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Wednesday, December 29, 2010

DOING BUSINESS IN CHINA: Consumer Nation: You May Want to Look at China For Exporting, Not Importing

Doing Business In China with Dan Paulson

Though it has taken some time, the consumer power of China is a force to be reckoned with. Now may be the time to seek opportunities in the Chinese consumer market.

For years now, we have heard about sourcing products to China for low cost manufacturing. Some companies have been very successful with this while others have found it to be a painful process. In either case, importing products leads to exporting jobs and as it turns out, potential opportunities.

As is often the case, we tend to get trapped in our own tunnel vision. The US has been the greatest consumer nation for decades. Cheap money and a credit-based society has allowed a person to “buy now and pay later” which has kept the engine going for quite some time. In recent years this has changed as a weak economy has hit people in the wallet causing them to spend less. The good news is early predictions from this year’s holiday season sales are up substantially, which is a positive sign that consumer confidence is growing here. But what about spending elsewhere?

China is one of the fastest growing consumer populations spurred, in part, by our investment in manufacturing there. While many in China are still working to earn a living wage, many others have taken advantage of this new prosperity. As wealth grows, many Chinese are buying. What do they prefer? Brand names from other countries. With the right product or service, this could be a great time to expand into the Chinese market. Consider the following:
  • China’s population exceeds 1.4 billion people with the population transitioning from an agriculture-based to industrial-based society
  • There is growth in virtually every sector of spending from housing, to food to electronics to cars
  • Until recently, the Chinese rarely purchased virtually everything under one roof. They were more accustomed to specialty shops providing specific goods. Today, department stores and retailers such as Wal-Mart are expanding in China.
  • China is still a cash-based society. Most Chinese save at least 30% of their income. They are accustomed to paying cash when they buy. Credit cards and checks are used very differently and are rare occurrences in transactions.
  • The youth is where it’s at. A younger, educated workforce wants the brand names and gadgets their parents couldn’t get, or afford. They look to western culture for the trends in fashion, food and technology.
  • Brand is important. The Chinese seek brands they can trust because they know what they can expect from it.
  • Quality is key. This culture was used to shoddy products that failed to meet expectations. Companies that make products where quality is much higher than what currently exists in the markets will do well.
  • Price is still important. The Chinese are still price sensitive. Many work hard for their income and part with it only when there is a true benefit. Being a foreign competitor and remaining price-competitive can be a trick, but if mastered, can lead to great success.
  • The need for infrastructure. Cities are growing rapidly. Needs for sustainable energy, water quality, transportation and other services exist. Companies with expertise in these areas can experience profitable growth with decades worth of work ahead of them.
As our own economy begins to bounce back, the growth will be slow. However, more companies are looking for opportunities in the market. As a nation of innovators, it may be time to not only look at opportunity here, but also abroad. While there are no guarantees, with the proper planning, research, and connections, the potential exists for businesses to expand and be profitable. Are you willing to seek out that opportunity?

For more information, please visit Dan's TNNWC Bio.

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