How to break into China (but don’t leave home)

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China is Australia’s largest trading partner and has been for a number of years thanks to Australia’s plentiful supply of raw commodities such as iron ore, steel and coal.

For those planning on expanding glocally (going global with your business while staying local) China, Australia’s largest trading partner, is one of the most attractive markets due to its proximity, Free Trade Agreement and high demand for Australian products.

Although Australia has traded with China for centuries, the ‘Asian Century’, as many economists have referred to it, continues to present new and plentiful opportunities for Glocal SMEs.

As the country and the market demands of China’s growing consumer class evolve, its market demand will likely shift from a commodity-based demand to one that requires complex services including high quality human resources, financial advice and other professional services offering – a new market that will only continue to grow spurred on by the Australia-China Free Trade Agreement.

going glocal: go global with your business while staying local

Many have already begun to realise this for themselves, with majority (72 per cent) of Australian SMEs considering it one of the most attractive markets for expansion and a further 39 per cent currently putting plans in place to go Glocal in China.

Despite its slowing Gross Domestic Product (GDP), China continues to present an increasing number of opportunities for Australian SMEs who are able to tap into the niche markets demanded by the growing domestic consumption economy.

Asia’s increasing appetite for Australian exports is showing no signs of slowing down with the buying power of China’s growing consumer class expected to reach $8.6 trillion by 2030.

Without the local presence of internet giants such as Google and Facebook, the middle class Chinese consumer had previously been typically hard to reach by Australian SMEs. The rise of Chinese online payment and selling platforms and an increase in overseas travel among the wealthy consumer class coupled with Australia’s access to fast broadband and new technologies powered by the nbn network, could mean this is no longer the case for a number of Australian SMEs.

China’s buying power is expected to reach $8.6 trillion by 2030

With 467 million digital shoppers, China’s e-retail market is expected to account for more than 50 per cent of the global online shopping sales by 2019. With its digital shopping market alone far outweighing Australia’s consumer market, the market potential for Glocal SMEs is seemingly endless.

Just as Australian SMEs value China for its market potential and access through online selling platforms and the internet; China too appears to value Australian products and services. Among international competitors operating in China, Australia arguably has one of the highest brand values of any country among Chinese consumers.

Our Australian environment, education system, produce and stable investment all appear to have tremendous appeal to Chinese consumers – making us synonymous with quality, healthy products and services.

As a result, wine, food, skincare and health products are becoming increasingly popular among China’s consumer class, with consumers almost twice as likely to associate Australian products with health, natural and nutrition than products from the US, Germany, Japan and South Korea.

72% of Australian SMEs agree China is a great market to do business

Niche markets like skincare and food products could be where the opportunity lies for Glocal SMEs in China, evidenced by the success of products such as Lucas’ Papaw Remedies and Banaban Coconut Oil, among others. Although this complexity can be challenging, especially when considering the additional language and cultural barriers along with domestic regulations, no foreign market seems to hold as much promise as China for Glocal Australian SMEs.

Australian SMEs are most interested in expanding their business glocally to China due to its strong demand for Australian products/services (37 per cent) and size of the population – therefore high market potential (35 per cent) Australian SMEs believe China is one of the most attractive glocal markets because of its continued growth potential (31 per cent), as well as its Internet access and online selling platforms, making it easier access to the market (31 per cent).

Want to do business in China?
Selling into a Chinese market is like panning for gold – the potential is there, but scratching the surface won’t make you any richer. Glocal SMEs need to be prepared to do some work to develop and execute their go-to-market strategy. China plays by different rules, so it pays to learn about the market ahead of time. Utilising online, government and business resources are an essential tool to successfully enter the Chinese market.

Daigous are Chinese visitors and immigrants who ship goods to China for sale – can be a powerful tool for selling products into China. Remember that working with a Chinese partner improves your chances of success. In China, relationships can be more important than contracts.

One of the biggest enablers of Glocalisation in China is e-commerce. eBay is not widely used in China the way it is used in Australia; the major B2C platforms in China include Tmall and JD.com.

Tmall is a do-it-yourself platform that gives the business owner a high degree of control.
JD.com is a ‘ re-and-forget’ platform that puts limitations around the business owners capabilities and selling powers.
• The C2C market in China is also growing thanks to the increasing numbers of Chinese tourists, with Taobao being the platform of choice.

Digital marketing, messaging and translation
Reaching customers from your Australian base usually means relying on digital marketing. Facebook is not widely used in China, so won’t play the same role in a marketing strategy that it does when talking to Australian consumers. Specialised social networking and social marketing sites are the best way to talk to consumers, with WeChat (the Chinese platform similar to Facebook) and Weibo (the Chinese platform similar to Twitter) being the most used.

Google is blocked in China, so Adwords won’t help here. Instead look at investing with Baidu, the Chinese search engine. It is also useful to know that word-for-word translation from English to Chinese never works; messaging needs to be appropriate for the market and the country.

Whilst we are in the midst of what many have dubbed the ‘Asian Century’, the opportunity for Glocal SMEs has been driven by factors such as an increase in connectivity, with the majority of Australian SMEs (88 per cent) agreeing that without the correct technology, such as the nbn™ network, overseas expansion would be near impossible.

Alongside connectivity, business owners’ passion to expand their operations also fuelled the growth of this new-look business model. In a recent survey of over 500 Australian SMEs, conducted by nbn in 2017, respondents cited the opportunity for further growth opportunities (46 per cent) and growing the business (42 per cent) as the main drivers behind their move to go Glocal).

Payments and regulatory issues
Credit cards, online payment platforms and money transfers that are commonly used in Australian SME transactions are all subject to different rules within the Chinese market. Union Pay is the top credit card in China; Via, MasterCard and American Express are far less accepted.

Chinese payment platforms like Alipay are becoming an increasingly popular way
for Chinese people to exchange money with businesses. Also, transferring money from China can be difficult for Chinese consumers, so adapting to their payment methods and platforms can assist with success.

“We’ve previously seen larger businesses successfully establish their footprints overseas but the expansion of the digital economy and growing access to fast broadband is helping to open up a world of global opportunities for smaller businesses to reach new markets. Proximity, increased connectivity powered by the nbnTM network and strong demand for Australian products and services in overseas markets have helped the development of a new breed of small and medium enterprises (SMEs) – the Glocal: SMEs expanding their business globally while enjoying the luxury of staying local.

The emergence of the Glocal is a trend that continues to grow rapidly, with a prediction that more than 1.23 million Australian SMEs will adopt this business model in the next twelve months – equating to almost half (46 per cent) of all Australian SMEs.

Not only is the Glocal model a growing trend and relatively inexpensive. It can also be a profitable one, with Glocal Australian SMEs accounting for more than $2 billion of Australia’s total export value.

To date, the industries who have capitalised most or have reported that they wish to capitalise on their Glocal ambition, includes information media and telecommunications (80 per cent), wholesale Australia’s trade agreements and the changes to consumption-led growth in China may also provide opportunities for Glocal SMEs in healthcare, retail and food products.

When it comes to choosing locations, SMEs with plans to go Glocal have their eyes on Australia’s neighbours – New Zealand (63 per cent), China (39 per cent) and Singapore (29 per cent).

Increased connectivity as well as strong international demand for Aussie products and services is leading to growing global ambitions from small business owners with almost half (46 per cent) planning to operate overseas in the next twelve months according to new research. The nbn commissioned report released today focuses on the emergence of ‘Glocals’; specifically business owners harnessing fast broadband and online applications to help expand their business internationally while enjoying the freedom and lifestyle of staying local. It highlights that international small business trade currently contributes more than $2 billion to Australia’s total annual export value and lists countries such as China (39 per cent), Singapore (29 per cent) and the United States (26 per cent) as the most attractive markets to expand into due to their strong demand for local products and large potential customer base.

“We’ve previously seen larger businesses successfully establish their footprints overseas but the expansion of the digital economy and growing access to fast broadband is helping to open up a world of global opportunities for smaller businesses to reach new markets.

“Take Asia for instance – the increasing appetite for Australian exports shows no signs of slowing down and with the buying power of China’s growing middle class expected to reach $8.6 trillion by 2020, now is the perfect time for small businesses to capitalise on this market and take their businesses ‘Glocal’.”

Ben Salmon, nbn’s Head of Business says: “Increased connectivity through the nbn™ network is facilitating new businesses who are harnessing technologies such as multi-line video conferencing, cloud computing and file sharing to connect, collaborate and sell to overseas markets. “Nationwide access to fast broadband will ensure business owners can benefit from online services which will allow them to act and operate as a global business from anywhere in Australia. “Taking a business overseas requires a considerable amount of knowledge and preparation – that’s why we have teamed up with Cross Boarder Management to launch an initiative to help small businesses navigate these exciting new market opportunities.”

The nbn™ Glocals Report was commissioned by nbn and Authored by CT Johnson on behalf of Cross Border Management. The report included insights from a survey conducted by Fort 2 Consulting in April 2017 of 506 Australian small and medium sized businesses with less than 1-199 employees across every state and territory. The nbn™ network is currently available to one in three Australian businesses, is due to be half way complete by mid-year 2017, three quarters built the following year and scheduled to be complete by 2020. 

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