Kiwi exporters too naive about China: experts

The Chinese say Kiwi business people do not spend enough time in China to understand the market. Photo / David White

Focus on Exports: The Business Herald this week puts the spotlight on New Zealand's export sector.

China is fast becoming our dominant trading partner, but Kiwi business leaders based there say many New Zealand exporters are still taking a naive approach and making numerous errors as they try to crack the Asian mega-market.

Placing too much reliance on distributors is a common mistake, they say, while some companies are overestimating how much power the "Brand NZ" message holds over Chinese consumers.

In an off-the-record briefing given to a group of ANZ export customers who were taken on a tour of the world's second-biggest economy by the bank last month, a Shanghai-based Kiwi consultant said the "farmer/fisherman model" of signing up a distributor and simply throwing product at the Chinese market was outdated and often ineffective.

Exporters needed a presence in China - and that meant more than spending a week or two there each year, the consultant said.

Sitting in his Shanghai office overlooking the Huangpu river and the city's legendary Bund district, ANZ's head of institutional banking in China, Tim Bezencon, said there were essentially two groups of Kiwi businesses trading in the Chinese market: those which had set up shop there and made a full relocation and those which continued to export from NZ.

"The exporters are having success to varying degrees," Bezencon said. "A reasonable number who I have met and talked to have been struggling with distribution.

"Whether it's the partners or the terms and conditions or the geography, it's a variety of things.

"The idea that one size fits all just doesn't work and if you trip around Shanghai you can see that what you'd look to distribute in Puxi might be completely different to how you'd distribute in Pudong [the financial hub on the opposite side of the river] because the infrastructure is different, the demographics are different and the wealth is different."

He said exporters needed to carefully consider the relevance of their products to Chinese consumers, retailers and distributors.

"Understanding the product that you have and how to adapt it to the market conditions is really essential."

But exporters did not necessarily need to have a full-time presence in China, he said, as there were Chinese and Kiwi consultants based in the country who gave valuable help.

Meanwhile, the consultant said New Zealand businesses often made the mistake of dispatching "Jim" to run their Chinese operation. The problem with that approach was that "Jim" often had little or no experience of China's complex and multi-faceted business environment.

Kiwi companies often neglected to make use of the high-quality, English-speaking Chinese talent that was readily available, he added.

A New Zealander who runs a successful retail chain in China, who also spoke at the ANZ briefing, said one of the biggest complaints the Chinese had about New Zealand's businesspeople was that they did not spend enough time in China.

Another speaker at the event said that even before the Fonterra botulism fiasco, Kiwi brands were losing their premium position in the Chinese market.

"Retail infant formula prices [on New Zealand-made products] will have to come down."

Christopher Adams travelled to China with the ANZ exporters' tour, which was funded by the ban.