Capturing A Billion Customers: The Sales Incubation Model in China

November 17, 2017
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Not to Be Ignored

As most in the business world would agree, China is one of the most competitive markets on the planet for local and foreign companies alike. In many ways, the country’s economic policies, Five Year Plans and overall top-down leadership out of Beijing are hugely competitive with its counterparts in the West – and in ways, even more forward thinking and innovative. Whether we fear it, hate it or are indifferent to the rise of China, surely those in the global business community would agree that we cannot afford to ignore this ancient culture and increasingly influential super power.

Why Sometimes Knowing Less, Is Knowing More

With publicized market entry failures from the likes of Home Depot and Best Buy, entering the Chinese market to sell your products or services certainly can be a multi-dimensional chess game that requires tremendous amounts of resources for success. But how is it possible that at the same time, there are some very successful foreign Small and Medium sized Enterprises that have been growing sales and operations in Mainland China for a decade or longer? How could they succeed – with the limited financial resources typical of most SMEs – where other MNCs have failed miserably? This complex answer might be broken down into two key elements:

  1. These foreign SMEs were opened minded enough to acknowledge that the Chinese business environment and culture is NOT the same or similar as their native Western countries and;
  2. Upon entering the market (often times, with limited resources, there is only one shot at this) they sought to find a partner (not the same as a distributor) on the ground with the operational business experience in China, required to successfully navigate the market during the first five or so years and grow their sales in a sustainable way.

 

Where the Hell Should I Start?!

China has a seemingly endless list of “consultants” and “experts” that range from every kind of lawyer imaginable, to specialized tax accountants, to government relations advisers. The list of questions for SMEs wishing to enter is equally long –Should I do market research first? What about opening a Representative Office? How can I “test” the market to see if there is even demand for my product/service? Do I need to register a legal entity before I can do business? What if I need to hire people legally in Mainland China? And how can I get my profits (if you make it that far!) back to my home country?

Well, Start Small… Focus on Maintaining Growth and Real Business Control

One option for market entry, that no lawyer or consultant will ever tell you and has been around for almost 15 years in China, is the sales incubation model. Before even setting foot in China, this model does not require any legal registration of ANY kind and allows for immediate commencement of business activities:

  • Hiring and hosting an experienced Sales Manager;
  • Importing and warehousing products (even setting up a factory incubator for local manufacturing, but that’s another article!);
  • Selling to local customers by invoicing in RMB; and
  • Repatriating profits out of China

Just some of the benefits for this alternative model are clear from the very beginning:

  • Significantly reduced upfront investment to “test” the market (How do you know if your product/service will sell?)
  • Shared liability with the sales incubation partner (When storing and selling, they earn only when you sell)
  • Built-in, full-range of customizable local Chinese business infrastructure and experienced professionals (These are the teams who have been supporting successful foreign SMEs in China since the early 2000s)
  • No need to spend the time, money and mental effort (yes, that is valuable!) for registering a Rep. Office, Joint Venture or Wholly Foreign-Owned Enterprise (WFOE)
  • Leave China as quickly as you entered, without the hassle of legal obligations

Go Get ‘Em, Partner…

The future of the Chinese economy is far from certain, but one thing is for sure – China will continue to be the Wild West of modern economic outlaws and bandits willing to risk it all for a billion customers.

PTL Group’s China sales incubation model could be the perfect opportunity to fully exploit your SME’s potential in a globalized world  – for more details click here.