Listen to the full episode of China Paradigm #124 on YouTube, Apple Podcast, Google Podcast, Spotify, Soundcloud, or Ximalaya.

Here is the transcript from our interview with Chinese healthcare R&D consultant, Douglas Corley

Today we are interviewing a western expert on Chinese healthcare R&D and the Chinese healthcare industry. Douglas Corley came to China 9 years ago, initially teaching English and learning Chinese for what was supposed to be a 6-month sojourn in Dalian before starting medical school in the US. However, he decided to stay and moved to Beijing where he studied at the Chinese Academy of Science. This involved working part-time at Peking University Hospital and the 301 Military Hospital. What he learned was similar to what one would learn working in an R&D laboratory of a healthcare company. Essentially he was working on how to commercialize the Chinese healthcare R&D lab work of healthcare scientists.

Although many of the scientists were highly gifted, they were not used to the commercialization of R&D work. At the time, Douglas realized this was the direction Chinese healthcare R&D was going in. And he was fortunate enough to be in the right place, with the right people, at the right time.

His experience of working in the Chinese healthcare industry is certainly unique among western healthcare experts, and his experience at Beijing’s elite 301 Military Hospital is unrivaled among American peers. This makes Douglas Corley a vital link between Chinese healthcare R&D and the western healthcare industries. This experience led him to founding an events platform, Beijing Health Forum in 2015. Then incorporating this into and founding his China healthcare strategy consulting firm, DHB Global in 2018.

Can you give us a brief company history of DHB Global?

Douglas Corley: DHB stands for Dunhuang Bio. Dunhuang, located in Gansu Province was the area along the ancient Silk Road where healthcare devices and information were traded between China and the West. DHB has consulted with over 250 American and European healthcare players.

What services does DHB Global provide its customers?

DHB helps western healthcare companies enter China. It informs them about the current state of Chinese healthcare R&D. DHB can advise them on who to partner with within China. DHB helps them understand market segmentation in the Chinese healthcare industry.

China’s hospitals/ institutes are divided into 3 main tiers. Tier 1 would be the lowest in terms of capabilities and quality while Tier 3 would be the most capable and adhering to the highest quality standards. In addition, each Tier is subdivided into 3 further levels (A, B, and C).

A rating of 3A would place a hospital among the country’s best hospitals. Likewise, a rating of 1C would place the hospital among the country’s worst. In reality, a 1C hospital is likely to be very small and in a remote area and a 3A hospital/institute is likely to be in Beijing or Shanghai.

In total there 9 classifications for China’s hospitals. The classification system takes into account a hospital’s ability to provide medical care, its medical research capabilities, and the academic level of its staff. There is one additional level called 3AAA. This level is reserved for the most specialized and highly qualified of all hospitals in China. The highest level specialists in China have to teach, publish, and have an active clinic where they treat patients.

How does DHB Global facilitate the link between the Chinese public health institutions and foreign private healthcare companies trying to sell their services on the Chinese market?

DHB helps western healthcare institutions identify the best hospital partners for medical research and which products they want to bring into the Chinese market. Once they know what level of hospital they want to work with, DHB facilitates meetings and discussions between the hospital and the foreign healthcare institutes. They also help with bringing western IP to China and IP collaboration projects between Western and Chinese healthcare R&D players. DHB can introduce Western healthcare players to investors. They can also help them with market operations. This can include access to grants, labs, partner companies, domestic scientists, and product distribution channels.

Are research universities in China incentivized totally different than foreign universities?

If a Chinese healthcare R&D academic gets research published in a top-level medical journal they can earn anywhere from $15 – 50 thousand. This incentivized researchers to split up one major idea into multiple smaller ideas. The government has recently begun to crack down on this practice. Another result of this is that you see some copycatting. For example, the invention of a new molecule: An entrepreneurial Chinese healthcare R&D institute may take a recently invented molecule and add some tiny adjustments to it that don’t necessarily affect the outcome but necessitate a new name and hence a new patent for the molecule.

Could you give us a precise example of the scope of services DHB Global provides?

DHB worked with a very large publicly traded company that had a very novel way of diagnosing and managing chronic disease. They wanted to come to China. DHB did market segmentation, SWOT analysis, client interviews, commercial partner interviews, and academic partner interviews. The pre-market process also involved introducing the client to investors and institutes where they could secure grants. DHB helped them set up manufacturing processes in China. The process lasted about 18 months and they now have a legal entity in China and their manufacturing is split between China and India. They are still waiting for product approval because that takes anywhere between 12 and 36 months in China.

What is the level of internalization of operations for DHB Global?

There’s a lot of delegation. For the legal work involved DHB always has somebody who is amazing in that regard and I provide them with the structure. If the project involves three or more stakeholders, DHB will have a project manager who maintains communication between stakeholders. My personal strong value-add is being able to initiate and maintain communication. Product design can be kept in-house. DHB also has a number of medical experts. I have a strong network of domestic or foreign investors and evaluators that can provide expertise in terms of financing. DHB’s main team is about 8 people, which helps us manage 2 – 3 projects. For anything else, we leverage the relationships with other organizations we have built up over the last few years.

Deep dive – the Chinese healthcare system

80% of 3A hospitals in China are in Beijing or Shanghai. This is where the best doctors are working, despite many of the doctors coming from small cities. But, until 4 years ago, there were no policies which allowed these doctors to return and begin practicing in their hometown. Upon graduation from high school, they would have gone to a prestigious medical university in Shanghai or Beijing. By the time they become a highly trained specialist in their 30s or 40s, they’d probably have a family and be less willing to relocate.

On top of this, the equipment they would use in different provinces would be different and they would be unfamiliar with it. It’s not appealing to move to a place where the infrastructure is less developed.

Is there a private healthcare sector developing for smaller Chinese cities?

About 90% of all hospital beds in China are in public hospitals. It is a government aim to increase the share of private hospitals up to 20 – 25%. Also, in the last 3 or so years, the government has started incentivizing and training people in hospital admin roles, which will positively impact the quality of hospital treatment. Johns Hopkins partnered with a university in Beijing to offer a course in this. Also, all of the famous doctors work in public hospitals.

Healthy China 2030 – what are the main directions?

One of the goals is to have enough domestic manufacturing of medicine and advancing its quality. They also want to have more trained doctors because it’s about half the per capita rate that is seen in OECD countries. And not just doctors, but the per capita rate of nurses in China is much lower too. They also want to incorporate AI so people can see doctors remotely. It also aims to increase the level of insurance coverage.

What means will the Chinese government employ in order to fulfil the Healthy China 2030 objectives?

It can often be quite similar to how they attract foreign companies, using some kind of Free Trade Zones. To bring healthcare R&D companies here, they will mostly use science parks which offer companies certain healthcare industry-related perks. Also, access to capital and talent in universities is offered. Tax incentives are also used. The investors are also often located in the science parks too and they will offer investment for equity.

How much autonomy do science parks have in provincial China?

It varies massively from area to area. Certain areas will be very strong in certain categories. And if the government is going to look to invest in certain healthcare products from that category, they will most likely start their search in that science park. An example of how varied these science parks are is that Guangzhou, the city, has over 200 science parks.

What is China’s current vision on nursing homes?

They are looking to ensure those wealthy people who can afford it have access to top level nursing homes. Following this, they are looking to ensure an adequate level for the rest of the population.

How good is the Chinese public health insurance system? Is there room for a private sector in the Chinese public healthcare system?

It depends on your Hukou. If you haven’t transitioned your hukou to the city that you live and work in you can still be covered. You pay upfront, and you can be reimbursed later. The amount of coverage for public insurance you have depends on your level of income.

It’s quite a unique system. If you were to compare it to another country, it’s similar to maybe Vietnam. Public hospitals have a large number of well-qualified, English-speaking doctors. And there is a small but fast-growing number of hospitals that are becoming specialized in certain practices like IVF or stem cell therapy. They don’t want to have every hospital have an amazing level, but they want to have specialist centers where you can stay in the country and get the highest quality care.

What is DHB Global’s experience in dealing with the COVID-19 crisis?

There were lots of people selling sub-standard PPE. Initially, people wanted masks, then they wanted ventilators, then gowns. And for the last 6 months, people have been demanding gloves. Fortunately, I’m in Thailand now, and that is where most of the gloves in the world are made.

How does DHB Global use cryptography to reinforce transparency on its suppliers and supply chain?

DHB has a tool that uses a blockchain that allows our clients to track their purchases from the factory to the client’s address.

What books have inspired Douglas Corley in his entrepreneurial journey?

Measure What Matters by John Doerr.

What does Douglas Corley read to stay up to date with China?

I read the social media posts of the most interesting science parks and Chinese healthcare R&D companies. But the most useful sources are the WeChat groups that I’m in that are related to the Chinese healthcare industry. I spend about an hour every morning or night going through them, taking notes, and keeping the best articles. Also, the FT app is pretty good.

Not much is better than the primary sources though. So, if there is a quote by somebody in an article, I might reach out to that person. Usually, if you reach out to people with a precise question, they are more than happy to qualify what they said. They will often explain to you in greater detail what exactly they meant.

What books on China have been a game-changing read for Douglas Corley?

On China by Henry Kissinger.

What other activity would Douglas Corley pursue should he have extra time?

I would probably teach about the Chinese healthcare industry. Also, more content writing about the current state of Chinese healthcare R&D.

What advice would present Douglas Corley have for his ten years younger version?

I would focus on Chinese characters, also I would advise somebody to practice with one specific dialect.

This transcript is a sample of our China Paradigm podcast interview with Douglas Corley, founder and CEO at DHB Global.

Listen to the full episode of China Paradigm #124 on YouTube, Apple Podcast, Google Podcast, Spotify, Soundcloud, or Ximalaya.

This article Linking Chinese healthcare R&D and the Chinese healthcare industry with the rest of the world: China Paradigm transcript #124 with Douglas Corley is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 122 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

What made Australian Philip Beck put down roots in China?

Philip Beck: I first came here with my father when I was 8 years old. I was blown away by the magic of the country, and I’m still being blown away by the magic of China daily.

Why is life in China “7 times faster” than in Australia?

Philip Beck: There is the Big Mac index, and I use a “subway index” analogy. China’s infrastructure develops about 7 times faster than back in Australia. Also, in one year of working here, I make about 7 times more decisions than I would if I were working back home in Australia.

How does Philip Beck identify a screening method for good investing?

Philip Beck: I invest primarily based on the strengths of the team. I won’t invest in a team of 1. I don’t like to invest in teams of more than 3. To an angel investor in China, it’s essential to have at least one Chinese member in the team. And I look for teams whose members complement each other’s skills. So, if one team member is weak in one aspect, the other team members must make up for their deficiencies and vice versa.

In how many companies has Philip Beck invested in since 2009?

Philip Beck: About 25, I generally invest in about 1 new company every 6 months. 18 of the investments I have made as an angel investor in China have failed, and 7 of them have succeeded

How does an angel investor in China protect themselves from making bad investments?

Philip Beck: When I was new to being an angel investor in China, I made many mistakes, and then I got in with some co-investors at the angel stage. About 75% of my investments are with other angel investors, and maybe 25% are scenarios where I am the first angel to go in. The key thing is always setting out with the start-up exactly what they are trying to validate with the funds they seek.

Does Philip Beck belong to a pool of angel investors in China?

Philip Beck: There is a pool of angel investors here like Anglelvest, Shanghaivest. There are also overseas pools, but the angel community in China is quite small and close. Therefore, we know each other’s areas of interest and expertise. Sometimes I will come across a project that I think looks really good, but I will know another investor with much more experience in that field to pass that opportunity onto another angel. Likewise, they will refer other opportunities to me. I was originally in some pools, but now I just use my network to find new projects. Occasionally an angel investor in China will come across projects in accelerator programs that may be interesting to invest in.

Why is Philip Beck involved in angel investing in China rather than real estate investing in China?

Philip Beck: As good an investment as real-estate is, I have no desire to own 17 properties. People have shown trust in me throughout my working life. I want to repay that trust in kind by mentoring and investing in people who want to build their careers. One of the best bosses I ever had was Peter Irvine, he was my first boss, and I worked under him for 14 years. He always showed trust in me and gave me incredible guidance. Peter is a wealthy man. He could retire, but he is still committed to helping entrepreneurs become successful and helping people realize their true potential in life.

What is Philip Beck’s current rate of return on his angel investments in China?

Philip Beck: About 24% annually. There’s no magic formula for a great ROI, most of the start-ups will fail, and those that succeed will succeed spectacularly.

What is Philip Beck’s focus after angel investing in a company in China?

Philip Beck: Generally, I give advice and leverage my network, but keep equity and take a back seat role when a company gets to series A round investment. Before that, I will work with a start-up to make sure all the initial problems and issues are dealt with. That is where I excel. When a company is doing very well, I can have reverse-Midas touch because I like to break things down and solve problems. It’s a useful skill at the start but can be detrimental when the business is going well.

How are the companies that Philip Beck is still invested in performing currently?

Philip Beck: Roughly 10 out of every 100 investments an angel investor in China or anywhere else makes will survive. 50% will fail within 12 months. The other 40% will fail within 3-5 years, the reaming 10 or so will survive, and probably one out of the 100 will pay you back about 30 times your initial investment.

I’ve made roughly two of those 30x investments. One company I invested in at the angel stage made more money than everything I had ever previously invested, it covered all my failures, and I still hold equity. The second one is about to exit too, so that one has done very well too.

For most of the companies, it’s a 7-year journey before I can exit. Long-term investing offers a much better outcome. Which’s why I like to keep equity in those companies.

Should investors also be vetted by company founders?

Philip Beck: I would advise companies looking for investment not to look for investors but to look for other companies that are doing something similar. Then, ask the founders of those companies to introduce them to their investors. This way has much more power than an entrepreneur simply reaching out to an angel investor in China. Founders reaching out to other founders is the best way, in my opinion, because successful founders will often give you invaluable information about the angel investors that were and those that weren’t helpful to them in their journey.

In what business sectors do foreign entrepreneurs have a bigger chance of succeeding in China?

Philip Beck: They can be successful in any category, but they need to be respectful of China, use their ears more than their mouth, and always keep in mind that the Chinese member of their team will eventually need to be the public face of their company in China.

What do clients value most about Philip Beck’s non-executive involvement in their companies?

Philip Beck: I always cut through the bull. I’m not willing to pussyfoot around problems. If there’s the elephant in the room, I’ll make everybody talk about it. Then we’ll get that elephant out of the room.

Are entrepreneurs late on deciding to get coaching for their businesses?

Philip Beck: Yes, I was personally too late. I needed people to call me out on things earlier on in my career, but nobody around me would do that. I learned it when I was 38, but I wish I had learned it in my 20s. Coaches helped me avoid unnecessary conflict and tension, which are useful in the growth stage but not helpful in the post-growth stage.

Breaking things – the process of growth for companies

Philip Beck: It’s about knowing when to walk away from the company, knowing when you don’t have much more to contribute to the company’s development and when you’re going to start having a negative impact by constantly stretching the business to breaking point. I really respect Jack Ma for doing that. He realized he wasn’t the best person to lead Alibaba anymore and had a long-term plan to get out, and then he put Daniel in charge.

Moojing Market Intelligence – how do they extract data from the marketplace?

Philip Beck: We crawl or scrape the data available on public pages on Chinese platforms like Kaola, Suning, Taobao, Tmall, JD, VIPshop, and some other e-commerce platforms to give brands an idea of what their competitors are selling, how many sales they are making, their competitors’ price points, what regions their competitors are stronger in, what the consumers are saying about their competitors’ products in the comments section. We scrape the data for 99% of the products available on e-commerce platforms, and that equates to about 100 million products every month. We give our clients an excellent idea of what the market is doing and demanding.

There are some issues with this kind of software, such as not every product review being genuine and the publicly available data doesn’t show the return rate. But there are ways to get around this kind of problem, such as placing massive order quantities and seeing how many a certain product is available. Also, we are aware of the kinds of products that have a high return rate, like female apparel/ shoes/ fashion accessories, etc., and products that have a low return rate like mobile phones.

Why are APIs less used for data gathering in China than scrolling and crawling?

Philip Beck: The e-commerce platforms in China just don’t want to share their data.

Can Moojing be used as a tool by investors to make smart investments?

Philip Beck: Yes, it can and is used by investors.

Because Moojing is a SaaS company, does it offer another layer of services to its users?

Philip Beck: Our services cost about 3,000 USD per year, so it is very competitive. Some brands and investment funds now just want our raw data and don’t want to use our platform because they have hired their own data scientists to analyze the data. Those clients just want us to build an API link that links the data on our platform to their own data warehouse, and they just want to analyze it themselves.

What is Philip Beck’s view on the evolution of advertising in China in the past 10 years?

Philip Beck: My biggest criticism of publicly listed advertising agencies is the abdication of their core responsibility to their clients, which is to guide clients towards understanding consumer behavior and then identifying how the client’s brand can influence that consumer. A lot of their profits were coming from areas like media rebates which is a legal grey area. And so, when digital came along, they were looking out for themselves and their profits rather than looking out for how to serve their clients better.

A lot of new international and local small digital companies have come up to take their market share.

How does Philip Beck manage his time?

Philip Beck: I get up at 4 o clock every day. For the first 2 hours, I do some reading, read the news, review the previous day. I use Google Calendar to manage my time. Then I do yearly reviews in the second week of December of my time in the next year. Focusing on cutting things and adding new things into my schedule. I always allow at least 1 hour a day for what I call “Oh Shit,” which is where you have an emergency meeting or have to put out some fire somewhere.

Generally, my time is 50% between my 2 companies Moojing and DianYue, 25% mentoring young Chinese professionals, 25% on my non-executive roles at companies.

How does Philip Beck say “No”?

Philip Beck: A big thing for me was learning how to say “no” to help other people because my time was already so stretched. But when I have to say no, first, I say thank you for asking me. Even though I would love to help you, I just don’t have the capacity at the moment, and then I always try to find somebody who would probably be able to help that person. So, I’ll ask them if they’re ok with that. Then I’ll connect them with the person I think could help them and try to set up contact between them.

Are to-do lists still a relevant way to approach a business schedule?

Philip Beck: My assistant and I use my Google Calendar to schedule everything. Also, if I can’t deliver something on time, I always try to let them know a week or 2 in advance.

Tips for entrepreneurs from an angel investor in China

• Instead of looking out for angel investors in China to fund your new business, look for founders in a similar industry and ask them about which angel investors would be the best to work with
• Have at least one member of your team be Chinese and make sure each team member has complementary skills/ talents
• Be precise about what you need the funds for, and what theories/ ideas those funds will validate. This will help you when you move onto other funding rounds
• Most angel investors in China rely on their network to supply them with new investment opportunities, rather than accelerator programs
• Angel investors like Philip Beck are investing primarily because they want to help young business people, rather than out of a necessity. Angel investors in China will use their business network and personal experience to help take your company to the next level. For Philip Beck, the entry to exit duration for successful start-ups is roughly 7 years

Listen to the full China Paradigm episode 122 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article Advice for start-ups from an angel investor in China: China Paradigm transcript #122 with Philip Beck is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 121 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

How did MBA school at INSEAD – lead to the beginning of an entrepreneurial journey?

Jie Zhang: At INSEAD, I went in there with a strong corporate background but became an entrepreneur. I met so many talented people there from every field, and I developed many business ideas. My roles at Huawei involved many expansion projects into Moldova and Serbia before doing the same in Denmark and Norway. Also, at Telenor, I was responsible for setting up a new business unit from scratch. So, I wasn’t totally new to entrepreneurialism.

Can you give us some background details about AdChina.io, such as company size and funding?

Jie Zhang: It started as GoDigitalChina in late 2015 as a media agency. In late 2017, we decided to switch to a SaaS model and created AdChina.io. It took us about 2 years to have the platform up and running. But we launched and received backing from 2 VCs in Norway. Last month we went through another B round of investment, and in total, we have raised around 2 million USD. We employ about 20 people across the world. Our team in Shanghai focuses on operations and software development. Our sales team is located in different countries like Norway, Australia, India, and Pakistan. We have over 100 clients from across the world, all continents except for Africa. In the beginning, most of our clients were in Scandinavia. We are a SaaS tool that advertisers and media agencies can use. We want to make the process of digital advertising in China more transparent and more automated.

How does AdChina.io work, what does it offer clients, and what is the pricing policy?

Jie Zhang: We wanted to make digital advertising in China simple to use and familiar to western advertisers. So, in terms of easiness of use, we are similar to Google Ads or Facebook ads. Because the digital advertising systems are different in China, it is frustrating for western digital marketers. They get strange reports, and they don’t understand the data. So we make digital advertising in China easier for them.

We have 4 different prices. Clients can use a free trial period of one month where we take 20% of ad spend. There is a starter option of 99 USD per month, plus we take 12.5%, then there is the “growth plan” package and the “scale plan” package. The scale plan goes up 699 USD per month plus 7.5% of ad spend.

Regarding the fixed monthly fee, we are cheaper than the competition but in terms of the % of ad spend that we take, we are slightly higher than the competition. That is because most companies waste a lot of money when they try to do digital advertising in China. They waste money because so many companies outsource work, so with our platform, it’s more transparent, and we cut out the middlemen agencies.

Also, our platform is connected directly to the media channels through APIs, and our clients don’t have to worry about the authenticity of their traffic. Also, sometimes the social media channels will discount if a company spends a certain amount of money on advertising. Other agencies will hide this from clients, but we will make this transparent with our clients. They can see exactly how much of a discount they are getting and exactly how much they are paying to do digital advertising in China.

How does the digital advertising platform, AdChina.io handle government censorship when it comes to advertising content in China?

Jie Zhang: For the content that western companies want to publish in China, we manage editing content manually right now. But we are working on an AI engine to automate some of the processes. But usually, every social media channel in China will approve content themselves before letting it go live on their platforms.

Mathieu David: Do AdChina’s digital marketing solutions also include LinkedIn advertisements in China?

Jie Zhang: Yes, it was quite difficult to work with LinkedIn APIs because all Microsoft products have very Chinese-specific guidelines, but we include LinkedIn China as one of the platforms companies and advertising agencies can use to do digital advertising in China

Does AdChina have access to all the big social media channels in China?

Jie Zhang: Yes, each platform requires a different amount of minimum investment and deposit. If you want to do digital advertising in China, one of the cheapest platforms is probably Baidu, and one of the most expensive is probably LinkedIn. But western digital advertisers need to know that Baidu is not equivalent to Google to build and expand a business. You need to go to other more specific platforms which are more suited to your brand.

We actually don’t work with Weibo because they don’t have APIs that other platforms can work with, so their process is not transparent and doesn’t align with our values.

Mathieu David: Your digital marketing platform sells on a SaaS basis. How is AdChina.io used by its clients?

Jie Zhang: Our clients often try out our platform as a kind of market survey to test if there is a market for their product. Brands that make a mistake when doing digital advertising in China are to rush in and advertise on every social platform and make big decisions early. They need to treat it as a slower process, make the important decisions, later on, fail fast and fail cheaply. That is why our platform is a good way to test the waters in China.

What is the philosophy behind AdChina.io?

Jie Zhang: China’s social media platforms evolve much faster than those in the west. When we came into the business, we knew that we would not be an expert on how to do digital advertising in China for every industry and on one or all of the platforms because there are so many new platforms, a new player emerges every 2 years. Our platform is there for clients to play around with it and experiment at a lower cost than focus all of their resources on one platform. 

Mathieu David: What level of information does each social media channel offer on AdChina.io?

Jie Zhang: Gender, age, educational background, financial situation, device (android or ios), if house owner, or if the car owner. Not all of the social media channels provide the entire suite. Douyin tends to target people more by the content they like, so your content could be shown to a high-income consumer and a low-income consumer simply because they like the same video.

Mathieu David: Which social media channel should social media advertisers focus on in China?

Jie Zhang: It needs to be multi-channel, but the most detailed is WeChat. You can define your target the most clearly. But there are some disadvantages too, it is the most expensive, but a multi-channel approach is necessary. It would be foolish not to have a multi-channel approach for digital advertising in China.

Which Chinese social media platform makes it the easiest to target demographics according to their interests?

Jie Zhang: The tracking of social media user’s data started before data protection laws were widely enforced in China, so many companies could get in there early. Most of them are quite good in this regard. WeChat is probably the best in terms of tracking by “interests.”

On our platform, clients can also target consumers through “behavior” too.

Mathieu David: What level of programmable advertising can AdChina.io offer?

Jie Zhang: In terms of retargeting consumers, we don’t offer many solutions unless a client is looking to build a community and investing a lot in the lifetime value of their relationship with their customers.

How are Nordic brands perceived in China?

Jie Zhang: Scandinavia has a name in Chinese, so it is easier for Chinese people to identify and classify it. One of our first clients was the Scandinavian Tourism Board. We had to advertise for them in China. Then we decided to focus on 2 main themes attributed to Scandinavia, health and nature, and happiness with Denmark because it is more urban and has less nature. More recently, it focuses on the sustainability factor, which is all good marketing points. So, when we promote Scandinavian brands in China, we usually rely on these elements. Nature, health, happiness, and sustainability are what Chinese people think of when they think of Nordic countries and Nordic brands.    

Mathieu David: What advice can Jie Zhang offer brands regarding cross-border eCommerce?

Jie Zhang: Cross-border e-commerce has the least amount of restrictions on other methods of entering China, and it has high costs in terms of digital advertising in China. Cross-border e-commerce is the best way to enter the China market. It allows brands to start small and maybe move to an e-commerce platform after a year or two if things are going well.

Which Chinese platform is best to start with for eCommerce?

Jie Zhang: Tmall is the best, but it also has the highest entry cost and is the most crowded. Some of the brands we have helped through Nordic Express have also tried to enter through WeChat mini-stores.

What did Jie Zhang learn during his time spent working for Huawei?

Jie Zhang: A lot, everything I know about business, I learned at Huawei. I mainly left because I was starting a family and it was too difficult to live out of a suitcase anymore. It’s a fun job because there are lots of challenges. We would meet customers during the day, have internal meetings at night and do training during the weekend. It’s like a college or the army because of the amount of time you spend together. They push you to the limits. It feels great when you achieve something because the work was so demanding, so it’s great for young, single people but not for people who have families.

Also, as a Chinese, there is a great deal of pride in Huawei. In 2004 when I came to Norway, I was not selling Huawei. I was selling China, trying to convince telecommunication companies that China could produce something other than manufactured goods.

Does the mispronunciation of Huawei in different parts of Europe affect brand recognition?

Jie Zhang: I don’t think it matters a great deal. The most important thing is the identity attached to the brand and the quality of what you produce.

Mathieu David: What is Jie Zhang’s point of view on the success of Chinese brands overseas?

Jie Zhang: You need to have resilience when you try to enter a new market. It would help if you had visionary people in charge of your company. Huawei’s leaders have that.

What does the next wave of Chinese companies that will be successful in the West look like in Jie Zhang’s opinion?

Jie Zhang: Probably fashion, there are companies like Bosideng which have been really successful outside China. There are so many Chinese companies that are operating on e-commerce platforms, but they are almost hidden. They turn over serious revenue, but their usual route to market is through companies like Amazon. They don’t compete so much with their brand, but they dominate online e-commerce in the west.

What is the experience of representing Maotai Baijiu in the Nordic countries?

Jie Zhang: It is a hobby rather than a business. I was happy to help them to investigate the market because I like the brand and I like the product. But Maotai is not really concerned with how much they sell in Europe. Actually, the more they sell outside China, the less they sell in China, plus the price in China is higher, so they are really not concerned with how much they sell in Europe. They advertise in the west as part of a branding initiative. Most of the consumers in Norway are Chinese tourists or the local Chinese community. But they have also tried to launch different innovative products like cocktails, ice-creams, and chocolates with baijiu. But I don’t think it will become a big thing anytime soon. It may become like sake, where it is served on special occasions.

Mathieu David: What unexpected business success has Jie Zhang witnessed in China?

Jie Zhang: Probably the technological advance, the digitalization of society. In the future, companies are going to be copying Chinese as opposed to the other way round. Also, many smaller brands have entered China successfully over the years, which is a positive.

How does Jie Zhang feel about working overseas instead of living and working in China?

Jie Zhang: I have had the privilege of returning home at least every 2 months for work, so I fly home and see my parent every 2 months. Being an entrepreneur has allowed me to be able to connect more often with China.

Mathieu David: What unexpected business failure has Jie Zhang witnessed in China?

Jie Zhang: Probably Amazon. At business school, I learned about the case of India and Russia, where foreign companies found it really difficult to succeed. I hope, and I suspect, foreign brands will continue to be successful in China.

When you want to do digital advertising in China, there are a few guidelines you should follow, according to Jie Zhang from AdChina.io.

• Use a multi-channel approach
• Only fools rush in – take your time when entering the digital marketing sphere in China!
• Have a trial period, test the waters before you commit serious money to digital advertising in China
• Cross border ecommerce with digital marketing is a great way for smaller foreign brands to enter China
• WeChat offers the most precise targeting but is also the most expensive
• Dealing with social media platforms directly is difficult for foreign brands because the Chinese data system is different and will be unfamiliar to Western digital marketing experts
• Dealing with other digital marketing agencies can be tricky because they will outsource a lot of the work which may then be outsourced again, this adds to the cost and makes the process less transparent
• AdChina.io makes it simple, transparent, and familiar to western digital marketers to engage with Chinese social media users

Listen to the full China Paradigm episode 121 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article Digital advertising in China, using simple platforms to engage Chinese customers: China Paradigm transcript #121 with Jie Zhang is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Today’s guest is Pierre Gilson. He is a baker and pastry chef with over 15 years of experience working with high-end establishments and globally recognized F&B brands. In May 2018, he opened Stoneground Consulting. He advises global food companies such as Andros and Lactalis in operations, staff training, and marketing.

Listen to the full China Paradigm episode 120 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

Consumers have their own preferences in Chinese bakery and pastry market

Matthieu David: How sweet should baked goods in China be to satisfy the needs of local customers?

Pierre Gilson: There are a few differences between the European and Chinese bakery and pastry markets. For one, Chinese consumers generally dislike overly sweet desserts, except for some areas. But in general, desserts must be less sweet than the same desserts in the West. This is a bit of a challenge for European bakeries in China. But to attract mainstream consumers, the sweetness of baked goods in China must be reduced.

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Matthieu David: What other characteristics of a product need to be adapted for the Chinese bakery and pastry market?

Pierre Gilson: Taste and shape. We are also trying to educate the consumer about Western palates and make them come to our preferred recipes and tastes. I have never used durian, but I have tried using goji berries, matcha, and Sichuan pepper in pastries. The results have been positive.

What is the process of coming up with a good mix of ingredients?

Pierre Gilson: By taste, I like to try and experiment with lots of different Chinese foods. About a year ago, while in Sichuan, I made some chocolate bonbons with Sichuan pepper ganache inside. So, when Alipay came to me and asked me to make a documentary where I baked using Chinese ingredients, I made a chocolate cake with pineapples roasted in Sichuan pepper inside, and it turned out very well.

Matthieu David: What other ingredients besides Sichuan Pepper does Pierre Gilson consider using for his products?

Pierre Gilson: Goji. Also, I know tofu can be used in vegan cakes. Someday I would like to work with durian, but I will need to figure out exactly how to do so first.

Are Chinese consumers pleasantly surprised when they taste Stoneground products?

Pierre Gilson: They were very pleasantly surprised by the chocolate cake I made because the Sichuan pepper and pineapple worked very well together.

Matthieu David: Does the addition of Chinese ingredients contribute to the marketing strategy?

Pierre Gilson: If you want online engagement through pictures that can be shared online, the most important thing is that it looks beautifully presented. But when using KOLs and KOCs, incorporating Chinese ingredients helps a lot.

What was Pierre Gilson’s perception of the Chinese bakery and pastry market when he first arrived in China 5 years ago?

Pierre Gilson: Initially, I went around the city to try out all the different bakeries and get an idea of what was here, and what consumers liked, particularly that was coming out of European bakeries in China. There were many Paris Baguette stores and some genuine Western bakeries but much less than what we currently see. At that time, I was asked to replicate what I had always done in France, but later I realized how important innovation was for baked goods in China.

Matthieu David: How has the Chinese bakery and pastry market changed over the past 5 years?

Pierre Gilson: China is attracting more and more top-level professionals in this field. It is becoming one of the biggest markets in the world for baked goods.

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Do Chinese customers consume baked goods on a daily basis or does that happen more on special occasions in China?

Pierre Gilson: It has changed a lot. It is now considered less of a special occasion purchase. 5 years ago, I met a consumer who thought of a baguette as a dessert. But in the last few years, with more and more Chinese traveling to Europe and living there and adopting the local habits around coffee and croissants and then returning to China and looking for the same thing from European-inspired or actual European bakeries in China, purchases of baked goods in China have become more of an everyday thing. But especially outside Shanghai, it has not yet become a daily routine.

Matthieu David: How do Chinese people approach the consumption of croissants?

Pierre Gilson: It’s different from region to region. But in Shanghai, it is often the case that they like to come in groups of friends and buy coffees, croissants, and other baked goods and pastries. It is a social thing in Shanghai. The Chinese bakery and pastry market is less developed in other cities, and it’s more of a discovery purchase. So consumers are just trying it as something fancy or new.

What new interesting pastry and beverage pairings have Pierre Gilson discovered in China?

Pierre Gilson: Not in Shanghai, but if you go outside a little outside Shanghai, like in Minhang, you start to see some interesting combinations like pork on croissants.

Matthieu David: Why are baked goods and pastries overpriced in Shanghai?

Pierre Gilson: To make the best products, you need the best ingredients, particularly butter and flour. And these ingredients are better outside of China, so we have to import them, which brings up the cost of premium baked goods in China.

What is Pierre Gilson’s opinion on the fact that there aren’t any major French entrepreneurs in the café/ restaurant industry in China?

Pierre Gilson: I think French food entrepreneurs do best when they have total control over all aspects. They won’t feel comfortable working in an environment where they can’t guarantee the highest quality ingredients. To scale up in the Chinese bakery and pastry market and become as big as Starbucks, you need to automate production. This is guaranteed to lead to lower quality products, possibly why there is a paucity of global, mass-market French food brands.

What type of services does Stoneground Consulting offer on the marketing side of a bakery & pastry business?

Pierre Gilson: Actually, we work more with clients on the kitchen layout design, equipment supply, sourcing ingredients, opening support, menu design, full team training. So more on operations rather than marketing.

The marketing activities that have the biggest reach seem to be bringing people to events because they can actually taste the products, so I will advise working on taste more than images.

Matthieu David: What was the experience of opening the biggest Starbucks in the world like for Pierre Gilson?

Pierre Gilson: It was very high pressure because within 6 months. I had to ensure that a factory went from not existing to operating and producing goods and all the jobs.

Matthieu David: What other types of market constraints have impacted the way Pierre Gilson works?

Pierre Gilson: Apart from some companies wanting me to add preservatives so that baked goods will stay fresh for 12 to 24 hours, which I will not do, some other challenges are to have a steady supply of the best ingredients at all times.

Matthieu David: What are the challenges of operating a Starbucks kitchen?

Pierre Gilson: I had over 100 people under me, which is not normal for a baker, so I had to learn on the job how to become a manager. You have to be there all the time and keep an eye on every aspect because problems can multiply quickly in a factory.

Matthieu David: Recruitment: how hard was it to find well-trained people?

Pierre Gilson: Well, Starbucks is good at recruitment, so it wasn’t too hard to find ordinary employees. But the biggest issue was to find very trustworthy and skilled people to whom I could entrust a chef’s job.

What is Shanghai Young Bakers and what does it do?

Pierre Gilson: It is an association founded by French people. We teach orphans from the countryside how to bake and offer them a one-year program where they train them in many aspects, essentially giving them the skills to go out and get a good job with European bakeries in China. I am very proud to be involved with the organization.

What source of inspiration has impacted Pierre Gilson the most in his entrepreneurial journey?

Pierre Gilson: I try to take inspiration from everyday things. In terms of books or movies, I don’t really rely on them too much. I have two extremely helpful, life-long mentors, who I can turn to for advice no matter where in the world I am working. But in Shanghai, my wife is a massive help to me in my career.

Mr. Paul Bocuse was a famous chef I had the honor of working under. I always try to emulate him because I have never seen a chef who treated all his staff with such high levels of respect. In return, they respected him. He gives time and attention to everyone, from the dishwasher to the head chef. He made everybody feel as though they were a valued part of the company.

Matthieu David: What does Pierre Gilson do to stay up to date on China?

Pierre Gilson: For food, I subscribe to a French food e-magazine called AtabuLab. I also read a similar kind of publication in English called Eater.

Matthieu David: If he had extra time, what other business ideas would Pierre Gilson pursue?

Pierre Gilson: I would like to do more training. One day, somewhere, I would like to have my own bakery but in shanghai. I feel my calling in the Chinese bakery and pastry market is mostly in training. Not just training professional chefs, but teaching ordinary people how to bake. I want to accomplish a goal in the next few years—more B2C work.

Matthieu David: What is the most surprising experience that Pierre Gilson has had so far in China?

Pierre Gilson: Seeing somebody taking a selfie with a baguette.

What surprising business success or failure has Pierre Gilson witnessed in China?

Pierre Gilson:  I think of it a success that there are no huge, fast-growing French pastry brands. Because each French bakery around the world is essentially an ambassador for France and French culture, so I am glad that the experience of going to a French bakery has not been automated, commodified, and scaled-up.

In terms of a surprising failure, I was surprised that the macaron didn’t meet its potential. I think the company that brought it to China failed to localize the product sufficiently.

Listen to the full China Paradigm episode 120 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article French consultant gives insight into the developing Chinese bakery and pastry market: China Paradigm transcript #120 with Pierre Gilson is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Kai Hong:  I think you pretty much covered it. So, JINGdigital is a CRM/Marketing Automation platform providing digital optimization solutions to customers and has been involved in marketing automation in China since 2014. We help brands to define better, reach out to, and target Chinese consumers on WeChat.

Listen to the full China Paradigm episode 119 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

Click here to find out how daxue consulting can help you to size up your market in China.

What is the current company size and revenue? How many employees?

Kai Hong:  Almost 10 million dollars in revenue and 130 staff.

How did JINGdigital acquire luxury brand customers?

Kai Hong:  Luxury brands often spend more on speculative marketing campaigns than normal brands. They embraced having WeChat accounts first because it was potentially a more effective way of building relationships with clients than EDM emails. Also, almost everybody in China is on WeChat, so brands don’t target Chinese consumers on WeChat. They are going to fail here. They came to us because we had already built a good name for ourselves in providing premium CRM solutions for companies on WeChat. Our marketing automation in China has a good reputation.

Why is JINGdigital the top choice when it comes to CRM solutions for companies on WeChat?

Kai Hong:  JINGdigital has a very feature-rich platform that gives brands a lot of freedom in creating their own tags tailored towards potential customers. Secondly, our customer service is excellent. Thirdly, we have lots of operational knowledge, which gives us lots of credibility. Although companies would like to develop their own marketing automation in China solutions, they have less money to develop and implement new solutions constantly. That is also where we have an advantage because SaaS makes sense for these companies. It gives them agility in terms of innovations, and the cost is decreased.

The JINGdigital teams – how are they categorized?

Kai Hong:  Of the 130 staff, around 70 people are in R&D/product development. The remainder is mostly in sales and customer support, and then, of course, there are the managers.

What is the JINGdigital pricing policy in providing CRM solutions for companies on WeChat?

Kai Hong:  When it comes to segmenting and pricing the CRM solutions for companies on WeChat that we provide, we have five main products. So, certain companies that are more B2B will not want to bring out new campaigns constantly, but luxury companies actually need to run campaigns constantly. So many things impact our clients’ price, i.e., how many followers they have. We also do ISV so clients can pair our tools with other CRM platforms they may be using. The bottom line is that companies have to make economic sense to adopt our SaaS rather than using custom/ privately developed solutions. But prices would start at roughly 1,000 USD per month.

Matthieu David:   Why is JINGdigital targeting companies with 15 million USD revenue?

Kai Hong:  Because the CRM solutions for companies on WeChat that we provide are better than the competition, we charge higher than some competitors. However, when we show our past figures to potential clients and generate for them, generally, the price is not an issue for bigger companies.  

Initial funding of JINGdigital

Matthieu David:   Initial funding – how much money did you have to raise to start JINGdigital?

Kai Hong:  So, we are all entrepreneurs, so we financed the company ourselves for the first 3 or 4 years, and in the past 2 years, we have raised about 5-10 million USD from external investors.

Why do Kai Hong use the term marketing automation more than CRM?  

Matthieu David:   Marketing automation vs. Social CRM. You tend to use the term marketing automation a lot more than CRM or social CRM, but it seems your solutions are very WeChat-centric. Why do you use the term marketing automation more than CRM?  

Kai Hong:  Basically, saying Social CRM is less clear, so when you talk about it, you need to explain more, whereas marketing automation in China is understood clearly by all marketers. It’s a less vague term.

Matthieu David:   In my opinion, your platform and services are much easier to use than Facebook’s advertising platform, Google AdWords, or even ZOHO’s CRM. What features do clients like about JINGdigital’s software, and which of the CRM solutions for companies on WeChat do they often end up ignoring? What are some examples of marketing automation in China that JINGdigital does?

Kai Hong:  We help brands to understand customers better and to target Chinese consumers on WeChat. After adopting our solution, the solutions will help the brand better track user behavior in the very diverse WeChat ecosystem. Then we allow brands to use our platform, or we integrate their CRM system with ours. Also, we help them to implement market segmentation. We also allow them to create and execute automated responses in user journeys. Because we are on a social platform, we allow clients to easily create content with audio, pictures, and video, which they can use to target consumers. Also, our BI analytics is powerful, and it allows our clients to display results clearly.

Many systems in China like WeChat are relatively closed and difficult to implement campaigns such as ad retargeting. How does JINGdigital’s software interact with other digital assets outside of WeChat?

Kai Hong:  WeChat is relatively open to innovative third-party companies like us, and we can avail of their comprehensive APIs. Unfortunately, WeChat is the only open platform, but there are other platforms like TikTok and Little Red Book with strong growth, and these could be future channels. Hopefully, in the not too distant future, we will target the users of China’s other huge apps in the same way we target Chinese consumers on WeChat.

Matthieu David:   Is the phone number still the key to identifying the lead client?

Kai Hong:  Yes.

Are there regulations similar to the GDPR for personal data collection and storage in China?

Kai Hong:  So, foreign brands who want to use the data of Chinese citizens can store the data on special systems. One example is storing critical or personal data on PII servers. These servers in China will be fully compliant with data protection laws in China.

Obviously, compliance with data laws is essential for foreign brands. Many of our clients are Fortune 500 companies. Before we work with them, they will test our security systems, and because these tests are so stringent, not many other companies will pass these tests.

How does JINGdigital manage client expectations when it comes to CRM solutions for companies on WeChat?

Kai Hong:  We select our customers. We will often politely decline the opportunity to provide CRM solutions for companies on WeChat who want to have bespoke solutions. Sometimes we will outsource work if there is a program the client wants that we do not have.

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How does JINGdigital define their competition?

Kai Hong: Some companies provide bespoke solutions, and some competitors come from a DMP or DSP background.

How does Kai Hong see the future of JINGdigital?

Kai Hong:  Growth is phenomenal. We generate 1500-2000 leads every month, so the trend is very 5. We want to become the best SaaS company in China.

Matthieu David:   Outro: We’re pretty much out of time, but we didn’t get to talk about your previous experience in founding Capvision or your experience in Entrepreneurs Organization. Hopefully, we can chat about that again. But thanks for taking the time to talk with us.

Kai Hong:  Yes, let’s chat again soon.

Key Takeaways

1. JINGdigital is a CRM/Marketing Automation platform which has been providing digital optimization solutions to clients since 2014. They help international clients on a SaaS basis to communicate effectively with consumers on WeChat. JINGdigital is approaching the 10 million USD mark in terms of revenue and have raised between 5-10 million USD in external investment. They now have 130 staff.
2. It would be too expensive for each brand to research and develop their own CRM solutions so clients use JINGdigital who they know will release new features regularly.
3. JINGdigital do not provide bespoke or custom solutions. They have recently begun to outsource this kind of work.
4. A strong sales team is very important to JINGdigital despite already having a very high quality platform.
5. WeChat is the only platform they work on currently. Platforms like TikTok and Little Red Book are potential future partners but are currently not open to companies like JINGdigital
6. Navigating data protection regulations in China can be difficult for foreign companies. JINGdigital is compliant with international standards and their security systems go through rigorous testing procedures.

Listen to the full China Paradigm episode 119 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article 2014 SaaS start-up provides CRM solutions for companies on WeChat approaches $10 million in revenue and raising millions of dollars in external investment: China Paradigm transcript #119 with Kai Hong is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 118 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

Can you give us a brief history of your company’s journey in China?

Rodney Evans: Thanks for having me. I initially came to China as a photographer because I wanted a change of scene from Australia. There was massive room to grow as a commercial photographer as the market was so underdeveloped back then. We were the first international-level Shanghai content production studio. We received widespread acclaim across China relatively quickly back then.

But over the last 10 years, the industry has gone from strength to strength. The rise in professionalism, the increase in the quality of the local photographers, technicians, the crew, the creativity. The adoption of new technologies have been breathtaking. It is at a world-class level now. Having a studio for the last 11 years, I’ve borne witness to this metamorphosis. I guess we just caught a wave and have been riding it ever since. As the industry has grown, social media has increased the demand for marketing content for brands in China, albeit cheaper content. Still, all brands that advertise on social media need content. It’s about being flexible enough to catch new work when it comes.

You mentioned international studio, what makes a content production studio international?

Rodney Evans: When I first came here, I remember these big warehouses everywhere. But when you would go to a studio to shoot, you would never find all of the equipment you need, and you would have to go to the studio, find out what equipment was needed, go out and procure the equipment and bring it back to shoot another day. So, when we built our Shanghai content production studio, we had the chance to take a lovely place in the heart of the city.

We made sure it had all the equipment that a crew would need, and at that time, it was really a blue ocean market. But pretty quickly, people saw what we were doing and started to imitate us and our business practices. But I took that as a form of flattery. So, by international, I mean that we provided a full service, one-stop solution. But now, apart from studio and equipment rental, we also offer lots of other services.

How did you manage to get such a good location in Shanghai?

Rodney Evans: So firstly, as with most successful businesses in China, you need a bit of good luck and to avoid any bad luck. Before buying it, I had worked in that place and had planned to set up a Shanghai content production studio in 2008 in a different location. The financial crisis happened, so we postponed that idea. But one day, while working in our current studio, I talked with the landlord and agreed to rent it from him.

At that time, there were no metro stops nearby. Now there are 3. There were none of the cafes and restaurants you see now, only old houses and now there is the big mall where previously there were demolished old houses. The rent has gone up a lot, but we have a good relationship with the landlord, and we bring a lot of celebrities to our Shanghai content production studio, and when he comes around and brings his boss, he can show them all the celebrities on our wall.

What are the specific services that Central Studios Shanghai offers its clients?

Rodney Evans: 80% of our business comes from production-related services instead of studio/ equipment rental. So, clients need us to create image or video marketing content for brands in China. Sometimes it will be direct with the brand and sometimes through an agency.

How has the revolution in the internet changed the demand for marketing content for brands in China?

Rodney Evans: Totally, at first, we did shoots, and these were released in clearly defined channels such as OOH (out of home), in-store, online, magazine print, posters, etc. Nowadays, it’s majority digital with a little in-store and outdoor. Back then, clients would pay less for digital because the lower level of technology, i.e., internet speeds, device resolutions, mobile phone usage, etc., meant you couldn’t reach as many people. And now, they’ve gotten used to those low prices, although digital reaches far more people than any other medium.

The internet has impacted our pricing a lot, too. These days clients come to us and need different marketing campaigns, but their marketing budget isn’t any bigger. It needs to split across many different campaigns, and our profit margins have come in a fair bit. There are fewer and fewer big brand campaigns and more of a move towards brands becoming tactical. And the shopping calendar is being driven by Tmall and their sales holidays. So, instead of big overall brand campaigns, brands focus on the Tmall sales events such as 11.11, Valentines Day, Chinese New Year, 6.18, etc. So, the way these brands create brand loyalty has also had to change.

How has COVID-19 impacted the media production industry?

Rodney Evans: For the first 2 months, our Shanghai content production studio had to go into lockdown mode and cut all costs. But in around April, clients started to trickle back looking for us to do work for them. And now, despite marketing budgets being down in those companies, we are slightly up on last year, probably because domestic brands are finding it harder to do campaigns outside of China and overseas clients who can’t bring their teams over and need us to do so stuff for them. Also, the domestic economy is quite strong.

Could you share with us some company metrics from 2019? How is your team organized? What are the main departments?

Rodney Evans: Our Shanghai content production studio has about 30 staff. In 2019 we restructured a lot. We keep a lot more marketing content for brands in China jobs in-house, saving about 25% of our margin, which goes toward our bottom line.

We used to have 2 main departments, one being the photo department who take care of clients who come to use our studio or equipment. I liken them a little to our retail in that there is more traffic, but we make only 20% of our money through it. The other main department is the production department. They make the marketing content for brands in China and deal with building relationships with clients and recurring customers. But since early 2019, there has been the post-production department which has recently become its own profit generator. Then there’s also the admin, of course. In terms of structure, we have regular meetings with the heads of each department.

What’s it like managing artists?

Rodney Evans: Well, we have one or 2 junior photographers who are always in the Shanghai content production studio. However, after looking at a client’s brief, we usually recommend an outside artist for the job, be they video producers or photographers. When working with celebrities, we often don’t have a say in who the artists will be because they will already have their preferred artist. In those cases, it’s just about making sure they have all the equipment they need. But when our suggestions for particular artists are taken on board, we try to balance respecting the artist with delivering for the client and keeping the project within budget.

Do you almost feel like an agent for those artists?

Rodney Evans: Well, we’ve thought about doing that before, but in China, the concept of loyalty doesn’t really exist in that sense. The market seems hardwired to cut out the middle man, so we generally don’t get too attached to any particular artists.

There are some very famous photographers in the West such as Richard Avedon, Yann Arthus-Bertrand, and Henri Cartier- Bresson. Are there similar photography stars in China? Any potential stars to look out for?

Rodney Evans: Yes, definitely. Probably the most well-known would be Chen Man, a Beijinger. She was one of our first clients. A lot of other photographers have massive amounts of followers, in part due to them photographing celebrities. Interestingly, the people at the top over here don’t really seem interested in working overseas. The massive volume of work here, plus their adherence to the unique Chinese style/ aesthetic, means most are fully occupied with shooting here.

So, there aren’t really many worldwide famous Chinese photographers?

Rodney Evans: No, apart from Chen Man, who recently has moved a little away from photography and tried to branch into directing. Also, because they are so busy, Chinese photographers have less time to pursue their own projects and come up with their own unique style to emulate the other top Chinese photographers. A lot of interesting stuff coming out of the younger photographers.

I’d like to understand a little bit about how the market for marketing content for brands in China is structured.

Rodney Evans: Market structure is driven by production companies who try to keep as much as possible in-house. Sometimes brands will go directly to KOLs, influencers, and photographers who will also have their own particular style or team. Every player is trying to grab as much of the market as possible and how you navigate that.

What internet trends are likely to affect the content production industry in China?

Rodney Evans: Probably computer-generated images and virtual celebrities, where celebrities won’t have to travel to a location anymore and live stream a virtual location. So, a move away from the traditional model towards the virtual level, I think China is at the forefront.

How will you be ready for that? For the smaller part of your business that involves renting space/ equipment.

Rodney Evans: Well, I think it’s actually pretty resilient in that regard. Marketing content for brands in China and shooting people on green screens will always be in demand, even if the model’s environment is virtual. My biggest worry about the rental part of our business is that I may lose out on opportunities because I don’t concentrate on them.

What books, movies, etc. have inspired you?

Rodney Evans: Over the years, I’ve had to read many management books that have been shared through Entrepreneurs Organization (EO). In EO, they recommend a system of scaling up which follows Gazelles’ Management System. But as a result of reading so many management books, I wanted to read some excellent fiction. So, a great book I’ve read recently has been The Overstory by Richard Powers. It talks a lot about the destruction of the environment and how intelligent, and dependent natural systems are on each other.

You live in shanghai which is a very urban and very busy city, what in particular resonated with you in this story?

Rodney Evans: It’s also kind of a metaphor of not just how people depend on nature but how people depend on people. And against the current backdrop of society, we face these issues highlighted in the book about how we poorly treat the environment and each other.

Having a son now and thinking more about the future, the environment is quite important to me. We’ve made some changes around the office and implemented some initiatives to try and do our bit. I’ve been happy to see more general awareness, and lots of changes and policies have been made and brought in in China. I think there’s a chance for China to really lead the world on this issue.

How do you stay up to date with news in China?

Rodney Evans: I follow a few industry blogs which keep me up to date, and also some WeChat accounts such as RADII China, also I like the Sinica Podcast

What books on China would you recommend for people who want to understand more about China?

Rodney Evans: I read a great book a few years ago by Mario Cavolo called China: The Big Lie, which gave some incredible insights into the cash economy in China. Another book I read recently read was called Feeding the Dragon by Chris Fenton. It gave an insight into the use of soft power by China.

You’re from Australia. How is the relationship between Australia and China these days?

Rodney Evans: It’s a little disappointing, but hopefully, it will blow over.

How about productivity tools? How do you organize your digital life?

Rodney Evans: I turn my WeChat notifications off, so I won’t notice anything unless I look at my phone, same with email. Generally, I turn all digital notifications off apart from my morning alarm.

In terms of productivity or project management tools, we’ve tried a few, but if everybody doesn’t buy-in, then it kind of falls apart, which has happened to us a few times.

I use Evernote to keep all my notes, but I prefer to use Apple Notes more and more.

If you had more time, what would you do?

Rodney Evans: If I had more time, I’d love to be more supportive of my wife’s endeavors. She’s creative and always has great ideas, which id love to collaborate more on.

An unexpected surprise in China?

Rodney Evans: Deserts in Inner Mongolia, resorts in the middle of deserts. Once, back when I was a photographer, I was hiking up a mountain in Sichuan to catch the sunset. We got to the place we had wanted to shoot from. The moment the sun broke through the clouds, instead of silence and awe, we heard this massive cheer from a mountain nearby, which unbeknownst to us had a hotel on top of it and hundreds of people had come out to watch the sunrise, so the thing is that because of the scale of the country there are always huge amounts of people everywhere.

What unexpected success/ failure have you seen in China? In society or business.

Rodney Evans: An unexpected success was the fair day we started back in 2010 where everybody would come down and sell their second-hand stuff, and now it attracts a few thousand people.

A failure would be the global political situation. Hopefully, for the sake of international cooperation, there will be a return to normalcy in political relations. That’s coming from both a business perspective and from a personal perspective.

Listen to the full China Paradigm episode 118 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article Australian CEO and founder of Shanghai content production studio: China Paradigm transcript #118 with Rodney Evans is the first one to appear on Daxue Consulting - Market Research and Consulting China.

You have been in China for 7 years, but this is not your first company, Maik’s Gourmet was founded in 2018, but before that, you started a company in Manilla. So, you were already in the food business before setting up your current gourmet food business in China. Right now, you’re providing players in the food industry with products such as duck confit, slow-cooked braised beef, sauces, bases, and side dishes. From your PowerPoint, I understand you are working with a variety of players such as restaurants, cafes, and caterers.

Listen to the full China Paradigm episode 117 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

What is Maik Juengst’s perspective on how the coronavirus outbreak impacted businesses?

First, thanks for the invite, it’s the first time I’ve done this, so I’m excited to share our story. Before the virus, almost every food business in China, including ours, has been impacted negatively. At the time, when everyone had to stay home and nothing was open, we had revenue going from 100 down to less than 10%, so that was a shock. We had to adjust spending in the company straight away because we couldn’t do much in terms of sales because we do more B2B, which was impacted because those businesses had no customers.

We did have lots of time, and we wanted to make use of that so we created a platform for B2C, where customers at home could order our food. Today, and looking to the future, it is probably even better now than before the virus. Because the demand for safe convenient foods, like what we provide, is pretty high at the moment and unlikely to decrease. Also, excluding highly processed convenience food providers, there are not many players in the gourmet food industry in China. Some provide specialist sausages or French dishes like duck confit, but we would rather position ourselves as covering the whole line of B2B and B2C.

Yes, business is better now than it was before coronavirus because of the increased demand for healthy food. I think the gourmet food industry in China is on the way up and will continue to grow.

Are restaurants less affected by the outbreak than hotels?

I think so, the gourmet food industry in China is definitely changing post coronavirus. I originally came from a 5-star hotel with a buffet background. But I’m not sure if the change is totally to do with viruses, maybe more to do with the fact that there are too many 5-star hotels with buffets competing in the market. Maybe after the virus people will be humbler about their spending, so 5-star hotels will struggle, especially those buffet restaurants. Lots are now only doing buffets on the weekend. This is normal in the West because you won’t find that many customers willing to spend 80 USD for a lunch buffet. People want to spend 10-20 USD max and are looking for somewhere quick.

Thankfully for us, we have less of those hotel buffet customers and the one we do have is moving more towards a model more similar to what we’re doing. A faster, convenient service, like a Waga’s, a Starbucks. A good option to get what you need for an acceptable price. Less 1.5-hour lunch buffets basically. I would say my food business in China is like a Starbucks for food, although they have food too, they concentrate on coffee. However, Maik’s Gourmet focuses on the food, so is the opposite of Starbucks in this regard.

How has the coronavirus outbreak changed the way consumers judge how they buy their food?

I feel for a lot of my Chinese B2B customers it’s more about convenience rather than healthy food, so coffee shop owners would rather buy a precooked product rather than prepare it from scratch. It might be safety, labor costs, having a small kitchen, opportunity reasons (a commercial property owner may have extra space in the front of an office and there may be nowhere nearby offering food so they want to turn it into a restaurant). So, using my company you would only need to hire a third of the people and would require a third of the space that a traditional restaurant would need and you can still serve them a decent meal. Plus, there is less of a risk of spoiled products. So, these are just some of the food solutions in China that we provide.

Was the WeChat platform created during the outbreak for B2B clients or for the end client also?

Both, we can sell through an app directly to end-users who want to enjoy our products at home or if you’re a food business in China the chef can just log in to our b2b app. Shuhai Foods manages it, and the chef can order everything he needs and have it delivered within 24 – 48 hours.

Tell us about your food business in China

We started with customers similar to Waga’s looking for decent products which were easy to prepare. They weren’t so readily available here, so what was happening was business owners would come to China and want to create a brand, but they would struggle. They might find the equipment, a good kitchen, and the know-how, but never the whole suite. You might find the right chicken but not the guy who can cook it a certain way, so after opening a few stores, the chicken would taste different store to store. At this stage, I had left the hotel business and was doing some consulting in the gourmet food industry in China.

One day, one of my friends, Matt, who has a food business in China which is basically a restaurant chain with stores doing a DIY pizza concept, said to me, “I wanna open 100 stores, but I’m not interested in going around teaching each chef how to cook pumpkin soup.” This was when I had the bones of the idea already and when I brought my idea up, he liked it. So, he asked me to produce soup elsewhere, freeze it, and ship it to him so it could be reheated and served in his restaurant. This way he could focus on marketing.

Garage kitchen that had a Hai Di Lao factory produce its soups and sauces

Our customer experience, instead of teaching each chef how to roast a pumpkin and he could worry less about having bigger kitchens which would require lots of energy. So, I went back to the drawing board and opened a little garage-kitchen, à la Bill Gates at Microsoft, in a little, unlicensed 40sq meter kitchen. We didn’t pay attention to legal issues at first because we were so small, we just wanted to test demand. It turns out demand was pretty high, and we realized we weren’t professional enough, so we got in touch with people who do that on a professional basis with Chinese food.

We contacted some factories and made some relationships. We found a factory owned by Hai Di Lao, a huge, publicly-traded company and a very well-known hot pot chain in China. The business model for this particular food business in China is having a strong back-end and a strong front-end. Back-end meaning manufacturing and supply chain, where everything is manufactured off-site and can be sent to any of their stores in China.

We basically just walked in and asked if they did western food, and they only did Chinese food. So, we asked them about making some western soups, sauces, and meats in their facility. They agreed. And it’s been a great relationship, because I don’t need to worry about different manufacturers, building guanxi with thousands of different factories, business licenses, etc. They’re covering it all and they have a supply chain network and warehouses so I can have my soups in Beijing Wuhan, Xi’an wherever, and it can be delivered to restaurants in less than 48 hours.

What does Maik’s Gourmet bring to the table in their partnership with Haidilao a very big and famous food business in China?

Well, they were never a client, a few years ago I did some social media videos for them but that was the extent of our relationship. But I contacted them because I had other big customers in the gourmet food industry in China who told me that Hai Di Lao could probably do what I was looking for, and so I met their South China general manager, a Taiwanese, so he had some experience of Western food, and he was very supportive. Now it’s year 2 and despite some initial hiccups, everything has been working fine.

We’re basically an R&D company providing food solutions in China. We do quality control, sales, and marketing. So, we create dishes using their facilities, we do our own R&D in their factory despite them having their own R&D team, they had never focused on western food before. And of course, we bring revenue.

Can you sell anywhere in China or are you still just looking for clients in the Guangdong area?

That’s the main reason we chose Hai Di Lao because they allow us to sell all over China. But there are some things we still have to go elsewhere to produce like sausages and desserts but Hai Di Lao covers everything else. A very big chain like Starbucks, Waga’s, or other huge food business in China would probably have their own R&D chain capable of doing what we do but often they bring us on board because, like Oatley, there may be fan hype around the brand, so branding is important for us.

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So, what kind of sized food business in China does it make sense for you guys to work with?

It’s up to the owners really, the largest customer we have has 15 stores. Most of our customers are businesses owned by the Chinese. Now, they could cut us off and save some money but I also offer teaching, training, constant updating of the foods, market research, even sometimes going to their businesses and talking with their customers which regular suppliers in the gourmet food industry in China will not do. Our after-sales service is very strong. Also, big businesses might not bother with employing R&D people to come up with something basic like a salad because there are already so many competitors, so it might be worth it for them to just use us.

How does Maik’s Gourmet tackle the issue of inventory for their clients? I understand you provide very safe sourcing and give them marketing advice. But in terms of just having the right amount of inventory how do restaurants and you tackle this issue?

That’s a very important question that every food business in China and indeed around the world faces. Most stores don’t have big freezers to store 20 kilos of a product, so they need more flexible orders. So, we can supply any quantity of product within 24 – 48 hours. So, when you include the expensive, high-quality delivery fee, the more you buy the cheaper the delivery fee will be. Our delivery service will be trucks with freezers that go directly to your business which is the highest quality possible in food safety. We are very flexible in terms of the orders we receive.

As an example of some of the food solutions in China we provide for our clients, if a place can only order small amounts of a certain product per day because they have a small kitchen, we can advise them on what else to buy from us and sell based on their location, competitors, or several people in the area and teach them how to prepare that product, this way the more they buy from us, the cheaper the delivery fee will be, plus they can add new high-quality products to their menus.

For food businesses in China, how hard is it to ensure the quality and safety of the products?

Yes, so we adhere to those standards but actually, most of our customers don’t really care, maybe 80% just buy from us and trust us. The only people who ask about licenses are generally people who have to. I understand if you’re a small business you don’t have the time. But occasionally people will come and inspect our factories but most don’t. Resourcing, we do this with the factory. So over seven years I’ve built up a network of imported raw materials or use local farms and I take care of this myself to ensure quality and also, because of govt. regulations all this info must be tracked.

Regulations in the food business in China are very complicated and change a lot so, thankfully there is a department at the factory that takes care of this. At a certain size of manufacturing, there is a govt. person in the factory of every food business in China at all times to ensure regulations are not violated and fortunately the officials in the factories we work with are highly diligent and good at keeping up with regulation changes and updates because enforcement is very strict in China.

Why is focusing on B2C is not a priority right now?

So, we would like to work with end clients more but it’s more work and requires more time and resources to do social media and to get onto the right sales channels. So, at the moment we just sell the exact same products to end clients as we do to any regular food business in China. It takes lots of marketing dollars and we would be open to selling our products to a company that wants to do this.

In the west, there’s the idea that frozen food is fresher than fresh, or is fresher than a lot of produce you buy at the store which has never been frozen. Is this idea prevalent in China, too?

I think it depends on background/ education. Some people have zero ideas whatsoever about freshness or preservatives but we can explain the flash-freezing techniques we use. But in general, the knowledge situation is improving. And obviously, with B2B, the chef will know these things.

I ask because in the west many businesses use flash-freezing techniques but not so much in China.

Yes, so I think it’s a marketing problem and you’ve got to educate consumers.

Can you tell us about an unexpected success or failure you’ve encountered?

Hmm, unexpected success might be that I found it relatively easy to build good relationships with Chinese staff, Chinese B2B and Chinese B2C here. I always make sure to simply just be nice, honest, and respectful. I got lots of leads by doing this. Working on myself is the best way to build this, being humble, keep working on yourself rather than others. And this will give you opportunities.

Why Shenzhen?

I initially worked at a hotel there and when I left, my network was there. On reflection, I think our business model could have worked even better in Shanghai. There are so much more resources and big contracts to be made here. Scaling would be easier in Shanghai because the HQs of so many Chinese businesses are here.

Listen to the full China Paradigm episode 117 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article How a German chef started and grew his B2B & B2C food business in China that thrived during coronavirus: China Paradigm transcript #117 with Maik Juengst is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 116 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

How did the coronavirus outbreak affect the garment industry?

Vincent Djen: In most of the world, shops are still not open. In January, lots of orders were canceled. Orders numbers are coming back but not to pre-Covid levels.

Is the winter collection delayed as a result of the coronavirus outbreak?

Vincent Djen: Right now, it’s ok, not a huge effect.

The story behind Cheng Kung Garments

Vincent Djen: My parents started it in Hong Kong. Even though my parents were qualified in electronic engineering, there was an explosion in the textiles/ garments industry in China in the 70s, and they decided to start a company.

How and why did Vincent Djen decide to take over the family business?

Vincent Djen: I went to college in the US, and then I wanted to come home and take over. Even though I grew up around the factory and my parents often talked about business in front of me, I actually needed to learn a lot before I was ready to start managing a factory in the garments industry in China. But I thought I could bring some new and useful technological aspects into the business.

About Cheng Kung Garments, what is the current size of the business?

Vincent Djen: About 10- 11 million USD per year revenue. We make about 150 – 200,000 items per year.

What are the highs and lows of a season in the garments industry in China?

Vincent Djen: For us, peak season is late March to July

How do you manage low season in the garments industry in China?

Vincent Djen: You need to have a strong portfolio and a large customer base to ride out low periods. Also, you need to have one product that you are extremely good at producing and one or 2 other products that you are very good at producing. I liken good garments factories in China to Olympic swimmers. They maybe excel in the butterfly category but can also compete for a podium finish in the breaststroke and backstroke categories too.

How much of Cheng Kung Garments’ production is in-house and how much is outsourced?

Vincent Djen: We outsource about 66% of production to other garments factories in China, generally in Jiangsu, Zhejiang, Shandong, and Shanghai. We may be operating at anywhere from 30 to 60% of that factory’s capacity. I personally don’t visit them too much. Sometimes, I will go to build and strengthen relationships with factory owners or to take clients there, but I am not involved in doing any kind of quality control supervision. Other employees will do that when and if it’s needed.

Is China still the best place for the garments industry?

Vincent Djen: Yes, it has 38% of the global exports of garments. It has the best infrastructure and the deepest supply chains. Also, it has a massive domestic market, unlike some other South East Asian competitors. As a result of this huge market, there are large low-end, medium-end, and high-end markets. So, when exports take a hit for whatever reason, they can rely on the domestic market. Also, China has 4 seasons and different climate zones, which require different types of clothing. In the winter you need to produce heavy coats, in the Summer you need to produce light garments. This better prepares garments factories in China to serve markets abroad which have different climates. Expertise can be developed in these categories while serving domestic demand and can then be exported.

Why is the textile industry still so labor intensive?

Vincent Djen: In the last few years, we have seen automation start to enter garments factories in China. However, it’s difficult for robotic arms to work with soft products. But they have been improving in this regard, and the prices are coming down, so I think in the next 2 or so years, we will see a lot more robotic arms in garments factories in China.

What are the costs of using robotics for manufacturing instead of people?

Vincent Djen: Right now, the costs per robotic arm are hundreds of thousands of RMB. However, once the price drops to around 50-60,000 RMB, we will probably see many adoption by medium-sized garments factories in China.

What are the initial costs for entrepreneurs who would want to get into the textile industry?

Vincent Djen: Nowadays, MOQs have come down massively. When my parents started, MOQs could be as high as 50,000 pieces, but nowadays, 300 pieces can be fairly standard, and we are working on getting that number lower. So many buyers want smaller orders which are more unique, and garments factories in China have had to adapt to this demand.

Is there support from the Chinese government to encourage factories to come up with innovative and sustainable solutions?

Vincent Djen: In 2014, the government made it mandatory for more than 15,000 garments factories in China to publish real-time figures on their emissions. The 2025 plan pushes a more circular economy where factories will have to be less wasteful. In some coastal cities, the amount of water re-usage can be anywhere from 30 – 70%. It’s becoming cleaner and more eco-friendly. These new regulations do add costs, but they also give you tax incentives. Also, if you develop new technologies surrounding becoming more sustainable, you can apply for grants. We have applied for some grants, but we haven’t received any funding yet.

How is 3D printing helping the textile industry?

Vincent Djen: You can 3D knit a jumper which is done in one piece, rather than in 2 or 3, as was traditionally done.

How does recycling in the garments industry fit into the day-to-day activities of the Cheng Kung Garments factory?

Vincent Djen: We can make clothing items from recycled plastic pellets.

Mechanical vs. Chemical Recycling – how many times can a product be recycled?

Vincent Djen: With mechanical recycling in the garments industry, you can break a plastic apart and melt it back into pellets which can be used again to create recycled clothing, but it’s limited to being recycled maybe 2 times. However, with chemical recycling in the garments industry, you break the plastic down to its elements before reshaping it into nylon, so you can potentially recycle it an unlimited amount of times.

REMAKEHUB – what and why have specific products been picked for recycling in the garments industry in China?

Vincent Djen: We chose fishing nets that were collected from the ocean. The reason being that many plastic products have already found suitable recycling end goals but ocean nets haven’t. Many companies have recycled plastic bottles to make garments, but nets are more of a challenge. The reason is that plastic bottles are made from food-grade plastic, which is of high quality, whereas the plastic in fishing nets is mostly composed of nylon. Nylon is very tough but rigid as a material, so it takes more work to make it more flexible and softer for garments. 

Why was adding traceability for waste products recycled by REMAKEHUB important?

Vincent Djen: We developed a blockchain application to track the nets which we could use. This not only helps to verify we are using recycled fishing nets but also helps build the brand story and with customer engagement, and then consumers can sell the clothing second hand.

REMAKEHUB – following the “Cradle to cradle” design concept

Vincent Djen: For recycling in the garments industry, cradle to cradle refers to the circular process of creating products, using the waste from the product to create in other production areas.

Are big fashion brands already engaged in recycling in the garments industry?

Vincent Djen: Yes, Adidas, Patagonia, and PRADA are companies that make recycled products from both fishing nets and plastic bottles

Is it easy to tell if a finished product is made from recycled materials or not?

Vincent Djen: Not without machines; that’s another reason we want to add the traceability feature to our recycled garments.

Is recycling significant for brands that want to attract Chinese consumers, or is it still an afterthought for consumers?

Vincent Djen: Yes, I think the next few years will see a lot of growth in recycling in the garments industry in China. Covid will probably have the effect of speeding this up.

Are Chinese consumers buying recycled clothing already specifically because they are more sustainable?

Vincent Djen: Yes, it’s no longer just a Shanghai or Tier 1 city thing to do. We are seeing Chinese consumers buying recycled clothing all across China, and the trend of buying recycled products is becoming more mainstream.

What were the challenges you encountered when creating a brand in the fashion industry?

Vincent Djen: We tried creating a brand in the UK, but it didn’t make financial sense with BREXIT and the subsequent drop in the exchange rate. This was despite the fact that we had actually signed some contracts with ASOS and Harvey Nichols.

What is Vincent Djen’s greatest business goal?

Vincent Djen: I suppose I just want to help a little bit in making things more sustainable

What books have inspired Vincent Djen in his entrepreneurial journey?

Vincent Djen: One book which I found interesting was The Sum Of All Things about consumer behavior.

What does Vincent Djen read to stay up to date with China?

Vincent Djen: I just watch the news, a lot of news. National news and regional news in Shanghai and Zhejiang

What productivity tool does Vincent Djen use to run his business?

Vincent Djen: On WeChat, I use the reminders, but it can be unproductive because of all the message notifications.

What unexpected business success or failure has Vincent Djen witnessed in China?

Vincent Djen: The success of the KFC and the metro system in Shanghai. Also, Tesla seems to be doing very well in China. Some unsuccessful cases were probably some of the fashion brands that came and failed. They perhaps didn’t update their brand image enough.

Listen to the full China Paradigm episode 116 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article How to succeed in the garments industry in China: China Paradigm transcript #116 with Vincent Djen is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 115 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

What is the current position of Evoke Motorcycles in the Chinese market?

Nathan Siy: The market for high-quality electric motorbikes in China is definitely in its infancy. To date, there are subsidies available for electric cars in but there are no subsidies for electric motorbikes in China. Despite there being between 20 and 30 million low-end, electric scooters or non-electric motorbikes being sold in China every year, we still have to educate the consumers about our product. We see a good opportunity because the Chinese government is currently trying to step up their safety standards when it comes to 2 wheeled vehicles and because our motorbikes are built to a very high safety standard, we think the next 5 – 10 years could represent a great chance for us to grow.

What is the pricing policy of Evoke Motorcycles?

Nathan Siy:  Roughly 8,000 – 10,000 USD. In Europe and North America, there are a lot of subsidies available for electric motorbikes in those countries but none for electric motorbikes in China so we have had to be a viable business case right from the start. If the subsidies come in, that will be great for our margin. But right now we are mostly selling in Europe and North America so

What was the initial investment for Evoke Motorcycles?

Nathan Siy:  In 2 rounds of investment we secured around 1 million USD but over the last 2 years we have brought in around 1.5 million USD in revenue. Because our investment has not been so big we have had to become creative with how we work with factories. We have had to turn our supply chain into our investors, so making them believe in the future in the future of our business. It’s really great when you get these people on board because they can be really helpful even though we are very low quantity production.

Guanxi – how important is it to build trust before establishing a business relationship in China?

Nathan Siy:  Very important, but there some misconceptions around guanxi. Guanxi can be built, it’s about trust rather than bribes. But when you want these people to go out of their way to help you, you have to develop and nurture those relationships and that of course involves visiting them and drinking with them but it does not involves plying them with red packets.

How was Evoke Motorcycles able to make working with Foxconn possible?

Nathan Siy:  Pure luck, in 2017 Foxconn was looking into e-vehicles and one division was looking into electric 2 wheel vehicles. They found us online, cold-called us, literally came to our door with a business card, and at first, I thought it was a scam, but after 2 months I agreed to meet with them, and since then we have learned so much from them about manufacturing and quality assurance.

At what stage was Evoke Motorcycles before partnering with Foxconn?

Nathan Siy:  Well we were doing around 100 – 200 units a year. Maybe 30 electric motorbike batches a year

How did Foxconn impact Evoke Motorcycles’ business strategy?

Nathan Siy:  Massively, they helped us out so much in terms of getting things ready for larger quantities. They took our SOP from a 20 or 25-page manual to about a 250 page SOP manual. So in 2017 and 2018 we were bumping up our production procedures really quickly and getting ready for them to take over complete contract manufacturing. And you would think they would take a big part of our equity for this but as a feature of their top-down management system, their goal in 2017 was the electrification of 2 wheeled vehicles, but in 2018, they pivoted to Industry 4.0. They didn’t take any equity in our company and actually, our R&D facility is still over there, so we do some joint projects in battery development.

Riding the Industry 4.0 wave – how Foxconn is able to pivot so fast?

Nathan Siy:  They are so dynamic and nimble. At an annual meeting in 2017, the chairman said they needed to look at electrification, each of the 14 or 15 different sub-structures at Foxconn looks at different investment and collaboration opportunities every year but all surrounding one common theme. Their aim is to incubate projects and then take over the manufacturing of those products when they are ready. It’s a very smart business model, but they’re so nimble it’s almost like a gigantic start-up.

What does the process of building electric motorbikes in China look like?

Nathan Siy:  We have about 252 components and we have about 30 to 40 suppliers for those components for our electric motorbikes in China. There’s a lot of networking to be done but it’s very hard to have the money to get the production of all the components in-house. But we try to keep the core components in-house, like our battery pack assembly and electronics.

How did Nathan Siy get into building electric motorcycles in China?

Nathan Siy:  I started as an electronic engineer. But my hobby has always been motorcycles, all of our team are generally motorcycle enthusiasts. During interviews, we try to get the candidates on our motorbikes. I started my career in the automotive 4 wheel industry and then I took what I knew about cars and applied it to motorbikes. I had the chance to come to Beijing and I found that there was a gap in the market.

Does Evoke Motorcycles have a software development team?

Nathan Siy:  Yes, with electric motorbikes now they are heavily electronic controlled so that the electronic side is now slightly more important. You need to have the electronic control side tied down rather than the motorcycling part. We send our software updates to our consumers through our distribution network and they can upgrade their motorbike’s software manually.

Who are Evoke Motorcycles’ clients?

Nathan Siy:  We sell through a traditional distribution business model, we sell in about 20 different countries. So we are b2b, we sell to distributors and they sell to dealerships or the end-users directly. Our only interaction with the end-users is when we see them post content on social media using Evoke hashtags. But our relationships with our distributors are very close, we have to make sure they understand the technical aspects of our motorbikes. About 60 – 70 % of our total sales are outside China.

How hard was it for Evoke Motorcycles to obtain proper certification to be able to sell their electric motorbikes in China’s market?

Nathan Siy:  Pre 2019 and pre-new government regulations, our electric motorbikes in China were classed in the same category as electric scooters, so for both the average electric scooter you see in China which has a top speed of maybe 40 or 50 km per hour, and our electric motorbikes in China which have a top speed of 150 km per hour, you didn’t need a license and you didn’t need to wear a helmet. Because they were all classified as electric bicycles. Now the classification is clearer and they are defining new standards.

On the engineering side, most of our team has international experience so that meeting and actually exceeding international foreign safety standards has been something we have done since day 1. But for people who want to export the average electric scooters, you see Shanghai to Europe or America, if you don’t control the supply chain you don’t control the adherence to standards. So that’s a big difficulty with exporting electric scooters from China to Europe. Another difficulty for exporting electric scooters from China to Europe is that those scooters have a top speed of 40 km per hour and most of the rest of the world doesn’t have specific bicycle lanes as China does. So you have to ride that 40 km per hour electric scooter in the car lane in the car lane which is obviously quite dangerous. So we designed our electric motorbikes in China to have the power to be able to drive in the car lane.

Is Evoke Motorcycles’ development process a client-focused or a product-focused one?

Nathan Siy:  We design our products with ourselves in mind as the main consumer, we are quite representative of the end-user. What we love in our product resonates with our end-users.

How does Nathan Siy see sustainability evolving in China?

Nathan Siy:  Sustainability is not a driver for the consumption of our electric motorbikes in China. Because there no subsidies available yet. It’s a secondary thought in China because motorcycling in China is a relatively new concept so we push the fun factor of motorcycling in China in our marketing and the sustainability factor is a by-product. Whereas in Europe the sustainability factor is probably the deciding factor when it comes to purchasing our motorbikes.

Why is Tesla not building electric motorcycles?

Nathan Siy:  I read Elon Musk got into a motorbike accident in his youth so he is maybe a little hesitant to get on one these days

What books have inspired Nathan Siy in his entrepreneurial journey?

Nathan Siy:  Actually I don’t read a lot, I like to spend my time tinkering with code or with mechanical stuff.

My team inspires me the most. We have amazing ideas and brilliant brainstorming sessions just having conversations about our bikes. They’re not actual meetings, just discussing the motorbikes and then the ideas come out of that.

What productivity tools does Nathan Siy use to manage his company?

Nathan Siy:  We use Teambition.

Should he have extra time what other business would Nathan Siy like to pursue?

Nathan Siy:  I would like to focus more on the subcomponents of motorbikes. And maybe start producing them.

What unexpected success and failure has Nathan Siy witnessed in China?

Nathan Siy:  A success would be the Foxconn thing, where such a huge company would be interested in collaborating with start-ups. Also, the speed of development here is so fast, and there is so much creativity and such a strong work ethic here, too.

Listen to the full China Paradigm episode 115 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article A Beijing company designing and building high-end electric motorbikes in China: China Paradigm transcript #115 with Nathan Siy is the first one to appear on Daxue Consulting - Market Research and Consulting China.

Listen to the full China Paradigm episode 114 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

Can you give us a company introduction to Adventi Communication?

I founded Adventi Communication in 2004. It is a PR consulting company that hosts exhibition events and offers market solutions to overseas companies looking to participate in the Asian market.

How did the need for a service like Adventi Communication come about?

I had attended the Grande Ecole school of engineering in France and I was really impressed by it so I wanted to create something similar in Shanghai but it never got off the ground but in 2003 my husband got an amazing offer to come back and work in China and I considered going back into academia and got some offers from universities such as Jiaotong and Tongji University. But this was about the time that the luxury brands market was taking off and booming in China and by chance, some of the people I had known from my time in education in France were starting their businesses in China and I was able to help them organize media events and before long the business was attracting more and more customers

Is having a Ph.D. in PR advantage for starting a PR agency?

Well, my Ph.D. was in a totally different field so there are very few people in the PR world with degrees in engineering so maybe I can draw on certain things from my previous experience to help with aspects of my current business. Also, I think that coming from a background where you want to learn all the time can help with running a successful company and our analytical approach to the market and competitors may be something that comes from my research background.

The SARS outbreak vs the coronavirus outbreak – how have these epidemics impacted the PR business sector?

All B2B and B2C business were negatively impacted but it also afforded us the time to reflect on our strategies and to maybe trim away some of the unnecessary aspects of our business.

Why are Chinese companies in general, and fashion brands not pushing for sustainability in fashion in China?

Although there are some businesses, particularly those in Tier 1 and 2 cities that push for sustainability in fashion in China, on the whole, most businesses in China are focused on growth. In this respect, they are slightly behind the West but I think this will change more in the future as environmentally friendly fashion in China becomes cooler and more mainstream.

Is the market the deciding factor for sustainability in fashion in China? – and the reason behind the launch of GREENEXT?

Yes, in particular, the younger consumers are concerned about environmental issues and sustainability. In some cities up to 85% of consumers say sustainability in fashion in China is a concern. So, you will start to see more companies looking to market themselves and compete on this front in China. At Greenext, we want to be the link between the supply chain, the brand, and the consumer. Part of our job will be to educate the consumers about the sustainable process and to work with sustainable fashion brands in China and help make environmentally friendly fashion in China more mainstream.

Are there any sustainable fashion brands in China that are making a name for themselves in terms of being environmentally friendly?

Icicle and LangerChen are 2 sustainable fashion brands in China that are doing just this. They are really adopting some interesting practices and leading the way in terms of environmentally friendly fashion in China

So we have heard about sustainability in fashion in China in terms of clothing but what other industries will be impacted by the need for sustainability?

I think the cosmetics and perfume industry are good candidates for implementing some sustainable features into their businesses.

What social values do brands communicate in China compared to the West and what needs to change?

In terms of the social values which resonate most with young consumers here, the first one would be sustainability in fashion in China and being environmentally friendly. Another value that we see among younger consumers is an embracing of traditional aspects of Chinese culture such as traditional medicine. In terms of what needs to change in order to make environmentally-friendly fashion in China more visible and more commonly purchased by consumers is the representation and amplification of the voices of such eco-brands. Our work with Greenext will be about developing sustainable fashion brands in China.

Do Chinese consumers purchase sustainable fashion brands in China or buy natural products for their own health benefits or for society’s health benefits?

I think both, there is more of a trend towards vegetarianism, organic & healthier foods, and organic cosmetics. Especially in the aftermath of Covid-19, more and more people were considering their impact on the environment. The signs look promising for environmentally friendly fashion in China.

What books have inspired Hong Zheng in her entrepreneurial journey?

A book which I’ve found very interesting has been Sapiens.

What does Hong Zheng read to stay up to date with China?

I like to read positive things which actually give solutions to problems we face, rather than just doom and gloom articles about the problems.

What means of communication should people employ in order to get a good understanding of China?

Look at as broad an array of information channels as possible.

What unexpected business failure and success has Hong Zheng witnessed in China?

I’ve been surprised at the huge success of Starbucks and I was surprised at the failure of brands like Next, Macy’s, M&S, and Topshop.

Thanks very much for taking the time to join us today

Thank you very much, Matthieu and I hope to see you in one of these small trendy cafes around Shanghai and we can continue our conversation. Thank you. Bye

Listen to the full China Paradigm episode 114 on Youtube, Apple Podcast, Spotify, Soundcloud, or Ximalaya.

This article An interview with an authority on sustainability in fashion in China: China Paradigm transcript #114 with Hong Zheng is the first one to appear on Daxue Consulting - Market Research and Consulting China.