Aug 31, 2012

SME entrepreneurs: a hidden bonanza

By Jing Yan

Luxury, high-end, premium, these are popular words used by many foreign brands and service providers entering China. However, not all of them are successful. By contrary, foreign SMEs are having better chances of success.

SME entrepreneurs China wants you
Attribution Some rights reserved by Daquella manera
Will you be the next Zara in China?

Why can SMEs make money in China?

Subway Sandwich which opened stores in China just a couple of years ago is an extremely successful chain restaurant brand in China now. It is expanding quickly in China's mega cities such as Beijing and Shanghai, opening stores in places where people can easily find. It is not very expensive, but it is almost as successful as McDonald's or KFC. Subway Sandwich offers services and products which are accessible, affordable and good quality. They are targeting the middle class Chinese people who are the backbone customers for many successful foreign businesses in China.

Luxury businesses do not come cheap

A lot of people read news about the rising of the Chinese riches, and the wealth they possess, but not many people know what kind of customers they really are. Luxury businesses take much longer time to reap profits than SMEs, as they need to spend more to establish brand image, woo the customers and educate them. Currently, Chinese riches love those well-established, historical luxury brands, such as BWM, GOCCI etc. 

“The unique shopping habits of the Chinese people: good taste, quality and not-so-expensive products.”

And smaller items of luxury goods are more popular to both the filthy riches and upper middle class, such as handbags, cosmetics, perfumes and watches which can easily fit into the Chinese gift culture. But these are far from enough. Chinese people like to spoil themselves on good quality products and services. The almost overnight success of Zara and MUJI in China, proves the unique shopping habits of the Chinese people who emphasize on good taste, quality and not-so-expensive products.

Nevertheless, new luxury businesses find it difficult to garner desired responses from Chinese people. The many failed luxury senior housing projects are some examples that were unable to touch the heart of Chinese customers. Chinese people are rather shrewd customers who reject overly-charged products or services.

Don't fool the customers

I was asked by many rookie expats whether my sunglasses and handbags were fake; the truth is, Chinese people always want the real stuff. The once infamous "fake" markets have been filled up with new emerging designers, wholesalers and online sellers due to cheap rent. If you are serious about setting up business in China, bring your knowledge and well-rounded business sense with you. There are indeed many untapped business goldmines here, but only for those well-prepared.