I love to talk about what I call our "accidental exporter"
clients. These are companies (mostly in the United States, but also in Europe)
who literally lucked out into becoming China exporters. And by "lucked
out," I mean that they were quietly going about their own business when
literally out of the blue they were contacted by someone in China who wanted to
buy their products and did, and then things took off from there.
The
interesting thing about this club is the diversity of the products they sell.
The below are the ones that immediately spring to mind:
A relatively small, very high end cookie maker that was approached by a
Chinese company in a completely unrelated industry about buying $ 800,000 worth
of cookies every month. Our China lawyers thought this was so crazy that for
weeks we all but forbid our client from doing anything beyond engaging in
massive due diligence to make sure that the whole thing was not a fraud. It was
not.
A Midwest USA factory machine equipment company that makes million
dollar machines that was approached out of nowhere by a large Chinese company
and now this company sells 3-4 of its machines to China every year, without
anyone from the company ever having set foot in China .
Many years ago, an East Coast Canadian environmental equipment company
(I'm being intentionally vague here) was contacted by a quasi-competitor that
makes similar (but different) equipment and told that a large Chinese
municipality was looking for XYZ equipment and since the competitor did not
make that equipment (but our client-to-be did), the competitor was letting our
client know. Our client then sold at least five million dollars worth of its
equipment.
And my favorite (and I wish I did not have to be so vague here), but a
small (like $ 100,000 a month in total revenue small) Pacific Northwest woolen
company (with a speciality) started becoming really popular with Asian
consumers, like to the tune of amazingly quickly doubling their monthly sales
from Asian consumers alone.
Now obviously most exporters to Asia have to do a lot more work to
become Asia exporters than the above four companies, but I mention these four
to highlight the plethora and the diversity of Asia export opportunities. If
these four companies can succeed as exporters to Asia by accident, just imagine
what companies that work at it can accomplish.
Anyway, I am focusing on exporting to Asia today because East-West Bank
sent me a really good article listing out six good strategies (really more like
tips) for exporting to Asia. Here are their six from their article, 6
Strategies for Exporting Successfully to Asia, with my comments.
1. Assess your potential to export. If you are going to export to Asia
(other than by accident), the first thing you need to determine is whether
there is a market (and where) in Asia for your product. The EW Bank article
recommends you secure help on this from US SBA Export Assistance Centers. and /
or the U.S. Commercial Service. This is really good advice, and most (all?)
European countries and US States have similar offices that also can provide
substantial assistance at sometimes ridiculously low prices. There are also many
excellent consultants who provide similar and more in depth services.
2. Protect your ideas first. Protecting IP is the issue dearest to my
heart and so I will just quote the whole thing from the article:
Asian countries have different laws regarding intellectual property than
the United States does, so make sure you get legal advice on how to safeguard
your brand and product before you start marketing it. "If you are going to
mess up on anything, do not mess up on your intellectual property," says
attorney Dan Harris, a partner and founder at Harris Moure PLLC in Seattle and
author of the well-known China Law Blog. It can be very hard to undo the
damage, by his account.
Some American exporters lose rights to their intellectual property in
China, for instance, because they do not realize they must actively file to
protect their IP there - or it does not belong to them, says Harris.
"Americans will go into China, sell on Tmall and all of a sudden, someone
will have their name," says Harris. "Then they will call us and say
they want to sue this company in China." These US firms are generally out
of luck, because they failed to register the Chinese version of their brand
name in China, according to Harris. "The only exception is if you are a
well-known brand, like Coca-Cola," says Harris.
All true.
3. Invest in relationships. The article rightly recommends you
"meet potential business associates and clients at least once before you
make a deal, and ideally more than that." I agree. Oh, and choose your
relationships wisely.
4. Proceed carefully with partnerships. This is the other issue closest
to my heart and so I will quote liberally on this from the article:
[M] any US companies look for a distributor to sell their products
overseas. That can be a good approach if you do not plan to open an office in
the Asian country, but it is important to vet distributors carefully. Be wary
of any distributor that demands an arrangement to sell exclusively in one
country with no minimum sales requirement of your product. "They are
probably selling for your competitor and will block you out of the
market," says Harris. "We have had brands blocked for years from
China. Americans are so eager to get in there [that] they sign these
agreements. "
If you plan to license your brand name to a distribution partner
overseas, do you your due diligence-especially on the partner's history of
quality control-and invest in good legal advice on how to draft the agreement.
"Americans fail to realize that a distributor can destroy their
reputation," says Harris. Some American companies have found that such a
distributor has put their brand name on an inferior or even dangerous product,
according to Harris. "They'll try to stop the company from selling it, but
their contract does not allow them to," he says. Enforcing even a
carefully drafted contract can be tough. "It's not as simple as people
think," he says.
All true.
5. Consider selling online. "If you sell a consumer product,
marketing it through a large e-commerce marketplace - or more than one of them
- may be the easiest way to break into Asian markets .... In addition to eBay,
Amazon and Tmall, sites such as Alibaba.com, JD.com and exportnow.com work with
American entrepreneurs. These sites make getting started on selling to China
much much easier. However, two important things to know are that (1) you still
need to protect your IP and (2) unless these sites really push your products, there
is a good chance that they will simply languish.
6. Minimize financial risks. "If any disputes arise over sales you
make from a distance, it will be harder to resolve them than if you and your
client were both in the United States, operating under the same legal system.
Many experts recommend getting trade receivables insurance and putting
safeguards in place to make sure you get paid. Getting paid in full upfront is
almost always best and easiest, but if that is not possible, try to get paid
enough before you ship so that your costs of production and shipping are
covered and you will at least break even even if you never receive any
additional payments.
Just do it ....
What strategies or tips would you add to the above?
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