Is it Too Late to Enter China?

Monday, November 18, 2013 4:43

In his recent piece for the Huffington Post entitled China 2014: Too Little, Too Late for Newbies, Tom Doctroff starts off with a bang

2014 will be the year leaders of consumer goods producers realize that it may be too late to enter China. If you haven’t established significant scale already, you probably never will. The PRC will not be an option for turbo-charging future growth plans for current non-players.

and ends it with his pitch:

So the pockets of new players must be deep, lest they consign themselves to competing in lower-tier markets at lower prices against very aggressive, operationally-savvy local competition or newbie international also-rans.

I have to admit that I have been out of the consumer game for a while now, but this to me like Tom is fishing for business because his own business is starting to dry up. Sure, as I wrote about a couple weeks ago, it is getting tougher in China.

YES, he is probably right that there is a measure of saturation here, and YES, he is probably right that it would be more expensive now than it was 10 years ago, but that is making a whole host of assumptions about how a firm would look to compete as a new entrant to begin with. As I see it,  China as being ripe for new entrants. Particularly those that are happy being niche players with a story that is wrapped around product safety/ quality, family values, improved livelihoods, or somewhere in between.

One of the best examples that has done this well recently, is Disney English.  They started their operations 5 years ago, in a saturated market, yet in those 5 years, they have grown to 44 centers and beat up the competition that once “owned” the market… and my guess is that they have done so at a lower (marketing) cost than their competitors.

Another would be Fields, a Shanghai based grocery delivery service, that started when its founder was tired of eating suspect food and wanted to build a solution.  Word on the street is that earlier this year Steve raised 20+ million USD and will be rolling out into a number of new cities next year.

Last but not least would be both the Naked Retreat and Linden Center, who boutique resorts not only a huge customer base, and found profitability, but are regularly courted by governments around China to develop their next properties

All of which prove, at least to me, that it is no too late to enter… or perhaps, that while it may be too late to enter as a manufacturer of textiles, or as a retailer of model figurines, there are still plenty of markets to be explored in China.  Particularly in China’s “other” cities.

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