This is a very good book, and is timely as well. Frank Lavin has more than 30 years of experience helping companies succeed in China, the last 10 years as owner and founder of his own consulting firm Export Now. He has had a distinguished career both in the private sector (with Bank of America, Citibank, and others) as well as in the public sector (former US Undersecretary of Commerce for International Trade, former US ambassador to Singapore, former Chairman of the Steering Committee of the US Pavilion at the Shanghai 2010 World Expo).
The reviewer finds this book to be both well timed and relevant. Chapters 1 to 5, as well as chapters 12 to 16 seem to be particularly pertinent.
While reviewing this book, on Sunday 10th October 2021, a television episode of Fareed Zakaria’s weekly GPS program featured views on China’s attractiveness. Several impressions were presented, but for this reviewer, there also seemed to be some problems, even contradictions. In his opening remarks, Mr. Zakaria praised a non-tax, free trade policy, taking issue with former President Trump’s taxes on Chinese imports to the US. But, later in the program, the former senior advisor to the US President on security issues, Lt. Gen. (ret.) H. R. McMaster warned against a buildup of China’s military, as well as this country’s recent seemingly rather aggressive stance on several foreign policy issues. He further stated the opinion that key decision-makers in China may have come to believe, that the US may no longer be as strong as that previously been assumed.
So, it is appropriate to follow the strong advice of this book that the Chinese market represents an exceptional opportunity. Should private business be embracing China in such an unconditionally positive way that this book seems to propose? For what it is worth, this reviewer is endorsing “good China” as the most positive way to maintain the strengths of the US and Europe, in contrast to a much more defensive “bad China” approach, which might not bring us forward in significant ways. The issue is “how fast can you run”? (p. 108), and “if you want to see the future, look at China” (Mark Schneider, President, Nestlé, quoted on p. 170).
The first part of the book (chapters 1 to 7) aims primarily at business leaders who are not yet active in China, but might need to become convinced about the attractiveness of this huge market. In this reviewer’s opinion these chapters offer much more than this, namely an outstanding description of “why” China as well as “how to”. The key premise driving all of this is China’s strong position when it comes to e-commerce, closely intertwined with China’s general progress when it comes to business. China, with its more than 1 billion consumers, seems to have a virtually insatiable demand for product innovation, above all for international lifestyle brands and well-developed e-commerce platforms who are thus at the center of much of this evolution, further strengthened by powerful networks of social media and electronic payment systems.
China is notorious for major shopping “days” namely singles day (11th November), the 18th June shopping festival and the so-called “Double 12s” festival on 12th December. Sales on each of these days, primarily through e-commerce, is staggering! A so-called law of scale is behind this. Everything is big in China! The many Chinese consumers spend a considerable time online, primarily using Smartphones. And as noted, the luxury goods segment seems to be particularly hot.
Consumer taste seems to be more or less the same all over the world, whether a Starbucks or a Mercedes (this time being helped by a dominating propensity towards luxury and strong valuation of quality in all markets, worldwide). There is a “law of convergence” at work here.
There are mistakes being made all of the time, of course, some of which are grave. Lack of sufficient focus on growth is one! Social experiences are also key, and most consumers search for reviews, endorsements and comments by other purchasers, before acting. Perhaps the biggest mistakes that prospective actors in the Chinese market could make, may be to under-estimate the convenience of online shopping – is it all about e-commerce. And so-called “single brand” outlets seem to be the easiest ones for consumers to handle.
Market research is normally needed. One’s own field research seems particularly key here. And a clear Chinese strategy must come out of all of these market-related deliberations. This should typically break with the so-called MOTS approach (More Of The Same). The key headings in a China plan should emphasize how to get to more revenue, how to attract more consumers, how to build a higher market share, and how to take home more bottom-line contribution!
The China strategy should have a long-term focus. Pricing is typically not a constraining issue – it is often higher than in many other markets! And if one’s strategy does not work, it may in the end be more of a problem with the specific actor behind a strategic plan, rather than a China problem.
China is different! Discovery seems to be even more critical in this market than in others, so that consumers might be delighted, i.e., indeed feel that they are part of a successful movement. An effective e-commerce strategy should reflect all of this. It should ideally be driven by exclusivity. And, to analyze what key competitors may be doing seems essential.
In the end, Say’s Law of Markets (the ability to purchase something depends on the ability to produce and thereby generate income) seems to apply in the Chinese market - supply creates its own demand! Most conventional economics do of course cheat Say’s Law!
The second part of the book might above all be intended for businesses that already have an initial experience in China, and now hope to expand. As already noted, this reviewer finds this section to be somewhat weaker than the rest of the book, a key topic has to do with how to court the Chinese consumer. However, most of the points made here seem to have been covered earlier in the book. The same might be said about the next chapter, “Five decisions before you start”. The discussion of key platforms and social media outlets might perhaps be dealt with in more depth in other ways, say through trade briefings.
Section three seems to get the reader firmly back on track, however. To build up one’s sales strategy with the three one-day sales events as a basis (18/6, 11/11, 12/12), is already discussed. There are however risks here, surprises and unexpected changes. To manage risks, the universal approach so common everywhere is, of course, critical here too – a low break-even point, relatively little debt, and quick responses to currency shifts. Then there are potential intellectual property infringements and counterfeits. The best defense is a strong offense. Tracking, reporting, complaining and following up are sine qua non!
Regulatory and compliance risks are of course also real. The best advice seems to be to adhere closely to all rules, including to have one’s paperwork in order.
Then, there is a political risk. The author notices that retailing and trade do not seem to have been subject to too much regulation in general. Such trade problems seem to have been relatively short-term. And the author should know!! But there are of course macro-political realities that might be hard to understand, as well as unforeseen fluctuations.
The art of marketing in China, perhaps the most central chapter in the book (chapter 11), is focused on how to come up with a connected network of consumers and what they say to each other about one’s brand, i.e., word of mouth marketing par excellence! There seem to be three dominating e-commerce platforms that one might draw on (Alibaba, JD and PDD) as well as three prominent advertising channels (WeChat, Weibo, and Little Red Book (for luxury and beauty products)).
In terms of marketing collaterals, it is important to overhaul the content that one might have, so that it is truly relevant for the Chinese market, and to possibly use it very frequently (daily or even semi-daily). Digital reviews must be honest and focus on authenticity. Live streaming seems to be a much more central part of the marketing mix in China, with celebrities demonstrating one’s products and answering core questions from prospective customers. There seem to be five different livestream platforms that might be enlisted to handle this (Taobao Live; Douyin, Kuaishou, JD.com, Pinduoduo). Livestreaming is not hard selling, however.
Mini apps seem to be special, for the Chinese market only. These might provide a quick introduction to one’s brand. There seem to be three major mini-brand platforms that might be enlisted for support here (WeChat, Alipay, Baidu). And, as noted, co-branding seems to be potentially important, as evidenced by the author’s discussion of Dermalogica, a Unilever-owned brand out of California, which first promoted a skin care product and later a broader range of cosmetics. In general, it should be noted that a total of 18 relatively short case studies add to the relevance of this book. The author’s own credibility shines here.
Now to logistics and finance. As the author states “every e-commerce strategy needs a finance strategy” (p. 152). But let us first briefly review what the author has to share regarding logistics. For a starter, a so-called cross-border model might apply, where products are made, packaged at home and then shipped to China. Specialist companies such as Cainao or JD might be of support. Then a second stage might call for a designated fulfillment center in the region. And as a third stage, local manufacturing might be established. Thus, the risk might be relatively small. To shift from shipping products from airfreight to later making use of container ship service is also part of this.
Now to the finance dimension. To work closely with one’s established bank seems central. And so as to have a clear legal recourse, one’s CFO should be non-Chinese, or at least reside outside of China.
When it comes to consumer credit, Chinese shoppers might use Alipay, Taobao, WeChatPay or Huabei.
Now, potential failures, once more. Failure to agree on realistic China goals, typically rather long-term and/or to adopt a China strategic plan once more seem to be the key factors. And central here might be not to blame lack of success on factors that would be outside a firm’s own control. The counterpart to failures is of course how to get started in a way that might lead to success. To simply do it seems key! And to develop a network of friendly relations that might act as discussion partners, or even drawn on would be important. To spend the necessary homework is essential – to get answers to above all what one’s competitors are doing.
The final chapter, From China to the World, simply states that insights gained through workable experiences in the Chinese market, perhaps particularly when it comes to e-commerce, are likely to be of benefit also in other markets. So, while the Chinese market is demanding and may call for significant funding as well as a great deal of dedicated time from one’s top management, the benefits can be more than financial and also insightful for other markets.
So, after reading this book, as well as having worked with China in several other contexts, this reviewer is more firmly convinced than ever that China is it! This book provides critically important insights to contribute to one’s success on this venture!
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