Some 3,000 small business people, merchants and distributors gathered in Detroit last monthfor Alibaba’s Gateway ’17 conference, learning and sharing information about selling to and sourcing from China. Among those attending was Maggie Wang, CEO of Shanghai Amphora Star International Trade.
With over a decade of experience in bringing foreign brands into China, she has amassed valuable information for small businesses looking to penetrate a growing, and highly competitive, market. She shared some of those tips in a recent conversation with Alizila. The interview has been edited for length and clarity.
What specific areas or market segments are of interest to you? And why those areas?
We are in cosmetics, skincare products and makeup. I’ve been in this area for about 10 years. I was in the cosmetics business before. I like it, otherwise I wouldn’t have done it for such a long time.
What do Chinese consumers like about foreign brands?
Chinese consumers are very eager to try new products that are high quality, that offer up new ideas, new concepts, new technology.
What makes a brand accepted and successful in China? And how do you decide whether to take a brand on and introduce it to the China market?
I think I can tell whether a brand will be popular or not at first glance. But first,we need to try the product, make sure it’s good. And the product needs to have a very attractive design, packaging and brand concept. We also look at how they’re doing in their home market. We can check all the reviews and popular social-media sites or apps like YouTube or Instagram. If there are lots of pictures, it means they are popular in their native countries.
How do you make Chinese consumers aware of these brands and products from new companies?
Our company works with a lot of online celebrities, more than 30. We’ve opened a Taobao shop with them. Those products get recognized when online celebrities recommend them in their videos. When they recommend, all their followers see the product in the video. We up the product awareness, because most online celebrities have millions of followers.
For a small brand or company just starting to test the China market, what is the growth and development path you lay out for them, should they be successful?
Once we’ve approved a product and selected a brand, we send it out to all our celebrities to try it. If they like it, they recommend it in their videos. Once they recommend it in their videos, most of their followers will see it, and other Taobao Global shop owners will see it, get to know about the product and want it. If they have very good feedback from customers, other Taobao Global shop owners will sell it in their shops, too.
Once awareness is high, a brand can apply for a Tmall Global store, to sell the product themselves to Chinese customers.
What sort of concerns do foreign brand owners and small businesses have or express to you, and how do you respond to those concerns in your business relationship?
Brand owners in the U.S., and even European, countries care about pricing very much. They want to maintain their product’s price level in China, or maybe even go a little bit higher than in their home markets. Good prices make a brand long lasting.Most of the foreign brands understand this. Only a few don’t get it.
The way it works is like this: We get the products at a discount from the retail price in their home market because we handle distribution and marketing, taxes and other costs. In the end, the retailer in China typically charges a premium to the home-market price for the imported product, which is what the foreign brands are ultimately concerned about.
Is that the way most distribution deals are structured?
That is one of the cooperation models, one where they appoint exclusive distributors. Most of the time, brand owners don’t want to appoint exclusive distributors, because they are afraid if they don’t do well that they have no other alternatives. If they are not doing well, it’s a risk to them. So, most of the time, they don’t appoint exclusive distributors.
I think, at the beginning, they pick a few distributors. Then, after a few years, they check which are doing best.
If you assign only one distributor, most things are taken care of better by the distributor, including marketing, planning, logistics. But you need to find the right one.
Some will sign an exclusive distributor after a few years, because they know more about the market and know which one is best for them. And they will know what to do in the China market.
It sounds as if trust and experience matter a lot. At the start of a business relationship, how big an issue are language and culture in building up trust? How much explaining do you need to do about the China market to small businesses from overseas?
I think language is not a big issue, because most of the Taobao Global shop owners have a very good education and can speak English. But I think culture is an issue. We have a lot of misunderstandings. What we are doing is to build trust. At the beginning, the brand owners don’t always have trust.
We worked with one brand.Previously, when we bought the product from them, they asked us to pay 60percent upfront, and then, later on there was no payment upfront. Now, sometimes they will even provide credit for us. Once you have a good relationship with them, they will rely on you in the China market. I think the most important thing is to help the brands grow in the China market. Otherwise, they will not trust.
One question some of the brands have raised is how the distributor or merchant in China can help protect the brand’s intellectual property, against things like cut-rate pricing or the sale of fakes.
Actually, right now, fake products have very little room on Taobao anymore. That’s because Taobao and Alibaba have spent lots of money and effort to get rid of fake products and have a platform for brand owners to point to fake products.
Also, comparing the prices, because fake products sell for much cheaper—consumers know how to identify which are fake and which are real.
What do you consider success for a foreign brand in China? What should a small business or brand expect over time?
We have one brand we have worked with for 10 years. Every year, we fly to the U.K. a few times, and they fly to Shanghai. We have a very close relationship. They create specific products for us in the China market. Brands grow step-by-step.
The life cycle of brands is very short on Taobao, two maybe three years. The brand we work with that I just mentioned, we’ve been with them for 10 years. We trust each other, work hand-in-hand. When we do that, I think we achieve much more than what they originally expected.
Most of the brand owners think China is a huge market, and they have very high expectations for the China market. They think distributors can provide very good offers in the first year. I think we need to work together to make them be realistic. The brands cannot be popular so suddenly. They need time to do marketing and maintenance.