Associate, Advanced Energy Centre
Pallavi is an Associate at the Advanced Energy Centre (AEC) at MaRS. She works on identifying opportunities and challenges for Canadian innovation in priority international markets. In her role, she also focuses on communicating thought leadership developed at the AEC to the energy community. Please click here for more information on Pallavi.
Associate, Advanced Energy Centre
Roisin leads the Advanced Energy Centre’s (AEC) communications work, developing thought leadership and sector insights. In her role she works with the AEC’s partners and key industry players, to address the barriers to adopting innovation in the energy sector. Please click here for more information on Roisin.
This is one of three interviews to conclude MaRS’ series on China as an export market for Canadian cleantech companies. In these interviews, we talk to three Canadian entrepreneurs who have first-hand experience of doing business in China. From business etiquette to partnerships, their answers provide useful tips and insights for any Canadian company considering venturing into this market.
Gimmy Chu is the CEO and Co-Founder of Nanoleaf – a green technology company developing design-centric, energy-efficient lighting products. Its latest line of smart lighting products aim to bring design and energy efficiency into the IoT (Internet of Things) space.
Why did you enter the Chinese market and what is your current involvement there?
We currently have a Shenzhen office in China that focuses on operations and manufacturing. We do our manufacturing with a partner factory, where we built our own production floor. The Shenzhen team takes care of sourcing raw materials and overseeing production at the factory. We also have a small hardware R&D team there that works closely with our manufacturing partners. We chose to open an office in Shenzhen because it was, and still is, the LED capital of the world and we wanted to keep our manufacturing line close to our supply chain.
What were your major challenges and considerations when entering this market?
There were three major challenges that we considered before entering the Chinese market.
- The biggest challenge is that manufacturing in the Chinese market means your products can get copied extremely quickly, and there is a higher risk of having your products copied and produced at a much lower quality and cost by someone else before your product even hits the retail floor. We protect ourselves from it by building a strong brand that people can resonate with and by making sure we have innovative technology that we can patent.
- Communications can also be challenging at times because of the language barrier and the lack of knowledge of the business landscape in China. We are lucky that our Chief Operating Officer, Christian, is a veteran in this space and can act as our guiding light.
- Lastly, we did not have a clear picture on the best way to open up sales and distribution channels in this market. It took a lot of trials and errors to get it right. We are still learning the ropes, but it’s such a big market that it’s worth the hard work.
Tell us one thing you wish you knew before doing business there.
Understanding proper Chinese etiquette. I wish I listened more to my parents when they were trying to teach me. As a Canadian with a Chinese background, people in China are less forgiving if I make etiquette mistakes in China.
EDC resources to help you export
Did anything surprise you about this market?
One big surprise about the Chinese market is that people are very price sensitive when it comes to purchasing products. There is a lot of consumer distrust due to the high saturation of counterfeit products in the market. It’s much harder to convert sales with just product videos or advertising. Often times, it takes a lot more social proofing to get consumers to believe in your product than it does in North America or Europe.
Media coverage and PR also works very differently in China. Unlike North America, there is almost no such thing as free PR coverage. This can make it quite tough for small startups with a limited marketing budget to get their story out there.
However, the sales channels in China tends to move at a much faster pace than North America, which made communications with distributors and retailers in China a smoother process than we had originally anticipated. People are very open to innovative products, and often times retailers of high-end technology products are looking for good quality and unique products to add to their line.
What advice would you give other Canadian companies considering exporting/setting up operations in this market?
- Do your homework. Make sure you do your research before diving in to this new market. Recruit people who understand the business landscape to help you, or ask other companies with experience in the Chinese market to provide tips and guidance. Having someone who understands the market there to provide you with advice can make the experience of entering the Chinese market much easier.
- Learn to negotiate pricing. Haggling is key in the Chinese market, and if you are good at it, you can end up saving your company a lot of money.
- Find a good manufacturing partner. If you can find a reliable and trustworthy production partner, then you can better protect your proprietary technology and decrease the risk of it becoming a copycat product.
And finally, tell us one thing you love about China.
It’s a place that’s rich with history and culture, there’s so much to learn and experience, not to mention the food there is fantastic.
Please also read MaRS’ first article of this series, which provided a background on how policy impacts business opportunities for foreign cleantech companies in China. Additionally, the second article detailed pertinent questions that companies need to ask themselves before venturing there.
To learn more about the insights and support that MaRS Advanced Energy Centre can provide to cleantech companies exploring the Chinese market, please get in touch at firstname.lastname@example.org.