Why are U.S. exporters fixated on selling their products into China? China is a market where U.S. exporters, large and small, endeavor to establish a foothold in an enormous and growing marketplace. Many exporters see an opportunity to capture early market share for long-term export growth into China.
Rising prices in China have resulted in a “slowdown” that mostly impacts U.S. companies with manufacturing facilities in China. Some of these manufacturers moved their operations other low-cost markets, such as Indonesia or Malaysia, (or even relocated production back to the U.S.)
However, economic growth is still strong, and consumer wealth in China continues to expand, driven by a new middle and upper class of professionals and entrepreneurs. As a result, the Chinese market still offers green fields for ambitious U.S. small businesses that seek to export products that have growing demand China.
Exporting your product China has a long list of challenges: language and cultural barriers, regulatory issues, logistics, IP protection… just to name a few. Even the most seasoned exporters struggle with the fundamental question: How can my company break into the Chinese market?
It seems that few good options exist. Agents abound but are often dubious. Good joint venture partnerships may take years to develop, and requires the U.S. exporter to give up some level of control and profits. Setting up a direct subsidiary or sales office can be prohibitively expensive, complex and time-consuming.
Weighing the time investment, capital requirements and business risks, many SMEs abandon their China entry ambitions, leaving the opportunity to bigger businesses with deeper pockets. However, some SMEs have discovered a relatively unknown business model that offers compelling advantages: low risk, low investment and local know-how.
The concept is dubbed the “sales incubator”, and the strategy is simple. View it as your company’s cost-effective outsourced sales department. A sales incubator provides its clients with the equivalent of their own sales team and office in China but with the added power of local China sales and business development experience… and without the overhead, liability and regulatory requirements of opening a Chinese subsidiary.
The sales incubators provide a comprehensive cross-industry platform for American SME’s to sell their products and build their sales channels in China. Their support programs range from single sales objective, trial sales efforts, and Chinese distributor support, to full-service sales support programs that prepare an SME for its own entity in China.
A good incubator provides their client with a professional China sales team in as little as two months. The service includes a market-specific salesperson hired for your business, China-proven management oversight, an inside salesperson and administrative support.
The CEO of one U.S. industrial products exporter describes how the sales incubator model worked for them. “[The sales incubator] was key to our successful entry into the China marketplace. From recruiting and managing our China-based representative, helping manage safety certification process, to navigating through the cultural and commercial nuances of China, they continue to be a valuable partner in establishing our brand in China.”
In summary, the sales incubator model provides a platform for SME exports into China in early years. Once they have a foothold in the market, the client may choose to roll over the sales program into their own independent entity or otherwise expand their distribution channels.
For more information on exporting to China, contact your local U.S. Commercial Service Office about export assistance programs. (See www.export.gov.)
For recommendations on a sales incubators in China that would be a good fit for your company, you may contact the author of this blog, Ray Hays.