Opportunities

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Colin here. We hear a lot in the news about the Chinese hurting US markets. It’s politically convenient to blame others for problems.

The truth is that China represents the largest single opportunity in the history of the United States. Their consumer market is just developing, conglomerates have not yet converted industries into oligopolies like what has happened in the US. It’s a wide open opportunity for us.

Tim Cook, chairman of Apple, has expressed similar thoughts. He stated he has never seen such an opportunity in his career as what China represents to Apple. The truth is that China alone could double the size of Apple. That’s incredible when you realize that Apple is earth’s most valuable company already.

Imagine a retail store that averages 10,000 customers a day and that does hundreds of millions of dollars a year in sales. Now, you understand what the average Apple store is really like in China. And, Apple can likely increase the number of stores in China something between tenfold and a hundredfold.

Usually, when I talk about the opportunities in China I am dragged into a discussion about impoverished people who make $1 a day. This is not productive conversation. Yes, of course they have their poor. But here are the facts:

1. The United States has four times the percentage of its population living in poverty as does China, according to the CIA world factbook.
 2. Asia has more millionaires than does the United States.
 This means there is incredible opportunity to sell into China. And, best of all, the Chinese love Western products. One need only walk down a main road to notice the amount of Disney products that kids are toting.
I have a friend that watches “The Voice” on TV. It’s the Chinese version of The Voice. It’s not a knock off. It’s the real deal, produced in China using the exact formula as the US version. I have heard that the audience for this program is large enough to exceed the all-time Neilson rating for any show ever in the US. Now, that is opportunity!
The next thing that comes up is the thinking that it is impossible to break into the Chinese market and that only conglomerates can get Chinese approval. This is silly. If you are in the US and are selling into the Chinese market, most likely you will spend most of your time getting permission from the US to export products to any country. I have a friend that exports US fresh seafood to China. It’s a huge business. And, the grief that I hear is always about the difficulties the US imposes on exporting products…not about the difficulties of the Chinese government.
Another discussion is a concern about the high costs of doing business in China. This is another popular myth. The fact is that China is an incredibly entrepreneurial and efficient system. Here is a case in point: WalMart entered the Chinese market rather arrogantly believing that their distribution system, regional warehouses, and cross-docking methodology could allow them to wipe out local mom & pop stores in China as they had done in the US. It was a disaster for them!
You see, the seeming hap-hazard Chinese distribution system turned out to be far more responsive and cost effective than the rigid overhead-intensive systems used by WalMart. WalMart has never found a way to compete on price in China. They are failing in China not because of regulation but because they are inefficient by Chinese standards. They are used to working in the US where distribution is 20 years behind the times.
WalMart is starting to adopt a strategy of positioning themselves as a premium retailer selling premium brands at a premium price. Fancy that!
This brings up an important point: it is essential to localize your products. This isn’t a huge task, but it requires an open mind. It is more than running everything through a text translator to produce Jinglish sounding Chinese. It is a sensitivity to strong cultural values. In China one wears white to a funeral, for example. At an award or all-company presentation the leaders on the stage clap back at the audience as a sign of appreciation. You would try to avoid the digit four as it sounds like death (often the fourth floor is missing from a hotel, just like 13th floor is missing in the US.)
The good news is that China has more enthusiastic entrepreneurs than you can imagine. They would love to sell your product. And, they will help you localize your company and products. Plus, they will be absolute masters at efficiency. You will think of sending out orders via some carrier like UPS. Your local partner will send out orders via backpacks on motorcycle couriers. You don’t have to be an expert, you just need to listen and adapt and list after the huge market.
My experience is that the Chinese are great negotiators. This is part of their system of efficiency. They are patient when necessary and pounce when they see opportunity. Once you have established business connections your partners will protect you because they know hat trust in them is what will get them the next deal and the one after that.
So while we are lamenting our economy and busy assigning blame to the Chinese, let me just throw out that China represents the greatest opportunity that you will ever face–ever–in your career. Worry not about the hundreds of millions of people earning $1 a day (and not who are NOT starving at that) and focus on hundreds upon hundreds of Chinese who buy luxury goods, who prefer to pay cash, who love American brands and culture, and who probably live in a home that is more expensive than yours.
Yes, Tim Cook is right. It is nearly impossible to comprehend the opportunity that China represents.
Fact: Germany exports more products to China than the US does. Think about the absurdity of that.

Colin Berkshire