Finding the right local partner (distributors) to distribute your products is never easy and it is particularly true when it comes to China. The consequences of a bad choice can be dramatic for a company: poor sales and production relegated to the background by the distributor to the benefit of another brand, loss of its operating license, counterfeits, breach of contract …
Furthermore, Chinese distributors have become more and more exigent and only want to work with companies who have potential. We understand them. If you were in their shoes, with a dozen of companies contacting you every week to sell their products, you would not take a risk by closing an unknown brand while being perfectly aware that Chinese consumers don't buy unknown brands. After all, as a distributor, your job is to distribute, which you are good at. Your job is not to market the product you distribute.
Not only you will have to be extra careful when building your distributions network but even before looking for your first distributor you will have to work on branding and e-reputation.
ALTERNATIVE TO CLASSIC DISTRIBUTION MODEL
Opting for cross border when entering China is a good alternative. However, keep in mind that Chinese consumers are like Chinese distributors and won’t buy from you if they don’t know you or what you are selling.
It is not only bad news: Tmall has brought excellent news to foreign entrepreneurs. It now allows brands to select their partner from over 85,000 distributors across the country! We tell you everything about this below.
(Update) Tmall has just lessened the restrictions for brand with low awareness in China. Great new for every brand that wanna try out the Chinese market.
WHAT A CLASSIC DISTRIBUTION SCHEME LOOKS LIKE IN CHINA?
In the case of a foreign entrepreneur exporting his products to China, the distribution scheme will necessarily be long. He must first find the Chinese distributor who will distribute its products throughout the country. His distributor will go through a wholesaler who will market the products in supermarkets or small stores to reach the consumer.
Depending on what you are selling everything and everyone can be a distributor in China. For instance, you are an alcohol brand and would like to expend your business to China, you could try to get a contract with KTV (karaoke) or Night Club.
The complexity of this chain explains the cost of goods imported on arrival.
THE DIFFICULTIES OF DEALING WITH CHINESE DISTRIBUTORS
Above all, it must be understood that the sole task of the distributor is to distribute the goods: his role – and his investment in the brand – stops there. The distributor does not care about the branding of the brand; his vision of partnerships is short-term. He is wary of the fashionable setbacks and the sudden disinterest of the public for a product that sold well the week before. This is why he is mainly interested in the instantaneous profitability of sales and does not foresee long-term collaboration with brands.
TWO FACTS ACCORDINGLY:
1. The distributor will not put forward a brand that has not been proven profitable. He will choose an already profitable brand, which will allow him to generate profit for himself, fast.
The brand must be able to manage its e-reputation upstream, even before entering into the Chinese market, to be likely to interest a distributor AND to benefit in advance of its popularity once established in China.
2. The distributor will not help a brand to make itself known or boost sales. For a foreign entrepreneur new to the market, the competition is fierce with the international brands already known. This well-known brand will always be privileged because certainly profitable.
The brand must support its marketing from A to Z. The most effective at lower cost will be to undertake a digital campaign, what we call brand campaign or lead generation campaign. Being known on social networks makes it possible both to meet its customers, but also to attract the attention of distributors who also do the watch on the internet. Thanks to your actions, you will be able to convince them of the solidity of your business.
WHAT BASIC MARKETING ACTION CAN YOU TAKE AHEAD OF MEETING WITH CHINESE DISTRIBUTORS?
H5 Wechat Brochure: It is an electronic brochure that is easy to share on Wechat. It contains the listing of all your products (in Chinese). Besides, it shows you are already engaged in China and are aware of the tools available.
Website or Webpage: It needs to be in Chinese to rank on Baidu. It is especially necessary if you are in B2B. Having a company website is a proof that you are real.
- SEO and Undercover SEO: Above all, distributors will make basic checks on Baidu about you.
- Is there any press release?
- Are specialized websites talking about this company?
- Is there a Baike page? (Chinese Wikipedia)
- Are peoples talking about the company on Forums and Q&A (Baidu Zhidao & Tieba)?
- Is there any social media official account and are peoples engaging with the brand?
- Is there already resellers on Taobao for instance?
These checks are crucial in the decisions any distributors will take. Not only your website has to rank on Baidu but most importantly you have to be everywhere distributors are looking for you. They should be able to find information about you anywhere. Being present on all this third party websites and making full use of the Baidu ecosystem is what we call Undercover SEO. It is great to spread information about your brand/company but also to control your image.
HOW DOES TMALL WORK?
Tmall (aka Tiānmāo in Chinese, “The Celestial Cat”) is a Chinese retail e-commerce platform launched by the giant group Alibaba. It is the biggest e-commerce platform. Both local and international brands can sell on Tmall to mainland China, but also in Hong Kong, Taiwan and Macao.
In other words, the platform is revolutionizing mass distribution. Why? Because it allows – at least for local companies in China – to shorten their distribution chain. Tmall is the sole intermediary between you and the consumers. It operates as a shopping mall. You rent the place, manage your store, do customers service etc.
DO NOT CONFUSE TMALL AND TAOBAO
Tmall and Taobao are 2 different entities. Following an internal restructuring of the Alibaba group, three distinct companies emerged. Previously, Tmall depended on Taobao’s activities and then became an independent B2C focused company.
TAOBAO WHAT IS IT?
Taobao is an online sales site in C2C. This e-commerce platform facilitates retailing between consumers. It is great for small businesses and individual entrepreneurs who want to open online stores but do not have a big budget. On the other hands, Tmall is better suited for international luxury brands or having big financial means to invest in their branding.
TAOBAO NEW IDENTITY TO ATTRACT DESIGNERS
Taobao has been working on changing the perception consumers have. The platforms have been recruiting Kols and influencers to reviews products. In addition, Taobao is promoting young creators and designers looking to make a name for themselves. All these efforts are paying off and Taobao is not seen anymore as the paradise of fake and knock off. It is now a place where you can find good deals and discovers unique products.
According to the Alexa analytics service platform, Tmall ranked 14th among the most visited websites in the world in June 2018, while Taobao ranked 9th.
TMALL B2D: THE END OF THE STRUGGLE WITH DISTRIBUTORS?
After this restructuring of the Alibaba Group, Tmall B2D was born as an incredibly innovative new concept that is revolutionizing the e-commerce practiced as we know them.
This new system reverses the traditional distribution chain and allows brands to connect to distributors, choosing who they will entrust their products among the 85 000 Chinese distributors listed.
WHAT REVERSE E-COMMERCE ENTAILS FOR YOUR BRAND
In short, Tmall B2D gives brands great visibility on the current market.
Any entrepreneur can now choose his distributor on the Tmall app in the same way a consumer would roll out a list of products on his Smartphone, before choosing the right product and place it in his basket.
Not so easy to choose, however, when one has no expertise of distributors in China and is not in China. The application entirely in Chinese requires mastery of the language; it is better to be accompanied by professionals in this first step.
- This article is originally published on Marketing to China.
- The above is the author's personal opinion and is not the opinion or policy of ChemLinked.