Following on from the launch of the China Report, Practicology’s Global CEO, Chris Vincent, looks at how to overcome some of the challenges of working with a trade partner in China.
Since the launch of the China Report, most of the enquiries we have received have focussed on marketplaces and selecting the right trade partner for your business.
A trade partner is the traditional link between a marketplace and a brand or business looking to sell its products. It is estimated that there are over 100,000 trade partners currently operating in China, which is a near impossible partner landscape to fully digest. Identifying the right trade partner is an unenviable task for any business, but there are key strategies to adopt that will help refine your search.
Match the expertise to your business category
Trade partner operations are frequently started by ex-marketplace employees that have worked within one specific business category. As a result, this often becomes the sole area of expertise when they start their own venture, narrowing the category focus of the business.
Selecting a trade partner with experience in your specific sector is essential. If you do find a trade partner that services multiple verticals, make sure that this is because its employees have genuine experience across the range of business categories offered.
Trade partners are not retailers
Many trade partners operate very differently to traditional retailers, instead working more like an ecommerce factory that prioritises quantity over quality. Trade partners will often post a large quantity of product listings across the chosen marketplaces, but the quality of the images and copy will be poor, the marketing activity will be basic or unoptimized, and the customer service offered will be substandard.
Employee turnover can frequently be very high and competition between companies focussing on the same vertical is fierce as they vie for talent in a limited pool.
Don’t expect strategy from your trade partner
Understanding and accepting the limitations of a trade partner is the biggest challenge that western brands face when operating in China. No matter how well a trade partner packages up its solution, its expertise lies in technology and operations and not in trading practices and understanding customers. Do not expect your trade partner to deliver a robust strategy for your China business as its focus will be on generating sales – sometimes at a very discounted price point.
Overcoming these challenges
Do your research
Conducting detailed research into prospective trade partners is essential. Do not accept the marketplace’s recommendation as it will often select a trade partner from its network rather than the partner that is most suitable to your brand. If you have trusted contacts in the market already, ask them about their experiences on this learning curve. Finally, ask about the experience and expertise of the individuals you will be working with on a daily basis. Ensure they are well suited to representing your brand.
Set your targets
Many brands enter the Chinese market with very little idea of what ‘good’ looks like. Establishing clear turnover expectations in the market is very important allowing you to hold your trade partner to account on future performance.
Do not give away total marketplace control and ownership to the trade partner. You must retain visibility of day-to-day operations in China and find out as much as possible about your Chinese customers, the types of challenges they face with your product, and the improvements you can make. Always have a horizon line in the future when you will begin to take back some marketplace management responsibility from your trade partner.
Learn about the marketplace trading calendar
Understanding the marketplace trade calendar (featured in our China Report) will help you make informed decisions for your brand. If you let your trade partner dictate the calendar of activity they may push you to over discount and not build brand equity or value add activities in the market at the correct times. Western brands most take note of the Chinese calendar and understand the impact on the business. For example, although Singles’ Day registered nearly $18billion dollars in sales on Tmall in 2016, some brands experienced a returns rate of 30%-50%.
Above all, the best ways to build success in China is by conducting thorough research, spending as much time in the market as possible, and building strong relationships with your trade partners. If your partners know you are informed and aware, they are likely to be more engaged and in tune with your needs.