You have done your market research and understand your competitive environment and market potential in China. Together with a local law office you developed a legal structure to protect your IPR and with the help of a medical device agency you registered your rehabilitation / assistive equipment with the CFDA. Now you are ready to set out your sales strategy and start distributing in China.
Let’s start with some general advice on distribution in China. There are two things we usually tell our clients and that is (1) working with one exclusive countrywide distributor usually does not work well in a country the size of China and (2) select your distributors wisely and stick to performance-based contracts.
Download our latest report Selling in the Chinese Elderly Care and Rehabilitation Market for more in-depth information on how to find, manage and train your distributors.
Developing your distribution network in China
There are various ways to find distributors and we will briefly discuss a few of the options here.
Research agencies. One way to find distributors is by employing a research institute to assist you in finding distributors that adhere to your criteria and needs. Such firms normally provide you with a shortlist of the most suitable distributors and setup the introductory meetings.
Chambers of commerce and associations. Local chambers of commerce such as the American Chamber of Commerce (Amcham), German Chamber of Commerce (Decham) or other country government-affiliated organisations such as the Netherlands Business Support Offices (NBSOs) in China often have lists of verified distributors or can point you in the right direction. Keep in mind that many chambers of commerce work together with research agencies to find distributors.
Trade fairs. Exhibiting at trade fairs is an effective way to understand your competitive environment and to get in contact with potential distributors. However, before you exhibit your products at a Chinese trade fair we highly recommend to handle your IPR protection in advance. Although this might sound obvious, also ensure that you have your marketing and promotional materials translated into Mandarin Chinese when exhibiting at a Chinese trade fair. To our surprise we often see foreign exhibitors at Chinese trade fairs using English promotional materials. Download our report to see a list of Chinese trade fairs focused on the elderly care market.
Sector-related associations. Joining sector-related associations in China is a good way to gain valuable connections and more in-depth sector information. For instance, the Amcham and European Chamber of Commerce (EUCham) regularly host events geared towards the medical device sector in China. There are also several Chinese elderly care associations such as the CRDA that are worth joining – download our report for a list of relevant associations in China.
Managing and training your distributors
Distributors in China generally lack sophisticated inventory and CRM systems, resulting in inefficient operations and high overhead costs. They are also accustomed to selling on price and are less equipped to stress your product’s unique advantages. This, coupled with a high employee turnover rate, makes training and managing your distributors a time intensive task. However, if you provide the necessary support and training you can make a significant difference in their output.
Use performance-based contracts. Keep in mind that many distributors will lean towards whichever company provides the highest commission and that promising first-year results do not necessarily translate into good results in the following years. We have seen many cases where sales stagnated because the distributor found a different party with a similar product that offered a higher margin. Some ways to combat this problem is by developing better relations with your distributors, keeping a good eye on new market developments and tying your distributors to performance-based contracts.
Visit key-clients together with your distributors. Developing relationships with your key clients enables you to exercise more control over your business in China and become less dependable on your distributors. It also aids in your understanding of the local market, the problems your clients encounter and creates the opportunity for you to offer better service and customer support.
Display your products in elderly care communities and facilities. Many of the so-called new Chinese Continuing Retirement Communities (CCRC) include product exhibition areas. Companies can leverage these exhibition areas to introduce and market their products in the market.
Train your distributors. As we mentioned earlier it is important to offer constant support and training to your distributors. The best way to do so is by having a dedicated business development manager on the ground that can provide your stakeholders with the training and support they require. Training your distributors will give them a chance to gain a deep understanding of your products and benefit their sales process.
Control your brand. One of the most important assets foreign device manufacturers have in China is their foreign brand name. Foreign brands are favoured over domestic brands and can generally charge a higher premium because they are perceived to be of higher quality. In addition, Chinese brands are on average not very strong in marketing. Investing in marketing and stressing the popularity of your brand abroad therefore helps in building your brand in China.
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