China distributors are a great way for Western brands to enter the Chinese market and test the environment before setting up a comprehensive online and offline presence in the Middle Kingdom.
In addition to our last China Gravy guide on marketing research in China for individual businesses, this article will explain how international businesses can connect with China distributors and Daigou.
Collaborating with Chinese distributors is a quick and comparatively inexpensive way to enter the Chinese market. You can test your products and brand reception, and generate revenue from the get-go before or during the extensive (and costly) market entry process with your brand.
You can do so at a later step, after the initial testing phase has been successful and already implement the first lessons learned. The full market entry of a brand includes trademark registration, an elaborate marketing strategy, and an online shop launch.
Why Enter the Chinese Market?
We’ve spoken extensively about the size and incomparable growth and potential of the Chinese market.
A few highlights include the fact that China has the second-largest economy and the largest e commerce economy in the world, and that the Chinese absolutely love luxury and brand items around fashion, accessories, and cosmetics.
Besides, the health and fitness sectors are booming in China, in particular organic foods and cruelty-free products.
Benefits of China Distributors
Foreign companies wishing to enter the Chinese market can start building an audience and generate revenue from the get-go, while the brand setup is in progress.
Business setup in China includes market research, trademark registration, launching a Chinese website with an E Commerce shop (or TaoBao, a WeChat shop, etc.), business materials, and creating an engaging social media presence. Consequently, this process takes a while.
So, working with Chinese distributors and/or Daigou is a great way to test the market with the brand products and get first feedback and lessons learned. In addition, it keeps the investment cost low while already generating income.
First of all, Daigou (代购) means “to buy on behalf of”. It is a so-called cross-border e commerce business, where a Chinese person abroad purchases items for consumers in mainland China and ships it to them. Daigou in particular typically have a large follower base, and therefore are able to connect your brand with an interested audience and build your reputation in the Middle Kingdom.
Product quality, trustworthiness, and authenticity are important aspects for Chinese consumers, which they have to experience rather than “being told” through traditional advertising.
Moreover, Chinese distributors and Daigou can fill the Chinese network/partner and logistics gaps within your company and assist you with importing, storing, shipping, selling, and marketing your products in China. This gives you time to decide if you even want to open a Chinese company like a WFOE.
Typically, Daigou source their products internationally and sell them through so-called cross-border e commerce (CBEC) channels while local distributors source and sell locally in China. Read up more on the differences below.
For your business, it’s actually a great opportunity to start with a Daigou cooperation who sells via CBEC. Later on, if you want to do the logistics either on your own or together with a local distributor, you can sell your products in China through cross-border e commerce – either by yourself or together with distributors/partners.
Since Daigou normally work on a commission-basis, it is in their own interest to promote the products and drive sales. On the other hand, distributors typically buy products in bulk/wholesale and get better margins through the price advantage. Read up more on how to find and connect with distributors and Daigou further below.
Keep in mind the importance of Guanxi in China – building and maintaining a good relationship is the key to a successful and long-term business partnership.
Are there Disadvantages of Distributors in China?
Among the few disadvantages is that distributors and Daigou can be picky. They will promote what their audiences seek and therefore need to make sure that the products and respectively the brand/image are a good fit and have excellent quality.
In case the product fails to take off, distributors and Daigou may move on and promote other, more profitable products. You can mitigate this risk by ensuring that your products fulfill a specific need, have a good quality, and convincing USPs, as well as selecting the best and most appropriate Daigou for your niche.
A China marketing expert like China Gravy can help you to develop these USPs and value propositions based on the cultural specialties inChina.
Daigou vs. China Distributors
Daigou are typically individuals/self-employed and have a large and faithful audience, who are eager to get the latest foreign products and trends from them.
The most sought-after products include luxury goods like handbags and cosmetics, as well as everyday items like groceries and baby formula. Some critics raise concerns regarding counterfeit products, so this is something to consider when selecting your partner and the marketing promotion of your product.
On the other hand, wholesale distributors are businesses with a larger infrastructure compared to individual business people like Daigou. This can be an advantage in terms of logistics and experience. At the same time, an individual Daigou may put more personalized effort into the promotion of your products.
Now, how to find and connect with Daigou and China distributors?
China Distributors – How to Get Started!
Launching your products in China and entering the Middle Kingdom with your brand can seem like an overwhelming task. Don’t worry, we are here for you!
Before you start the full business set up in China, you can get started relatively easily, quickly, risk-free, and at a comparatively low cost. Here’s HOW:
- Product description in Chinese
- Connect with wholesale distributors
- Partner with Daigou
Let’s look at this in more detail.
1. Chinese product description
Create your product description in Chinese language including USPs and value proposals tailored to the needs and preferences of Chinese consumers.
You can take a look at competitors who are already active in the Chinese market to ensure differentiation and to adapt what you perceive as successful.
This includes brand presentation and pricing structure. Besides, you can check on which social media platforms and other channels the competition is active and which type of clients they attract.
2. Wholesale distributors
Search for and connect with wholesale distributors – large and small ones.
3. Partner with Daigou
Search for and connect with Daigou, who work on their own.
If your China market entry is successful, you can either expand the cooperation with your distributors, and Daigou, distribute your products through CEBC on your own, or consider setting up your own business structure in China.
How to Find China Distributors and Daigou?
If you don’t speak Chinese, this task may be a bit challenging, but it’s not impossible. Common options normally include trade shows and exhibitions, the Chamber of Commerce, hiring a consultant/agency, or simply searching online.
For an online search, you will need to know a few things. First of all, there are more than 85,000 distributors registered in China and millions more unregistered ones.
So, how can you find the best ones for you and ensure that they are legitimate business partners?
- Search engines
- Chinese e commerce platforms
- Social media in China
- Chinese Daigou in your country
- Contact logistics companies
- Strengthen your brand visibility in China
Now, let’s look at these options in more detail.
1. Search engines
For example, you can search for “wholesale distributor cosmetics China” (化妆品批发商中国), or “wholesale distributor nutritional supplements China” (批发营养补充剂中国), or “wholesale distributor fashion China” (批发中国时尚分销商).
An extension like Zhongwen on Google Chrome automatically translates from Chinese to English and can help you with this process.
2. Chinese e commerce platforms
You can also check specialized cross-border logistics/retail providers like Mx Haitao to sell your foreign products in China.
3. Social media in China
As Tencent’s WeChat is the most popular app for everything in China, WeChat shops are the best way to find and connect with Daigou, especially smaller niche Daigou.
For example, if you are in the milk powder industry, a highly sought-after market in China, you can search for “德国奶粉代购”, which means “German milk powder Daigou” (see screenshot below) and click on “official account” to find potential sellers for your product (milk powder is one of the most popular products among Daigou, specialized in the German market).
On the other hand, larger-scale Daigou – with a larger audience, but also a higher commission rate, and less niche expertise – can be best found through a specialized China marketing agency like China Gravy.
4. Chinese Daigou in your country
Alternatively, you can also search for Chinese Daigou in your country. The advantage is that they know the market of origin and the Chinese target market and typically will have extensive knowledge and experience with exporting products from your country and importing products into China.
For example, if you search for “German purchasing” in Chinese “德国代购”, Beizipu is the top result. Click on “contact us” in at the top right (“联系我们”). This takes you to the QQ/WeChat number (QQ is often identical to the WeChat ID). Distribution platforms like Beizipu work with an abundant number of Daigou and partners and can connect you with the best contacts for your business.
Typically, you will not find an email address, and if you do, it is likely not to be answered. Therefore, having a WeChat number/account is essential to communicate with your Chinese partners.
5. Contact logistics companies
Fulfillment providers typically have a large network with a variety of traders and industries. Find them on Sogou or Baidu, WeChat or one of the Q&A forums like Baidu Zhidao Q&A forum, and the Wikipedia equivalent Baidu Baike.
For example, you could search for “logistics company food specialization Beijing” (物流公司食品专业北京) or “Best fulfillment provider for food in China” (中国最好食品履约提供商).
6. Strengthen your brand visibility in China
Finally, wouldn’t it simply be amazing, if potential Daigou or distributors reach out to you because your product presentation and concept are so appealing to the Chinese market and they found you easily?
That’s exactly right! 🙂 So, by optimizing your brand presentation (website, social media, Q&A forums, etc.) you will create demand and interest, and make doing business with Chinese partners easier.
If you’re not sure where to start, a China expert like China Gravy is here to show you how.
Selecting China Distributors and Daigou
Make sure to do your due diligence before proceeding with any business collaboration. As this market is highly sought-after, there are also dishonest people posing as serious business partners.
Ideally, you have a Chinese-speaking person on your team and/or an expert on the Chinese market and business culture to contact your potential partners.
Your due diligence should include a background check. This can be in the form of online research and verification of the references which your potential partner provided you with.
Additionally, you can ask your potential business partner the following questions:
- Is there a minimum sales quota?
- Do you require an exclusivity agreement (not recommended)?
- What’s their commission structure?
- What are your payment and shipping terms?
- What’s your experience with trademark compliance and registration?
- What’s the registration court for legal responsibilities?
- What are each partners’ responsibilities?
- How to deal with customer concerns and warranty issues?
- What’s their own network of partners like?
- Will you sign an NDA (recommended)?
Now, let’s take a look at the summary.
China Distributors – The Takeway
China distributors and Daigou are a great way for foreign businesses to enter the Chinese market. It is a hassle-free way to test the product and generate first revenue, while the full China market entry process, i.e. your own CBEC process is underway (visibility in China, online shops).
We have discussed the advantages and disadvantages of collaborating with wholesale distributors and Daigou and provided you with due diligence guidelines. In addition, find out more about working with China sourcing agents here.
To get this process started, create your product presentation in Chinese language, and search for distributors and Daigou on the most popular Chinese search engines, e commerce platforms, social media channels, and in China and your own country. Make sure to have a WeChat account to connect with them quickly and easily!