and rated on the site. Often the daigou specialize in a product or product category.
THE PROBLEM IS THE OPPORTUNITY
Do you see the problem for the SME? These logistics companies-come-websites have no percentage in helping a ‘developing brand’ – a daigou has even less! Rather, they’re understandably committed to exploiting the large gap between Chinese consumer demand for iconic western brands, and the brands’ inability/unwillingness to supply efficiently, given the many foibles of the Chinese market, and the nebulous rules governing it.
The new “magic solution” cross border companies are savvy in perceiving the increasing Chinese consumer desire for lesser-known western products. Even the pundits who just a few years ago wrote gems such as “The Chinese only pay more for items that give them face,” are now proclaiming the advent of the “evolved” (read, “amazingly just like us!”) Chinese consumer.
So the magical new cross border company provides the commendable service of making logistics seamless for the SME, and providing a showcase for the product(s).
A few even lay claim to marketing channels – offline display, media opportunities. But this is where, inevitably, the offering ceases to be scalable for the SME. Turning a million dollar marketing budget into ten million in revenue is tough but feasible (especially for an established brand). Turning ten thousand into a hundred thousand, for an unknown brand, on some little site with no innovative strategy for driving customers away from the BAT’s tentacle clutches?
Thus, you’ll find that the few magical cross border companies willing to undertake your marketing, on top of everything else, will want exclusive rights to your product for five years, and other understandable but ultimately oppressive requirements for “taking care of China for you.”
UH, YOU MENTIONED AN OPPORTUNITY?
Indeed, there is power in being little known and all but unavailable in China. It’s grown in direct correlation to the disempowerment the Chinese consumer feels in the face of daily stories about false products, the dangers of trusting domestic brands, and the lackluster government response in punishing and curbing such malfeasance.
Thus the SMEs advantage in “not being in China”. The consumer can only get your product as a direct mail parcel, with foreign stamps and other bona fides that it hasn’t touched Chinese hands? You’re safe! Extra postage fees, extra lead-time equals extra assurance.
Counterintuitive, to be sure, but oh so valid.
A quick anecdote to illustrate:
Your author’s German friend recently moved back to Heidelberg from Beijing, with Chinese wife and infant daughter in tow. Mom has a large circle of WeChat friends sharing baby care info, who start besieging her before the plane has touched down – “Send us infant formula!”
Airmail fees? Pshaw. Three-week wait? Whatever. For products a family depends on, authenticity is the only concern.
That infant formula? Aptamil.
Aptamil is available on all major, minor, and magic cross border sites. Your finer Chinese bodegas (xiaomaibu) carry it, for goodness’ sake. Why, you well may wonder, don’t these moms just order it there, to save time and expense?
All for authenticity.
AUTHENTICITY AND OTHER EXTRA-SINO BRAND ADVANTAGES
Granted, infant formula is in a class of its own in terms of the lengths a Chinese consumer will go to assure authenticity and safety. If your product was made in China to begin with, isn’t ingested or worn, and otherwise of little Unique Value Proposition next to easily-found competition on Taobao, Tmall, JD, and so on, then your “Not in China” arbitrage opportunity decreases proportionately.
But UVPs exist beyond safety and authenticity for western brands to leverage. Boutique designers can leverage exclusivity. Special remedy brands leverage western medical authority. Innovation. Quality. Craftsmanship. These value propositions and the products which have them are all bolstered by western provenance and the mythic resonance such provenance has in the Chinese mind, “New Zealand, safe and natural. American, innovative and cutting edge. German, best engineering. English, heritage and tradition.”
Remember that no cross border sites, not Tmall Global, not JD International, or any of a thousand others without the capital to be prominent names yet, can confer that authenticity and UVP.
Not the way a cross border delivery can.
In the case of Tmall Global, remember that a few years ago Tmall was supposed to be the home of authentic foreign goods! That trust factor regrettably went out the window (not that Tmall hasn’t positioned quite well without it.) But really, do you think now the Chinese are turning to Tmall Global as “the trusted source?” Given the innate mistrust Chinese have for so many domestic brands, do you think its possible for a magic Chinese cross border site to become “the trusted source” for foreign goods?
SCALING THE OPPORTUNITY WITH CONSUMERS
Getting your product, brand, story, and UVP in front of the right Chinese eyes has been exponentially eased by advancing digital technology and adoption of that technology. However, the costs of building China-friendly digital assets, participating in third party sites, and buying traffic are still prohibitive to the SME, in general, even before considering tangential costs of licensing, trademarks, and other diligence.
The scalable way forward lies in cross border selling, but most likely not with a “complete solution” cross border third party store. In short, they have no percentage in the work of developing your brand.
Who does, besides you? Would you believe the consumer? Consider the anecdote above, and that there are more than 20m WeChat C2C “traders”.
Of course there are already plenty of pyramid scams and other hanky panky, but the new principle cannot be ignored – Chinese people want to buy from people they know, or have gotten to know from their contacts. Such people they know should ideally be directing them to mobile-accessible content that goes beyond ad and push to buy.
This is how egg farmers in rural Beijing are moving “farm fresh” product on WeChat. Rather than long articles like this one, they share videos of the hens, pics of the produce. They start and join groups for people who are interested in local produce.
Of course the use case of an egg farmer close to consumer is a far cry from that of the foreign SME. But the trickiest piece is not cross border delivery, for there are logistics companies aplenty developing Amazon-like delivery services to mainland China (get in touch for recommendations).
The content marketing and sales piece is what’s missing, and presumably hard to develop. The age of massive inefficient media spends is thankfully behind us, but the presumption remains that content marketing involves professional videos, pricey native advertising, and the like.
WeChat has changed that, and enabled tactics by which the consumer can also be your marketing/sales rep. But WeChat, while a light and versatile wonder-app, is a huge and tricky beast, and taming it to perform with other marketing channels takes some inside-out planning.
A rundown on scalable WeChat and other marketing/sales planning coming up next….