Ralf Haller April 5, 2009
This week while on a business trip to China I had some time for shopping on Saturday in Shanghai’s Huaihai Road. It is one of the major places to go to for the Chinese who are looking for brands and good quality. Prices here are about 1/4 to 1/2 of what you would have to pay in Europe I think, whereas high-end brands are actually even more expensive. Laptop computers, for example, are about the same price or slightly more expensive compared to what they would cost from an online store in the US.
The department stores were packed and, in contrast to 12 years ago when I first walked along this road, people are actually buying and not just looking. Discounts were offered everywhere and this is done slightly differently here. It goes like this: on every purchase exceeding e.g. 200 Yuan you get a 100 Yuan discount. I was told that not long ago one department store here had offered a 50% discount, leading to such strong demand that the crowd had burst through the shop window and the police had needed to come to the rescue.
Seeing this action here, I think there is a good chance that China is on its way to replacing the US as the world’s number one consumer country. No idea if this is also the official government strategy, but whether planned or not it seems to be happening. That’s at least my take from this Saturday afternoon’s stroll along Huaihai Road. BTW, I also had a visit to a movie theater to see the great movie Slumdog Millionaire. The Chinese asked me if it still looks like that in India today; sadly, it is the case. Even worse, this happens in a country proud of their computer science people and spending money on flying to the outer space, but not taking care of millions of people living on garbage hills. In comparison, China shows much more responsibility and humanity I think than India, which is sad, and one of the reasons I have not yet been attracted to visit India.
Ralf Haller December 6, 2008
I found this book in a book store at the airport in Shanghai on my way back to Europe and read it in the plane, from cover to cover. This is probably one of the best books you can read if you plan to do business in China and want to understand what challenges foreigners face. The authors interviewed 20 Western entrepreneurs who have started their own companies in Shanghai. The stories range from relative newcomers who have been there only two years to the ex-Roche MD William Keller who has now been living in China for 17 years and was even invited to speak on behalf of Shanghai in its – successful – bid to host the World Expo in 2010. This wide range of stories is what provides for a great read. It is not so important if the people interviewed are right or wrong; what counts is their reported perceptions, as this is what you will also most likely experience. The people interviewed were in different situations ranging from – in one case – being an expat working for large company, to starting their own companies either right away or after having worked for a Western company first. There are tons of books out there talking about how to do business in China, but I have not seen one that is so practical and useful as this one – and exciting to read as well. In the words of Deng Xiaoping, that Mr. Keller so properly quotes: “learn from the facts”.
Ralf Haller November 30, 2008
So far my impressions on this last long business trip for 2008 have been mixed. While you can read and hear quite a lot of bad economic news, such as closure of 50% of manufacturing facilities for toys or clothes in Shenzhen and other areas, Shanghai gives the impression of business as usual. In the telecom industry, the introduction of a third operator, China Telecom, alongside China Mobile and China Unicom, was yet another smart move by the Chinese authorities (in Shanghai they are called Shanghai Mobile, Shanghai Unicom and Shanghai Telecom). It will lead to even more investment, as well as making the operators more quality- and service-oriented, as consumers have more choice now. Still, people I talked to are pessimistic, and expect real problems still to come. One consultant from the Waigaoqiao business district whose job it is to attract direct foreign investment sees clear signs of less activity now, and even less in 2009.
Then again, the Chinese government has cash in hand like no other nation in the world, and has already announced it will be using part of it for an economic stimulus package. Moreover, in Shanghai’s financial district, Pudong, China’s third major high-rise project was kicked off yesterday, signaling to the world “business goes on…”. Along with the Jinmao and World Financial Towers, there will in a few years be an even higher (600+ m) skyscraper. So China continues to think big, even in somewhat troubled times. It is also moving on to produce its own high-tech products; this time you were able to read and see on TV about the first China-produced passenger jet trial flight out of Shanghai, the 33m-long Xiang Feng (Flying Phoenix).
ARJ21 has already received 208 orders and is planned to ship in 18 months. In this industry, too, China is determined to become a tough competitor like ZTE and Huawei became in the telecom industry with combined orders now of 49 bln USD in 2008.
Ralf Haller October 11, 2008
I am reading an interesting book, YES!, 50 secrets from the science of persuasion. While reading it I somehow thought that most of the scientifically proven “secrets” they mention I just came across in China. It was in one of these markets in Beijing where they sell all kinds of low-cost goods. Could it be that these dealers and the many in other countries have figured out without using any science how to best persuade buyers? One would think so as they manage to survive quite well, it seems. So here’s the Chinese way of getting people to buy, assuming they are indeed out to buy something and not just walk around. I am sure you remember this if you have been there as well.
- get attention: “come see”, “do you want…”, “hello sir”, “s.e.x.”, “best…”…
- pull them in: have you go into their booth, “come take a look”, “which one do you like?”…
- get interaction: “here hold it”, “pick the one you like”, “where are you from?, ah beautiful country…”, “for your wife?”…
- get action: “how much, here type it into this calculator”, bargaining starts closing in on the desired sales price, if you play this game you will most likely end up in the middle of each one’s first-entered sum; a trick you can use: once the pricing game is done, change your mind and start moving out of the booth slowly, this will lead to another BIG discount: the bigger it is, the worse you negotiated before in the first round.Still you will inevitably pay much more than locals even after hard negotiating, +50-100% I think is pretty much the best you can achieve, so best is to go with a Chinese or send someone telling exactly what you like. Or if you don’t like this all then you simply bring a list along that shows the right Chinese prices. They will hate you for that but it works, just always keep a smile though!
- after sales: they try to sell you more, “something for yourself too?”, “a second one maybe”, “here our business card, come back and you get another 10% discount”…
Ralf Haller October 6, 2008
I am back in Beijing for a business trip and will try to take some pictures that are hopefully unique. Today it was overcast and raining intermittently, so I left my camera in the hotel, expecting that I will have better weather soon. I saw some great things, though, and regretted not having my camera with me after all. One was a new shoe shop in the Sanlitun area that was filled with people still at 9pm on a Sunday. The shop’s neon name sign read: “C.P.U.” In China you never know if such names are used on purpose or by accident.
Not far away was the white Apple logo, standing above China’s first Apple store and completely dominating the shopping center skyline. The store was also still well frequented at this time, and the Apple people were actively selling with presentations on large LCD monitors to young and old, presumably explaining how much better the kids will be able to study with a MacBook and relax with an iPod.
The bars were empty, though. as you would expect on a Sunday evening, although of course I bet this was different during the Olympics. Maybe they were also busier earlier in the year: my not very representative survey talking to people shows that people are fully aware of the stock market crash and expecting that China, too, will be hit economically. Many people seem to have stayed in the market and have now lost big (one woman told me she bought China Oil for 15k RMB and it is now only worth 5k). Pessimistic people commenting on the Internet expect that it will take tens of years to recover; I bet it will be much much shorter.
One other interesting thing I noticed in a cab was a touch LCD monitor built into the rear of the front seat showing all kinds of ads. It was possible to turn off the audio, so it seemed fair enough. The text was in Mandarin only. Googling around a bit I found whose project this was: General Electric did it in 1000 Beijing cabs for the Olympics. Also interesting to read how social networking, blogging, all sorts of viral marketing ideas and much more was taken into consideration in the biggest ever online media blitz during these past Olympics.
Lastly, I was already able to make great use of an iPhone app called Beijing Taxi Guide. It is from the www.thebeijinger.com and let’s you find most of the hotels, sights, restaurants etc. The guide provides you with the place’s address, phone number and something even better: a full-screen Chinese character description of where to find it. Since the Beijing taxi drivers don’t speak English and often have problems understanding foreigners, this works great (mostly, at least: one taxi driver could still not find the place, which was more his problem than the iPhone guide I think. At least I managed to call the number quickly and they could direct us nicely. And it looks like even better Beijing guides with maps are on the way, but of course the one who came out first has an advantage: time to market(ing) is key for online marketing. I was impressed: this was a really good example of how to digitally promote your business through location-based services.
Ralf Haller July 5, 2008
This week I heard on the radio while traveling to Germany that the small (revenue 40 million EUR) German high-end teddy bear company Steiff decided to move production back to Germany from China. Reasons mentioned were long transportation (up to 3 months), initial startup costs, among others. This news had its impact as many media picked up the story and helped Steiff’s CEO Mr. Frechen with this PR campaign. Steiff needs this PR desperately as they have to fight low cost competition and it is key to them to develop a strong brand similar to the fashion labels.
I must admit that I also fell into this PR trap and started thinking if this could be a general trend now or what impact this would have. This morning I did a little research on Steiff’s CEO and found that he told back in January already in public, see FAZ, that he would bring production back to Germany from China. At that time it did not have the PR effect he was hoping for, so now they brought it up again (I assume they have hired a PR agency to do so) and recooked this old story again.
While I can see lots of resentment in countries like Germany where jobs are lost and new ones created in China, it is also clear that the future cannot be in competing with low cost manufacturing locations but in innovation and excellent product marketing. This is true for consumer as well as for ICT industries. Thinking differently would be fatal and also Steiff is BTW manufacturing in Northern Africa where total costs (transportation included) are similar now to China I think. Lastly what Mr. Frechen will also learn over time is the fact that building a solid brand takes time and cannot be done with fake PR news. People today want authenticity, good content, interaction and not propaganda. See our new PR Services website on this topic…