Scandic Sourcing interviewed our business developer Thomas Axelsson about trends and opportunities in China during 2016. Thomas has got 7 years experience working in the Chinese market. Before he started in Scandic Sourcing, Thomas started two businesses where he sourced products from Asia to Scandinavia. He has also opened a strategic office in China for a European company and was responsible for their expansion to China.
What trends do you see during 2016?
There is a concern about the declining growth, but one should keep in mind that China increases its purchasing power. Amongst other things, salaries have been increasing with about 10% per year. Lower growth will become the new normal in China with the move towards a consumption driven economy instead of relying fully on the manufacturing industry. Another trend is that there will be an increased production of green products.
What will happen within E-commerce during 2016?
Cross-border sales will continue developing with e-commerce platforms such as Tmall that has opened up also for small companies to sell online to China. Nowadays you don't have to go through a full import process to start selling to China, with the new e-commerce solutions where you sell single items directly from you warehouse or through bonded zones such as Shanghai Free Trade Zone. Thus you can quickly test out the market and receive feedback without having to start a company.
We will also see an increased tendency that Western companies use distriubtion deals or E-commerce or incubators to start accessing the Chinese consumers instead of setting up your own company in China. Traditionally, you have to start your own company or enter a Joint Venture with a Chinese partner, which costs both time and money. Are you not 100% sure of the likelyhood of success of your expansion to China, it might seem like a big step to go through the full company registration in China, thus more businesses might be inclined to test their product via business incubators or other faster ways in.
It is easier said and done finding suitable distributors in China compared to other countries in Asia such as Korea or Japan. The size, complexity and the large number of trading companies and agents - and the difficulties of communication, are reasons you usually need a partner in China to find the right distributor. Also, you often need more than one distributor because of the size of China, regional distributors are usually the way to go.
What's your advice for someone who quickly wants to establish themselves on the Chinese market?
A good first step if you quickly want to try your product on the Chinese market is to use a Business Support Office solution. A Business Support Officeis an efficient shortcut to the Chinese market that saves time and capital. With Scandic Sourcing's BSO, you can legally establish one or several employees here in China through our Shanghai office, either your own staff that you send here, or sales reps that you recruit (we also have recruitment services). They can invoice in China via our company, and we have many services such as HR, administration, invoicing, accounting etc. We also have an import license and a warehouse in Shanghai, so you can import through us and use our warehouse space.
A good strategy is to start with a Business Support Office solution to test out the market. Meanwhile you can start your company registration process in China, which takes 3-6 months. If your business needs expansion, you can move out to your own office with your employees. The business support office is a way to start immediately; it is pretty unique to get access to the world's biggest market in 24 hours. For instance, we helped one company that is selling legal services, that started with two employees via our Business Support Office, and three years later they moved out to their own premisess with 15 employees.