Doing Sales in China
Foreign companies which want to sell their products on the Chinese market have different options. In general there are two possibilities:
- sales without a local representation
- sales with a local representation, e.g. an agent or own company
Most companies start with the first option. They sell their products directly to Chinese customers in Euro. Once companies are ready to fully engage their Chinese sales goals, starting a local representation is unavoidable. Different structures are available, each with their own pros/cons. The most common options include using an agent, opening a representative office or starting a company. Less common ways are to start a joint venture with a local company or open a Hong Kong company.
Agent/local distributor
Working with an agent or local distributor entails allowing another production or trade company to sell your products to customers in China, usually on a commission base.
Advantages:
- the agent’s knowledge about the local market, products, culture, language and transport options
- small upfront investment
- the agent’s customer network and specific technical knowledge
Disadvantages:
- difficult to find trustworthy and professional agents
- no control over customer selection, sales prices and profit margins
- no experience/knowledge building concerning the local market
- no building up own customer network
- limited control over marketing, 4P’s and PR
- limited control over the amount of time the agent puts in your product
Representative office
Opening your own representative office allows companies to have ears/eyes in China.
Advantages:
- control over customer selection, sales prices and profit margins
- experience/knowledge building concerning the local market
- building up own customer network
- control over marketing, 4P’s and PR
- small upfront investment
Disadvantages:
- limited legal status – no rights to hire personnel, write contracts or do direct sales
- no rights to invoice in RMB or import/export
- fixed monthly costs for office rent, salaries and others
- tax
- no option to warehouse
Wholly Foreign Owned Enterprise (WFOE)
Starting your own trading or service company in China enables companies to have their own legal entity.
Advantages:
- control over customer selection, sales prices and profit margins
- experience/knowledge building concerning the local market
- building up own customer network
- control over marketing, 4P’s and PR
- ability to start a warehouse to reduce delivery time
Disadvantages:
- serious upfront investment
- high monthly fixed costs from office rent, salaries and corporation tax
- complicated and long lasting registration procedures
- activities confined by the limits of the business license
*partly based on GIC Verlag, Business Focus China - Markteintritt, 2008, 54-58
Cooperating with ECS
Cooperating with ECS practically enables you to delete the list of cons, and be left just with the sum of the advantages. We are a service platform that allows you to utilize its knowledge, experience and licenses for your own benefit. Outsourcing the infrastructural and administrational issues to us allows you to start your own sales network, be in control over marketing, branding, prices and effort, build up your own market knowledge and network while not having to pay upfront investment, register for licenses, pay high rent fees or wait for bureaucratic procedures.
- Not in China yet or working with an agent?
First of all you can use ECS’ trading services. We allow you to invoice to Chinese customers in local currency (RMB), import/export, and offer just-in-time deliveries through our (bonded) warehouses.
Secondly we invite your sales manager to work from a serviced desk, or locally hire a sales person that works from our office. The costs of this employee will be monthly invoiced to your European headquarter. This service entails:
- your own representative office in one of our rooms in Beijing, Shanghai, Ningbo or Shenzen, without upfront
investment or registration.
- starting to build up and control your own market, instead of or next to working with an agent.
- being well equipped for the future: using ECS allows you to act as a trade/service WFOE.
This option is popular with companies just entering China looking for a hassle, risk and high cost free solution. Companies that already work with an agent also choose ECS – it allows them to simultaneously build up their own market in another part of China.
- You already have a representative office or WFOE?
Representative offices have very limited business capabilities, and often WFOE's lack certain business rights,
experience or manpower. ECS can assist by offering our service platform, including:
- Trading services: invoice your Chinese customers in RMB, and let us optimize your China logistics by central
purchasing/warehousing.
- Registration services: sometimes you’ll need extra licenses. We can get them for you.
- Recruiting services: we help to recruit engineers and managers every day.
- Regional sales/purchasing offices: let your sales/sourcing employee work from a serviced desk at the other side
of China.
- Printing services: why not have your marketing material printed in and distributed from China, thereby saving on
costs, not quality.
- Consultancy services: having another set of eyes look at your problems can help solve them.
- Accounting/financial services: having an independent party overlook your bookkeeping will let you always
understand your commercial situation.