Almost 1.4 billion people and a steadily growing middle class who are ready to buy more products: China is the market of the future. But it is also a market with a great number of laws, particularly for those Western companies who risk market entry in China.
So you don’t have to just make a leap into the unknown, ISPO BEIJING has since 2008 been organizing the ISPO China Market Introduction Program (MIP). Martin Kössler initiated the program and gave himself the goal of making companies as ready as possible for market entry in China so that unnecessary and costly mistakes can be avoided. Between 2011 and 2013, he was responsible for the successful launch of the Swedish company Häglofs in China, Hong Kong and Taiwan.
ISPO.com spoke with Kössler, head of ISPO Information Center Scandinavia, about the particular characteristics of the Chinese market, the aims of the MIP and things that Western companies need to learn.
Successful Entry for New Brands in China
ISPO.com: Mr. Kössler, how did you come up with the idea of launching the Market Introduction Program ten years ago?
Martin Kössler: As General Secretary of the Scandinavian Outdoor Group, I often noticed that there were often misunderstandings and wrong decisions made between Swedish companies and Chinese distributors. The lack of market understanding hindered economic success.
What are the aims of the MIP?
At a basic level, the aim can be summarized as so: The successful market introduction of brands which are new to China. Along with seminars for the brands, there is also further training for distributors to enable them to better understand the needs of Western brands.
How easy was it to get brands to participate at the early stages of the program?
When we presented the idea to companies, it was not particularly difficult to find participants for the MIP. The basic need for it was already there.
Have the aims of the program changed over the last ten years?
At the beginning of the program, the focus was on “matchmaking” – bringing brands and distributors together. Now, the focus of the seminars is on understanding the markets. Unless you have knowledge about the Chinese markets, it is no use making contacts through the matchmaking process.
Distributors in China Operate Differently
What are the biggest hurdles for companies and how can the MIP help to overcome them?
Primarily, there is still a great lack of understanding of quite how distributors in Asia (and in particular, in China) work. Distributors on the Chinese market operate more like franchise companies and have often never represented international brands. Because of this, brands need to understand that they can’t leave complete responsibility for the market to the distributor.
What do the brands need to do better?
They need to invest in building a clear brand awareness and work on getting themselves well-positioned. In such a large market as China’s, that is something that the distributor cannot do alone. The market doesn’t function like in Europe. The focus is on e-commerce and brand stores – multi-brand retailers like Intersport simply do not exist in China.
What expectations do participating companies bring to the MIP?
The majority of participants are simply looking for a better understanding of the Chinese market and are also hoping to find a suitable distributor. For this reason, we still host a matchmaking dinner as before, with around 25 market representatives and 40 distributors invited.
Name Rights Can Be More Expensive in China
Which companies have benefited from the MIP – what success stories do you have?
In my eyes, the program has benefited all participants, even when the market entry in China has not been directly successful. For some brands, it was clear that they were not yet ready and had more work to do. A good example of this is On, which found a distributor through the MIP, but then delayed the market launch for a year in order to get more prepared for China.
What have you learnt from the past ten years of the MIP?
The issue of protecting your brand’s rights was something which wasn’t so much on our radar at the beginning. As the years went by, we noticed that companies here have a considerable backlog demand. What often happened was that brands could often not get going, because they didn’t have the rights to their own brand in China. Buying back rights to the company name so that you can be represented on the Chinese market can under some circumstances be quite expensive.
What goals have you set for the MIP for the next ten years?
Above all, we want to strengthen understanding that China is the market of the future. China is already a key consumer market, even though many companies still believe that China is only a land for sourcing and production. This point of view is simply outdated. The revenue that could be earned in a single day in 2016 speaks for itself.
What are your personal highlights for the MIP?
I’m particularly proud of the high-quality of our speakers. Normally, you would pay more to attend a single speech by one of our speakers than you would for the entire MIP. There is nowhere apart from the MIP where you can get so much information about China in such a compact form – it is completely unique.
Finally: What is your advice to companies deciding whether or not to venture a step towards the market in China?
Don’t wait any longer, but make sure you are ready for it. China is already the largest online market in the world, and other markets are following suit. The ISPO China Market Introduction Program offers a quick and affordable opportunity to get to know the Chinese market and to learn which mistakes to avoid.
Note: The running of the ISPO China Market Introduction Program at ISPO BEIJING is dependent on there being a sufficient number of companies taking part.