The Chinese consumer is quite complex even for global players like eBay (Ruff.N 2015) who’s own attempt to establish itself in China back in 2004 became an exemplar in business circles of what not to do.
When doing business domestically, we already have the advantage of having access to a vast array of quality marketing and commercial research at our disposal and strong local market intelligence. We’ve grown up within the Australian economy and we are ourselves, consumers. We know what other Australian consumers want and with the assistance of our accountant, our lawyers, our bank manager and our marketing consultants, we can usually be successful in business just by utilising this local knowledge, using our own creativity, elbow grease and brain power without having to be too sophisticated in our research and planning. But the Chinese market is very different and so too are the rules of engagement. There are a lot of unknowns and this creates increased risk.
The Chinese have wads of cash but they are new to western style consumption. The Chinese people are used to their Government making most consumption choices for them so having the power of choice for the first time is a whole new world. It creates challenges for both buyers and sellers. There’s a weird power dynamic at play here as well. The Chinese consumer has the money and we have product knowledge and market experience. Somehow the two sides need to come together in an arranged marriage of sorts that is expected to offer mutual benefit.
The western market is perpetuated the value consumers place on goods and services and how much they are willing to invest in acquiring them. Establishing value perception of a product or service first requires awareness of its’ existence. Much of the Chinese market has little knowledge of the products and services Australia offer and so for the individual Chinese consumer, determining value is almost impossible without access to reliable sources of information.
This is where governments help. They market at a high level the broad range of products and services available and promote businesses and industries to help develop strong brands, create demand and grow a marketplace of buyers and sellers through business missions and delegations. The Australian Government negotiates agreements and terms of trade between countries such as the 2015 China-Australia Free Trade Agreement (ChAFTA). The agreements are intended to reduce red tape for importing and exporting businesses and provide each country with what they need from the trading relationship. They usually result in some sort of compromise and not everyone stands to benefit from them directly.
Important groundwork is being done by the South Australian government through trade delegations, business missions that help business research foreign trade markets, identify the market opportunity, analyse Chinese consumer behaviour and market preferences and to assist with strategy and gaining market access. The proof will be in the pudding but for now, if you’re interested in doing business overseas, contact your Rowe Partners accountant in the first instance. There’s a lot to consider such as working capital, risk assessment, planning for investment in infrastructure, exchange rates, new taxes and tariffs, additional fixed and variable costs to name a few. There’s plenty of practical advice and support available through Government agencies and industry bodies if you know where to find it and we’re happy to point you in the right direction.
This list of handy resources below is provided as a starting point only and is not meant to be exhaustive. It’s important to source information from a range of quality sources prior to formulating business strategy.
Federal and State government assistance is currently on offer to businesses interested in doing business in China (and other countries).
Business and industry groups can be a valuable source of reliable information on export and trade and as it may specifically relate to your own industry.