Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Frank Lavin @Export_Now Frank was America’s salesman in chief in his role as Under Secretary for International Trade at the U.S. Department of Commerce. Fluent in English and Mandarin, from 2001-2005, he served as the U.S. Ambassador to Singapore, during which time he negotiated the Free Trade Agreement between the US and Singapore. His company, Export Now is a service that allows U.S. producers to sell their goods on China’s largest e-commerce platform, Taobao. For more info http://www.exportnow.com
SmallBizLady: Why should small businesses be trying to export?
Frank Lavin: Sales growth can accelerate with a new sales channel. Look across the border. While the domestic economy is growing at about 3% this year, many countries expect 5, 7 or 9% growth in 2012. When a company enters new markets, it increases its customer base; and a larger customer base means increased sales; and ultimately a company with more sales will hire more workers. “Selling goods and services overseas should be a part of every business plan,” says the current Undersecretary of Commerce for International Trade, Francisco Sanchez.
SmallBizLady: Why is China a good target market for small businesses?
Frank Lavin: China is not just the largest oversees market. Chinese consumers see American brands, from the iPhone to laundry detergent, as a sign of quality. A population more urban and more middle-class than ever before places a premium on products that represent high standards and sophisticated tastes. Families typically have one child but increasing levels of disposable income. They value American goods. In ten years, U.S. exports to China increased by 468 percent, a growth rate that is higher than the growth rate for exports to the rest of the world.
SmallBizLady What is the best way for a small business to sell in the Chinese marketplace?
Frank Lavin: E-commerce is a simple and efficient way to reach customers in new markets. The smaller the company, the less practical it is to learn a new language, deal with new tax codes and currencies and to take a huge global risk. E-commerce reduces those barriers and lowers the costs of entering a new market.
SmallBizLady: Why is e-commerce the best option for selling to the Chinese?
Frank Lavin: In China, e-commerce has grown rapidly as an alternative to shopping in physical stores. In a nation still building the highway and mall infrastructure American consumers take for granted, Chinese e-commerce has leapfrogged ahead, making online retail the best opportunity for Chinese consumers to find the right combination of variety, quality and price. To open a physical store, or a wholesale operation, a company needs an extensive on-the-ground sales and marketing operation. The largest e-commerce platform in China has 150 million active customers and $60 billion in annual sales — a platform your company can reach from your desk in the United States. E-commerce allows a U.S.-based business to make targeted marketing investments — starting at almost zero. It is widely recognized as an innovative tool that can help U.S. businesses sell to these markets more easily and more cost effectively.
SmallBizLady: So what are some of the options for selling in China?
Frank Lavin: There are four other steps many small businesses take to start selling in China: 1. Go to China on your own or with others in your industry and showcase your products at trade shows to find a local distributor. 2. Go on a trade mission organized by state or regional officials. 3. Contact a commercial officer at the U.S. embassy and ask to participate in the government’s match-making program that helps companies find distributors. 4. Check with your current customer base to find customers migrating to China or with China connections and follow your customers.
The largest global companies can afford to have managers fly to Shanghai, set up distribution networks and solve legal and customs issues.. Most small or mid-size companies that want to start with a modest investment under carefully controlled conditions will prefer to start with a partner that understands China. A partner with an e-commerce and logistics infrastructure can make your entry into a new market even easier.
SmallBizLady: As a small business owner, what do I do to get started exporting to China?
Frank Lavin: Our book, “Export Now,” points out the mistake many companies make, which is to do nothing. Companies that fail to plan or to make an effort to learn local market conditions also fail to win new customers. We emphasize four steps: understanding how customers differ, understanding competitors in the new market, understanding the capabilities you need to win, and understanding the steps you need to take to close the capability gap.
SmallBizLady: What can a small business owner do to encourage sales with an e-commerce solution in Chinese?
Frank Lavin: While e-commerce allows your product to speak for itself, a little help can spur sales. We will work with you to organize a focused online ad campaign, including product images, banners and a few videos that show your product in a Chinese context. Even a modest investment can make a difference. The Taobao search window is searchable in English so you can see how similar products are presented on the site, even if you do not understand the language. You will get all the customer data we have, including comments. Taobao has a culture of substantial commenting activity and that can help businesses as they shape a product line for export. (For example, shoppers will request products in particular colors and in this year, the Year of the Dragon, they will tell you that dragon logos are popular.)
SmallBizLady: Who are the Chinese customers?
Frank Lavin: Taobao has 150 million active users. China has an ambitious, hard-working middle class with a strong appreciation for American consumer products. Chinese consumers aspire to the world-class quality they associate with top brands. Urbanization has pushed the population into cities and now more than half of Chinese live in urban areas. Five cities — Chongqing, Shanghai, Beijing, Guanzhou and Tianjin — each have populations of more than 10 million and another 150 Chinese cities each have populations of more than 1 million.
SmallBizLady: What attracts Chinese consumers to buy certain products?
Frank Lavin: The American lifestyle and its association with American brands attracts Chinese consumers. Small and mid-size businesses do best with premium and novelty products, items that Chinese consumers will associate with quality attributes. Some categories that draw particular interest are baby items that speak to the Chinese focus on education and safety, automotive items that appeal to car aficionados, and luxury home and beauty items. Exporters have found it is best to not focus on price competition but to emphasize a brand or product attribute that is well respected by consumers.
SmallBizLady: How do I win against copycat products?
Frank Lavin: The best defense is a strong offense. The single most important step to combat the possibility of intellectual property theft is to be in the marketplace yourself — and to go as fast as you can. Chinese consumers are increasingly sophisticated and they have demonstrated that they value an authentic product. Companies from Apple to Levi jeans have learned the advantages of bringing their own products to the market. Using a trusted partner increases the likelihood of success.
SmallBizLady: How can a small business owner sell agricultural products in China?
Frank Lavin: Food, cosmetics, wine, and pet food each require special licensing. Packaged goods from the United States are popular with shoppers. Stability is important, though. For now, no ice cream please!
SmallBizLady: How does Export Now work?
Frank Lavin: Export Now partners pay an annual service fee of $3,000. The annual service fee covers product listings and warehousing for one year. Export Now partners also pay transaction fees for all products sold. Fees depend on individual tariffs and other costs and range from 15% to 20%. All in all, your margin for sales to consumers in China will be very close to your margin for sales in your home market. How the product is positioned and described to consumer is vital — so we do the translations by hand. Export Now handles all language, legal and customs issues. After our partners ship merchandise to the company’s depot in Long Beach, Calif., Export Now consolidates the goods it collects into containers that it ships by sea to its warehouse in Shanghai. Consolidating shipments and the use of sea routes instead of air cargo provides significant savings, which allows you to sell your products to Chinese consumers at attractive price points. On arrival, Export Now shepherds the merchandise through customs and handles the relevant duties and tariffs. Our China team also handles the relevant Chinese product labeling required by local authorities.
SmallBizLady: What are the three biggest things a small business owner should keep in mind as they begin to market their products to China?
- Move incrementally. This mammoth market can absorb your entire marketing budget. Come up with a plan that allows you to move step by step and adjust as you go along.
- Find partners. Partnering with intermediaries can mean finding a distributor, a licensee or another ally who will be a force multiplier for you.
- Actively listen to customers. Be sure you have a robust feedback mechanism that allows you to hear about specific product attributes that may work well in the Chinese market. For example, Dunkin Donuts found success with a pork-flavored donut offered in its Chinese stores.
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Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog http://www.succeedasyourownboss.com Melinda is also bestseller author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.