You are a Brand with potential in China and want to reach a massive amount of Chinese Distributors
Finding overseas customers is not easy. Moreover, to embark the Chinese market demands razor-sharp focus and hard work. A way to simplify the process is to find a local partner to distribute products.
It takes time and money to find the right one. If you fail, 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 thorny. However, if you succeed to find a reliable distributor he will take charge of plenty of things as customs and fees, import licenses that are required to import anything into China, packaging, and labeling, marketing and sales, aftermarket services.
After branding, the choice of a good distributor is the key to a successful implementation in China. In this, Tmall brings excellent news to foreign entrepreneurs making exchanges between brands and distributors much easier. Now Tmall offers brands to select their partner from over 85,000 distributors across the country. A high-level local partner can also help you to establish the network of retailers in China for further expansion.
A Classic Distribution Model?
Chinese distributors scheme of a foreign entrepreneur exporting his products to China is a long chain. He must first find the Chinese partner who will distribute products throughout the country. As you can see the complexity of this chain explains the cost of goods imported on arrival.
Information Support is needed
The manufacturer and distributor have obligations to each other. Distributors don’t have a deep knowledge of product specifications. So, as the manufacturer expects the distributor to possess sufficient knowledge about the products and marketing areas assigned, his responsibility is to provide teaching materials and training. If a distributor is not prepared to promote your products, it will be hard to gain any profits.
Selling Directly to Local Retailers
There is an option to export directly to stores in China. However, many stores have no previous experience of importing products and proper licensing is required. Another problem is the lower volumes individual retailers can order. Individual retailers require individual shipments. LCL (Less than Container Load) shipping is much more expensive per shipped unit compared to FCL (Full Container Load) shipping.
Building a network of retailers is also time-consuming, especially considering the language and cultural barriers.
On the other hand, selling directly to retailers gives you complete control over pricing and which stores you would like to represent your products.
The main problem is that freelance agents don’t have the required licenses to import products to China.
An agent “on site” in China can still act as your representative and manage communication between you and your Chinese buyers, but should not be considered as a substitute for a proper distributor.
Dealing with Chinese Distributors
The role of distributors is to distribute the goods. The distributor does not care about the branding of the brand; his vision of partnerships is short-term. Thus, he is mainly interested in the instantaneous profitability of sales and does not foresee long-term collaboration with brands.
Two facts accordingly:
- The distributor will not put forward a brand that has not been proven: he will choose an already profitable brand, which will allow him to generate profit for himself.
-> So, even before entering into the Chinese market the brand must be able to manage its e-reputation upstream.
- 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, which will be privileged because certainly profitable.
-> The brand must invest in digital marketing. The most effective way is to undertake a digital campaign and become known on social networks platforms. It will attract the attention of distributors who also do the watch on the internet.
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Tmall: How It Works?
Tmall (pronounced Tiānmāo in Chinese, “The Celestial Cat”) is a Chinese retail e-commerce platform launched by the giant group Alibaba, owned by the famous businessman Jack Ma. Tmall works in B2C, that allows companies – local and international – to sell their products to consumers in mainland China, but also in Hong Kong, Taiwan, and Macao.
The platform is revolutionizing mass distribution because it allows shortening their distribution chain. Only Tmall becomes their intermediary.
Tmall is Not the Same as Taobao
Do not confuse Tmall and Taobao.
Taobao is an online sales site in C2C: this e-commerce platform facilitates retailing between consumers, or for small businesses and individual entrepreneurs who want to open online stores for lack of budget. While Tmall is better suited for international luxury brands or having big financial means to invest in their branding.
According to the Alexa analytics service platform, Tmall ranked 14th among the most visited websites in the world in June 2018, compared to 42nd for the mobile payment method Alipay, 20th for the Weibo social network, 9th for Taobao, which exists for longer and 4th for the search engine Baidu.
Invest in Digital Marketing and Keep Distributors Close
Investing in digital marketing and communication supports your sales strategy and proves the potential of the product making it visible on the market.
Alibaba Group offers an innovative concept to change the traditional distribution chain and allow brands to connect to distributors, choosing who they will entrust their products to. The entrepreneur can now choose his distributor on the Tmall app in the same way that a consumer would roll out a list of products on his smartphone, before choosing the right product and place it in his basket.
Hiring local distributors can be a great option to be better off. Keep a close relationship with distributors treating them as a part of your company but make sure you have an agreement including all essential items signed.
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