You should understand that there is not 1 distribution strategy for exporting your product to China but a multitude of alternatives but they are also a multitude of strategies that do not work such as emailing distributors in English (already they don’t read their mails so in English…)
Finding a reliable Chinese Distributors is Hard Work
In order to maximize your potential for expansion in China, you will need to manage a solid sales strategy while developing your distribution network. Keep in mind that due to cultural differences and sometimes a lack of understanding of the distribution landscape in China, many brands have found themselves in trouble trying to enter the Chinese market.
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Below we will expand on the following points to understand how distribution of goods works in China:
- Challenges of goods distribution in China
- Logistics and distribution in China
- How to be cost & time efficient
The Challenges of China Distribution
A successful distribution strategy is a crucial step for any company wishing to export products to China, even if it is not something easy to do …
Here are some key challenges that multinational B2B companies face when entering the Chinese market:
- Distributor fragmentation: given the size of China, many small distributors are not willing to extend their activities to other regions … they, therefore, push companies to seek new partnerships or limit their development in China.
- Many differences between regional markets: variations between regional markets can limit pricing strategies and require different capacities for distributors
- Diversification is necessary: with the rapid development of online B2B platforms, companies must consider developing a multi-channel strategy to optimize the management of their distribution through a distribution system both online and offline.
- Financial tightening: many local B2B distributors have limited funds and insufficient capacity to maintain large stocks.
- Legal challenge: foreign companies must seek distribution partners with sufficient capacity to cope with the legal approval process at several levels.
You can understand here that entering the Chinese market can be a real challenge for companies, regardless of how rewarding it can be.
Complete guide to distribution in China
- The cultural divide
- Different business behavior
In order to take full advantage of the Chinese opportunity, and before detailing the different strategies that you can use according to your business model, here are some things to think about from the start:
- The desired degree of control over your product
- The desired degree of control over your pricing
- The place that will be covered (China is a BIG country)
- Do you need to keep certain business channels separate?
- What capacity will you need to manage multiple distribution channels/distributors?
- What marketing support and investment will you need?
- Can you do it yourself or do you need an expert to help you?
Logistics and distribution in China
I) THE CHINESE DISTRIBUTOR
A basic and most common model for companies wishing to develop new markets.
How does it work?
You give a percentage of your turnover (usually around 50%) in exchange for local distributors who handle sales on your behalf.
Depending on the notoriety of your product and the negotiation process, a distributor may possibly buy your stock so that you can benefit from it.
What does that mean for you?
They do the work for you, which means less profit margin and surely more concerns about quality control and branding … If your product already works, they will sell it well. Otherwise, your product will queue up behind the best sellers.
Make sure distributors have already signed different brands offering the same type of product as yours. And they are only interested in the one who gives a result. If you lack reputation in China, distributors will not pay you much attention.
What solution do you have using distributors?
Exclusivity: we do not recommend it.
It’s complicated to manage. A distributor is not a partner. And he will put his interests before yours.
Multi-distributor: a good strategy. You control the distribution process and this will allow you to have a good presence in China, your own registration in the country, and a strong brand.
Direct distribution: you sell and deliver the products by yourself. You have full control of operations. You will not have to bear the intermediary costs but you will have a significant initial cost (stores + warehouse)
II) THE DIY MODEL aka DIRECT SELLING
Your company enters the market and works with an export company to reduce the cost and complexity of exporting products to China
Your company hires experts to handle inventory, logistics, and warehousing. You can also hire a service provider to support your e-commerce operations.
A good way for your business to manage your e-commerce operations is in the same way that you manage your operations in the domestic market.
1) What is the main benefit for your business?
It is a vertical integration system that allows your business to increase its net revenues while using online platforms and absorb certain initial costs, including the cost of inventory.
III) CROSS-BORDER OPERATION: CHINA CROSS-BORDER E-COMMERCE
What is it? read more here
You are a foreign company that ships products from your domestic market to China through an e-commerce platform
You are not required to have a Chinese business license or warehouse in China. You can deliver your product by the postal service or use a bonded warehouse
A good way to experience the sales operation in the Chinese market and reduce your costs as an intermediary, physical store, sellers, and inventory.
Click here to find out more about the cross-border e-commerce
MAXIMIZE YOUR PROFITS – AND INVEST IN YOUR BRAND
When looking for distributors keep in mind:
- Whether you choose to use an online or offline distribution system in China, keep in mind that each distributor can handle between 40 and 200 brands. Thus, they will not be interested in yours in particular, especially if others develop faster
- For online e-commerce platforms, it’s even worse. Some platforms such as Tmall Global receive thousands of requests every day. You will understand here that cooperation with a distributor in China is not an easy task.
Reasons why a Chinese distributor would want to distribute your product:
- Your product/company is famous in China
- You have a perfect position to maximize profits on a specific target
- You have a strong reputation
1) WORK ON YOUR VISIBILITY FOR CHINA
Make a website in Chinese and registered on a Chinese domain
Open an official account on Weibo: Weibo is the Chinese Twitter. The most popular social media in China, it is also the preferred platform for KOLs.
So if you want to target a large audience and engage with potential customers
2) WORK ON YOUR REPUTATION IN CHINA:
- Baidu: Having a Chinese website is good, but not enough. They do not trust companies … before buying anything from you, the Chinese will seek information on Baidu, their Chinese google. Distributors will seek information about your product/brand (this can be reviews, comments on something specific, forums, or general research)
- WeChat: The Chinese Facebook. Everyone uses WeChat in China. A super messenger APP that also has a “moment” system allowing people to share content (messages, photos, videos) and personal comments.
- Douyin: The king of video. A short video sharing application that is growing very quickly among the younger generations. It is the perfect application to generate content and distribute it to a wild audience. More intuitive and fun than WeChat and Weibo, this application is also a great tool for KOL.
After working on your branding and your e-reputation, you can make an appointment with distributors. And be sure that they will research your brand through Chinese digital platforms to assess your potential. They will check:
- If Chinese consumers like it and have already bought your product
- How is the quality? What do users say about it on forums and social networks?
- How many followers do you have on Weibo and WeChat?
- How many media are we talking about? What can they find on Baidu?
And since this is never enough, you will also have to work on your packaging. It should be:
- Good quality
- Adaptation to your positioning
- Adapted to the Chinese market (successful brands in China build a very specific range of products adapted to local consumers)
Finally, to manage your cooperation with distribution partners, here are some things to keep in mind:
- Spend time with the distributor to study the market and understand their skills/abilities
- Understand the reasons behind the margin, where the cost is expensed and where value is created
- Transparency of retail price levels in different channels
- Jointly develop sales targets and review them periodically
MARKETING TO CHINESE DISTRIBUTORS
Distributing products in China is not easy but can be very rewarding. To summarize the distributors in China:
- They want to make as little effort as possible for maximum results
- They want quick results
If you have any questions regarding the distribution of your products or the expansion of your brand in China, please do not hesitate to contact us.
DO YOU HAVE A PROJECT AND NEED SUPPORT? CONTACT US!
WE CAN HELP YOU :
GMA aka Gentlemen Marketing Agency is a “pure digital” agency, composed of 70 people, based in Shanghai, with micro branches in the world
WHY YOU SHOULD CONTACT US:
- We have been helping foreign companies to develop in China for 9 years
- We specialize in strategy, branding, advertising, reputation, lead generation
- Results-oriented agency (a pragmatic approach to the Chinese market)
- Experience + 800 projects (it’s starting to do)
- We are very familiar with the various problems you will encounter
- You are convinced that it is worth a small call (free)
OUR MARKETING SERVICES FOR CHINA
- Image management: Via Chinese social networks: WeChat & Weibo: creation of official accounts (Xiao Hong Shu / Little Red Book, Douyin,…).
- Visibility on the Chinese web: Optimizing your website on Baidu will be vital, our team of marketers will take care of all your communication in China (social networks, while implementing an SEO / SEM campaign, PR, Forums, KOLs )
- Development of your distribution: e-Commerce, Online and offline via distributors and by contacting supermarkets or local distributors