The Chinese market has been on the increase over the last decade, with the country estimated to take over from the US as the second largest global economy by 2020. Understanding how to enter a large and complex market as that of the Chinese market has become crucial to several companies in China. An example is the China liquor market which has been predicted to grow at a CAGR of 15% over 2016-2021 reaching more than $450 billion according to global data. The market was worth $205 billion in 2016, but an increase in the drinking culture at social events especially among younger consumers and female drinkers is set to boost this market category.
Many multinationals and even private individuals have failed because they neglected the concept of understanding how the China market works. Therefore, in this article, we will describe the reasons why people fail in the China market.
China is different from the west.
Foreigners and multinationals often disregard this. They believe that what works in the US will also work in China, and end up finding themselves unable to devise an advertising model and campaign style to fit the local market. An example is a company using the same pricing system it used in the US for China, forgetting the fact that local consumers will see these brands as premium. At this point, often the customers would rather go for the local Chinese brands at a cheaper price.
Failure to understand the market and culture.
Most people, especially foreign multinationals, move their businesses into the Chinese market without proper understanding of how the market works and its culture. For example; colors and specific days have specific meaning to the Chinese. Some days are seen as more prosperous. Hence, most people streamline their major business activities around these days. Taobao defeated eBay in China because Taobao understood the Chinese people and their shopping experience while eBay lacked that personal connection Chinese buyers were used to.
Choosing the wrong local partner.
If you do business in China on your own, it can be difficult, especially in some sectors e.g. liquor industry. To overcome this barrier, people go ahead and choose local partners, but choosing a local company to partner with brings its own share of troubles. Companies or people who choose partners that have conflicting interest with their own business will end up having problems in the long run.
Sadly the Chinese market is littered with prospects that look good on paper but in reality they may cause chaos in your organization. Take your time developing a strong relationship built on real value, mutual interests, integrity, trust and respect.
Failure to align with the government.
For some entrepreneurs and multinationals this can be the final knockout punch that they are not able to get back up from. Take it or leave it, the government of China plays a strong role in the development of the Chinese market. Most businesses/brands have failed in China because they have challenged the government directly. Although they say anything is possible in china and policies aren't always strictly enforce in some regions, the truth remains that when you refuse to go by the directives of the Chinese government, the outcome is going to be a straight ticket home.
Other factors that have caused people to fail in China includes; the inability to market and communicate with the Chinese people, bad timing, superior local competitors, and lack of flexibility in pricing and failure to localize.
If you’re looking to do business in China, you should consider using a consulting firm. If you’d like to get more information, you can join our email list at Sterling_q@outlook.com.
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