Branded or Private Label?
Many companies selling to China struggle with the question: should I sell my products in China under my own brand or should I better find a Chinese importer who sells my products under his own brand?
A few years ago the answer to that question was easy: there were no strong brands in China, so if you took the Chinese market seriously, you needed to go to China with your own brand and position your products as premium products, targeting the mid- to high-end market and not competing with low-end cheap Chinese brands.
Today this has changed. Now also Chinese merchants are becoming more and more aware of the importance of developing their own brands and the power of efficient marketing. In fact, the clever ones even have an advantage, simply because Chinese companies better understand the requirements of the Chinese consumers and they have the flexibility to respond to the fast-changing mindsets of their customers.
If you choose to go for a branded strategy, there are two important things to do: (1) finding a trustworthy Chinese partner and (2) control your branding.
Finding a trustworthy partner
The search for a trustworthy partner is instrumental to build a long-term sustainable business. This is the dilemma which many foreign export managers need to deal with when entering the Chinese market: often there is a lot of interest from Chinese importers and many of them are eager to buy from the foreign brand owner and launch the product exclusively in China. They try to convince you by placing an order, prepaid, and promise many containers in the near future. It is very tempting for a newcomer to China to accept these orders without much consideration or without really knowing their Chinese ‘partner’. It’s nice to come back from a China trip with a few orders and report swift success to the company’s CEO. As explained in one of our earlier blogs (see the following link), the export manager is often under a lot of pressure to deliver and doesn’t get the necessary support from the head office.
But unfortunately, there are no quick wins in China. Before you know it, in case the product is not selling well, your Chinese importer will dump the products at lower prices, resulting in your brand being destroyed. It is not difficult to sell a few containers to China, but it is extremely difficult to sell lots of containers for an extensive period of time. It is better to select the Chinese importer based on the long-term perspective, not short-term quick wins.
Control your branding
Often Chinese importers convince the foreign brand owner to take charge of the marketing in China. Especially SMEs with little budgets don’t have any staff in China and don’t know how to do it by themselves and gladly accept the offer from their Chinese importer. Marketing in China is very different, not only due to the different language and expectations from Chinese consumers, but also due to the fact that other marketing channels are being used in China. But you shouldn’t give away all control. It is crucial to make sure that your Chinese partner positions your brand in the right way and follow up what is being communicated in the market. You should keep ownership of your trademarks and social media accounts, if necessary by working with third parties such as MyChinaWeb, so that, in the event that the cooperation with this Chinese partner ends, you still own all IP rights, marketing content and followers.
Private label strategy
If you are only aiming at selling to China as soon as possible and as much as possible, then you better go for a private label strategy. But in that case you shouldn’t expect a long term success. As soon as your Chinese customer has found an alternative supplier, which can supply the same product at the same quality but cheaper, he may switch to that supplier and you lose your business.
Horsten International has many years of experience in doing business in China and can help you with selecting the right strategy and partner in China. Please check our website or contact us in case you have any plans to launch your products on the Chinese market.