INSIGHTS | 5 Important Considerations Before Entering the Chinese Market

China is the market of fantasy for many. It is one of the largest unified economic spaces, its business is booming, and consumer affluence is on the rise. These are just some of the factors that lure entrepreneurs in with promises of growth, fame and fortune. For many MNCs, China is already their single largest market, and it continues to grow.

At the same time, China is often talked about with fear. There are countless stories of foreign entrants who failed spectacularly; unable to compete and survive in its unforgiving business environment. Language barriers, a lack of transparency and local competition, amongst other factors, have existed at the peril of many.

#1 Adapt your Marketing Strategy

What is the most effective way to get the most accurate customers in the huge Chinese market, the answer is Digital Marketing. But we have seen many companies entering China and sticking to a marketing playbook they created and perfected through roll-outs in various global markets. However, these efforts often fall short of expectations and fail to deliver the usual results, racking up large bills without any return on investment.

When marketing your business in China, the key is to adapt your social media strategy to the local channels and to the different ways in which they are used. Unless you want to target only the young, tech-savvy and international Chinese, Facebook is not the place to promote your product. Applying your Twitter strategy to Weibo wholesale will also fail, as people use the platform differently. Incorporating WeChat into your playbook is a must, given that the consumer-facing service is also widely used as a platform for corporate marketing.

Another reality is the different roles of social media in China, where it is crucial for every business to be active on social. Even German B2B industrial companies have a WeChat presence that they use to interact with their Chinese business partners and clients. From publishing product catalogues to promoting events and sharing interesting content, even B2B companies can profit from a strong social presence and actual engagement, as it is expected and appreciated by the Chinese market.

Before deciding on a marketing strategy, it is also worth observing how other companies use the local social media platforms for marketing, and set aside smaller budgets for testing several different channels and measuring the returns.

#2 Localise Your Product

Many companies reach out to us, wanting to create a local version of their product. Often, they seek to do so by merely translating for the Chinese market. This approach is already flawed. It is based on the assumption that product-market-fit persists when entering China, and that the only concern is people being able to access it in their language. Most of the time, this is not true.

When entering China, you must assume that you have lost product-market-fit and need to rediscover it. It is crucial to start with a beginner’s mindset and test your current solution in the new market. Start with relocating your brand, doing user profile, create new brand story in order to validate what is and is not working. We've helped our clients to localise their product by having our Strategy and Rebrand Discovery Session.

When entering a new market that is as different as China, starting with a beginner’s mindset is a must. Being overconfident has cost many companies their entire expansion budget without any success. The secret to success is to test early, test cheap, be open and adapt.

#3 Know Your Chinese User: Cultural Context

Users come with all kinds of complexity, including their demographics, pain points, intentions, and cultural background. The only way to find real product-market-fit is to be user-obsessed and understand them as well as possible.

Users in China are very different in many ways from those in the West or in other parts of the world. One key difference lies in cultural background, where Easterners are more concerned with collectivism than individualism. This makes all kinds of experiences more inherently social, one big example being online shopping. For Chinese consumers, it is a very social experience, versus the more mission-driven approach used in the West. Another aspect is the complexity of Chinese written characters, which leads to a different set of UX patterns being preferred for their simplicity when dealing with Hanzi (汉字).

It is important to discover these differences in the target audience and design products and services that deliver value to this specific context. Starting with user research is often a good first step, followed by prototyping new potential solutions and testing them. Having a strong customer support is critical, as Chinese users are often quite vocal about their experiences and expectations. It is both a great way to show that you care and to gain market insight and intelligence. Let the user tell you about their experience, learn from it, and adapt your solution accordingly.

#4 Switch to Local Platforms and Ecosystems

Whether your product is a mobile application in your home market or your own online store selling a physical product, bringing your platform to China means that you will most likely need to change it. Adapting your product to the local context means examining where people are used to consuming similar products or services, and adopting that format.

If you are selling products online, it means offering your product through popular channels such as taobao, and cooperating with a local taobao partner in order to make that possible. There are many companies specialised in setting up and operating taobao, TMall, JD or Alibaba stores, which come with all the services you need in order to get started straight away. Trying to get people to use your own website to buy your product will result in enormous marketing costs and low sales numbers if you deviate from the channels the locals are familiar with.

Similarly, many services that enter China, possibly being a native mobile application in their home market, will need to create a WeChat application as their main engagement channel. Download rates for international mobile applications are negligible, abandonment rates are high, and people are already used to consuming a wide range of services (booking taxis, paying, ordering alcohol, etc.) through WeChat. By approaching users in a familiar environment and integrating the services they prefer (such as WeChat Pay), you remove barriers to adoption of your product and increase your likelihood of success.

In addition, many of China’s large technology companies have whole teams and infrastructure dedicated to your company’s success. By being open to the Alibaba or Tencent ecosystem and by taking advantage of the opportunities available, you are dramatically increasing your chances of succeeding by tapping into some of the largest platforms in the world.

#5 Pivot and Re-Evaluate in Shorter Cycles

By now it is almost common knowledge that Chinese companies work harder, move faster and operate more cheaply than their Western counterparts. They are obsessed with success, learn fast and innovate with enormous speed. Once you have entered the local market and find a business opportunity for yourself, you can also be sure that local competition will emerge to take advantage of it.

“Are you ready to play at ‘China scale’ and ‘China speed’?”

This will again test your ability to pivot in order to keep your product-market-fit. Instead of evaluating your business model and value proposition every few years, you must be ready to make changes to your business regularly. The market shifts constantly and competition moves quickly. While you may be a valued partner or supplier today, you might not be able to sell the same proposition tomorrow.

China possesses huge opportunities, and a reality check does not hurt before trying to seize it. The outlined points are by far not exhaustive, but should help your initial planning and first steps.