How foreign brands can compete with 60 million online merchants in China with Kung Fu Data

Josh Gardner is the Co-Founder and Managing Director of Kung Fu Data, a platform based in China, and he's part of the Entrepreneurs' Organization there. Kung Fu Data has a very simple mission, and that's to help non-Chinese brands thrive online in Chinese marketplaces. Chinese consumers are self-trained experts in everything they buy. They are extremely well-versed at buying and managing what they buy, and that plays out big in the marketplace. In fact, there are 60 million active Chinese merchants on Taobao, Tmall, JD, and other platforms, and 10 million of these merchants sell products made in factories, allowing consumers in China to easily buy directly from factories and have it customized and delivered to them right away. 

Kung Fu Datarevolves around marketplace commerce or what is called the marketplace economy, and these ecosystems in China are gargantuan. To put some context, Alibaba made over $1 trillion in their last fiscal year. This suggests that China's digital ecosystem is far more sophisticated, evolved, and interesting than anywhere else. And so, what Kung Fu Data does is help niche brands find a home in China and drive their commercial success, which they've been doing for seven years. In that time, they have launched more than 50 brands on Tmall, JD, and core marketplaces. They've done hundreds of projects on the market entry side as well helping people fix problems. 

Kung Fu Data recently signed a brand that had squatters all over their IP address in China. There were three or four entities sitting on various versions of the brand's name in Chinese and English, and they needed to get back their category. To solve that problem for their client, Josh and his team connected with partners in China that specialize in taking control of IP. Another example is when a competitor of theirs got in a lawsuit with a brand that was trying to cut ties with them. They were refusing to turn over control of the stores and the social accounts to the brand. Even though they were in arbitration, they were still holding it hostage, and so Josh's team served as triage. They were on the phone with different aspects of Alibaba management and different directors of different teams trying to get someone to give them new logins. These situations are somewhat unique to the Chinese marketplace and probably would not be encountered elsewhere, making their SOW quite specific. 

Let the experts do the work for you

It's never simple, and it's never just one thing, but the key problem Kung Fu Data solves is sales and amplification. For those wanting to break into the Chinese market, Kung Fu Data is an expert at taking brands from one to 100, however, they can't predict exactly when the company will reach 100. It takes time, but definitely, they are responsible for selling and managing the brand online and handling all the problems related with that. That involves logistics, customer service, returns management, tech integration, IT, data reporting, results, delivery, platform management, events, media, marketing, creative, etc. They do it all as the marketplace partner. In addition to that, they connect people who do things they don't do, which is social media, PR, and seeding. Their focus is more on integrating assets and marketing inside the marketplace ecosystems to be as active on the platform as they can. They aim to drive visible brand equity and push it in through the official channel, which is the flagship store or the authorized dealerships. Their job is to manage the commerce, drive it, grow it, expand it, make the brand as strong as possible, and with the resources that come from it, they are able to create successful brands.

Take note that only one in 20 foreign stores ever hit a million in sales. Most don't, but they're still able to build a good business. There is no doubt that Chinese merchants have the home court advantage, but it doesn't mean that a business owner should give up considering doing business in China. It's not that there's no demand for foreign products. If the demand is outrageous, a business can do really well. The issue is that internally, foreign businesses are resource-deficient. They are not educated and trained to think the right way about China, and they don't have cultural fluency. Linguistic fluency isn't necessary, but trade culture fluency is. 

In terms of the kind of companies Kung Fu Data works with, Josh says these ecosystems are now all encompassing. They build brands online in the Chinese marketplace, and so their core customers are mostly professional consumer brands or prosumer brands. And because 10 million factories are online and have Tmall and Taobao stores, actual professional trade now happens on retail platforms. WeChat accounts can be used for running the business, communicating with teams, and talking with friends and communities. On Instagram, it's just friends and family. Whereas with WeChat, anything and everything can be done. B2B, B2C, B2B2C, and M2C all happen on the same platform.

Bringing the business to China

To get into the Chinese market, a business first needs to understand what they're going to be up against, and then they need to act accordingly and plan properly. The amount of competition is insane coupled with the fact that, unfortunately, the business is not unique, so there has to be some kind of unfair advantage or a defendable position in some way. That is the game. Building relationships can help business owners find a position that allows them to build and grow. Otherwise, they're going to be attacked continuously, which is what Josh and his team have learned to avoid after many failed attempts. For those who have had a go in China, the old saying is, the longer you're there, the more you realize you don't know, and that definitely holds true. The market is ever-changing, and so businesses will always have to adapt and learn.

Once a business overtakes their competition, they then need to maintain that level of success, which is tough. Once they're on the other side, it's even harder to stay there because now they're a real target. This is why Josh always tell his clients that they need to come armed to the teeth; in other words, be prepared and have a budget, even for things money isn't usually allocated for, for instance, controlling the IP which is what Josh and his team work out first, because the brand can't launch without it. The next step is controlling the demand routing on anyone's trademark with proper registrations with Alibaba as the brand control unit. Doing this ensures that all the brand's traffic, IP, and visible brand equity are going to the official channels. A more aggressive way to do this would be through introductions Josh makes to a law firm founded by military attorneys which records over a half a million takedowns a year, making them equivalent to the marines of IP protection.

Kung Fu Data works with competent partners, and they always surround themselves with the same kind of talent in different verticals, because it's important to build infrastructure that secures one's position. Josh emphasizes focusing on marketing and PR and not backing off even when the business is already successful. Instead, Josh says to double down. That will get the business to a position where it is unequivocally so far ahead of everyone else, it would require a major disruption to unseat it. After going through all the trials and tribulations and making it into the winner's circle, double down again, because you don't want to give anyone behind you a chance to catch up. Otherwise, they can take you down. The idea is to secure the winnings and to do that, the business needs to invest in the right resources. 

To learn more about Kung Fu Data's impressive offering, you can reach Josh via LinkedIn or visit their website. They constantly publish content on there, so you'll have access to lots of resources. If you're interested in bringing your business to China, he can set you up with his commercial team and they'll see if your brand's ready or not. With Kung Fu Data, this is a not-so-easy but potentially highly profitable route to get noticed in the Chinese market and it's possible to do so even for foreign businesses.

This is a transcript from our podcast which you can find here. If you're interested in learning more about what we do, you can sign up for our newsletter here.

Cover Photo from Kung Fu Data