In a nutshell, a distributor is a middleman between a producer and another entity in the supply chain, be it a wholesaler, retailer or end consumer. As a reseller of products, a distributor buys directly from the producer and sells the products to those further down the chain. The main advantage of this entry model is that you can ride on the coattails of a distributor’s already-established network of sales channels without a substantial initial outlay on infrastructure and logistics. Furthermore, since a distributor’s scope of operation can be very wide – encompassing customs clearance, storage, shipping, sales and marketing – those opting for a more comprehensive service may be inclined towards this method.

Distributors can be found at trade shows and exhibitions, through referrals or third-party specialist agencies, via introductions by chambers of commerce and on e-commerce platforms. While it may be tempting to choose the first prospective distributor that comes along, rogue distributors have the potential to break your business in China, so proceed with caution and circumspection.

The best China distributor is more than just a sales channel

The best distributors do more than move boxes. They understand your sector and can navigate local compliance, consumer preferences and channel dynamics.

When approaching a potential distributor, ask about their experience with foreign brands. Can they provide case studies? Do they understand your product’s positioning and pricing expectations? The ability to align with your market vision is just as critical as having an expansive sales network.

While many UK businesses hope to find a single nationwide partner, the truth is China’s market is highly fragmented. A distributor with reach in Shanghai may be weak in Chengdu. Often, a regional or non-exclusive approach is more practical, if not essential.

At the same time, consider what other brands they carry. Are they already working with competitors? If so, your product could become a second priority. Conversely, partnerships with complementary brands can open the door to co-marketing and bundled distribution.

Due diligence is not optional

A recurring pitfall for UK exporters is inadequate background checks. It’s not enough to meet a potential partner at a trade show or through an online lead and assume they are credible.

You must verify that the distributor is legally licensed and has the correct business scope for your product category. This means checking their registration with the State Administration for Market Regulation (SAMR) and ensuring they hold any required import or distribution licences – particularly important for highly-regulated sectors like cosmetics, supplements, or medical devices.

Financial stability is another critical factor. Distributors with poor cash flow or excessive debt may delay payments, underinvest in marketing, or fold mid-contract. Engage a local consultancy to review their credit reports and litigation history. Reliable distributors should also be willing to provide references from other foreign clients – ideally those with similar requirements to yours.

When speaking to those references, don’t settle for platitudes. Ask whether targets were met, whether the relationship remained collaborative over time, and how the distributor handled setbacks.

Legal and commercial foundations matter

Once a distributor looks like a good fit, the real work begins: crafting a robust agreement. This should clearly define the scope of responsibilities, sales targets, marketing commitments, pricing expectations, and intellectual property (IP) protections. Be especially cautious with clauses around minimum resale pricing. Under China’s Anti-Monopoly Law, you generally cannot enforce such restrictions.

Also consider territory definitions. Will this distributor have exclusive rights to all of China? Or just to certain cities or channels? Flexibility here can give you room to work with multiple partners if needed.

It’s equally important to plan for the end of the relationship. Who owns the IP? What happens to unsold stock? Can they continue using your brand on e-commerce platforms? Many distributors register WeChat accounts, Tmall stores, and even your product’s Chinese name in their own company’s name, so clarity from day one is essential.

Don’t overlook communication, culture and compliance

Even the best-looking distributor on paper may prove difficult if communication breaks down. Pay close attention during early conversations. Do they respond promptly? Are they transparent and realistic? Do they push back or ask insightful questions – or simply say yes to everything?

Cultural alignment also plays a role. In China, business relationships often follow a slower pace at first, built on mutual trust and informal connection. A distributor that’s too quick to sign may not be invested for the long haul.

Beyond this, assess how they handle the practicalities of doing business in China. Can they manage customs clearance, pay import duties, and comply with labelling standards? Have they successfully registered similar products before? Lack of regulatory know-how could delay your shipments or result in costly rejections.

Finally, any distributor operating in today’s China must understand the country’s unique digital landscape. Success increasingly depends on platforms like Tmall, JD.com, WeChat, and even Douyin (the Chinese version of TikTok). Ask about their e-commerce strategy. Do they run flagship stores on these platforms? What’s their relationship with local influencers and content agencies? Offline distribution alone won’t cut it in a digitally-native market.

Align on control, involvement, and expectations

One of the most strategic choices you’ll make is deciding how involved you want to be. Are you looking for a turnkey partner – or do you expect input into branding, pricing, and local marketing?

If your brand is premium, your distributor must protect that positioning through selective channel choices and consistent messaging. If you’re aiming for mass-market reach, they’ll need to scale fast – and report metrics regularly.

Set expectations from the outset. Will you approve all campaigns? What reports will they provide, and how often? Is there a dedicated team for your account? The more proactive and structured the relationship, the more likely you’ll succeed together.

Final thoughts

Selecting a distributor in China is as much about partnership as performance. With the right groundwork, UK exporters can build long-lasting, mutually beneficial relationships that open the door to one of the most lucrative markets in the world. But it requires patience, planning, and a sharp eye for detail.

The post How to choose the best distributor for your business in China appeared first on Focus - China Britain Business Council.

So you’ve decided it’s time your company expanded into China. Inexperienced, unfamiliar with the market and concerned about high upfront costs, you are, however, not ready to take the plunge fully into uncharted waters. Working with a local distributor is often touted as an ideal first step, one that promises a soft landing. But is it? The apparent ease and efficiency of partnering with a distributor to kick-start your expansion in China may belie perils and pitfalls – if you are not careful.

In a nutshell, a distributor is a middleman between a producer and another entity in the supply chain, be it a wholesaler, retailer or the end consumer. As a reseller of products, a distributor buys directly from the producer and sells the products to those further down the chain. The main advantage of this entry model is that you can ride on the coattails of a distributor’s already established network of sales channels without a substantial initial outlay on infrastructure and logistics. Furthermore, since a distributor’s scope of operation can be very wide – encompassing customs clearance, storage, shipping, sales and marketing – those opting for a more comprehensive service may be inclined towards this method.

Distributors can be found, for example, at trade shows and exhibitions, through referrals or third-party specialist agencies, via introductions by chambers of commerce and on e-commerce platforms. While it may be tempting to choose the first prospective distributor that comes along, rogue distributors have the potential to break your business in China, so proceed with caution and circumspection.

Do conduct sound due diligence

Before engaging in any kind of business with a distributor, you should vet them thoroughly via a meticulous due diligence process. In order to ensure that they are legitimate, you should check that they have been properly registered with the Administration for Industry and Commerce. Central to this verification are the registered name of the company, its unique identification number and the name of the legal representative. A credit check should be performed by examining, for example, debt records, bank statements, bank loans and mortgage records. In addition, a hallmark of reliability and credibility is the quantity of positive references from customers and suppliers that can be produced.

Do have contracts in place

It is essential that proper legal safeguards are in place to protect your company’s interests from the very outset. Contract provisions should delineate the distributor’s scope of operation and actions to be taken in the event of non-compliance or breach. The role of the distributor should be clearly defined: are they to act as an agent, whereby the contract of sale is concluded between you and the end customer with them pocketing commission; or as a mere reseller, purchasing from you directly and selling the products on?

A partnership that involves the distributor adhering closely to your guidance, a transfer of proprietary knowledge and pronounced use of your trademarks and brands may – against your intention – slip into a franchiser-franchisee relationship. This can spell trouble if relative simplicity is your top-of-mind priority, as you may find yourself confronted with a slew of regulations governing franchise arrangements.

It should also be noted that China’s Anti-Monopoly Law forbids price control, which means you cannot stipulate that your products be sold at a specific resale price by the distributor to retailers.

Don’t automatically assume a smooth transition after a break-up

The contract should provide for the eventuality of the partnership ending. Matters to take into account include:

• The transfer of ownership of social media accounts, websites and e-commerce stores
• The means by which and the jurisdiction under which disputes will be resolved
• The fate of unsold stock – whether this is to be repurchased from or sold off by the distributor

The upside is that, unlike the legal protection bestowed on distributors elsewhere, who may be able to claim compensation or an indemnity payment, no such privilege is available to distributors under Chinese law, which makes termination comparatively inexpensive and straightforward.

Do consider whether you want to put all your eggs in one basket

Another important consideration is the kind of partnership between you and the distributor. Traditionally, there are three types of distributorships: non-exclusive, exclusive and sole.

• In a non-exclusive arrangement, you engage multiple distributors, thereby spreading the risk and potentially gaining access to a wider range of retailers. Given China’s sheer size and heterogeneity, working with a number of different distributors would offer better coverage.
• In an exclusive arrangement, however, you appoint one single distributor, who acts as the only point of sale in a given territory. The lurking danger is that, while you are restricted to working with just one distributor, your distributor is – on the contrary – free to market and sell on behalf of other brands that may be your competitors. Beware of sleights of hand on the distributor’s part, who may unilaterally decide to “shelve” your product under the pretext of exclusivity so as to oust you from competition with their other brands.
• A sole distributorship is similar in that there is only one distributor, although you are allowed to sell your own products in a given territory.

Do set sales targets

In the case of an exclusive distributor arrangement, it is especially advisable to set sufficiently high sales quotas to ensure that the distributor puts their nose to the grindstone and does not fall into complacency. You may wish to set the same target across the board or different targets for different products. It is common practice in China for such quotas to be set on a quarterly basis, and they are usually not categorised into provinces. In order to ensure that the distributor knows what is expected of them in terms of sales, targets should be formulated with clarity and specificity. The contract should provide for the event of the distributor’s performance falling short, which can lead to the loss of exclusivity or even termination of the partnership.

Do make sure your brand already has a level of recognition

If you are envisaging a partnership where your distributor is committed to working shoulder to shoulder with you to consolidate your brand in China, you are unfortunately going to be disappointed. Distributors tend to be short-sighted realists in that they value short-term gains over long-term rewards. This is also partly due to the fickle tastes and shifting preferences of Chinese consumers, whose brand loyalty is known to be low; therefore, distributors are keen to avoid having too much inventory pressure.

You may fall into a Catch-22: your brand is new to the market and does not yield high returns yet, although it may have every potential to do so in the future. For this very reason, distributors are reluctant to take on your product. The underlying irony is, of course, that the lack of distribution channels would stop sales growth dead in its tracks. To circumvent this trap, you should aim to acquire a level of brand recognition prior to entering the Chinese market, particularly through e-commerce platforms.

Don’t forget about IP protection

The importance of properly registering all your intellectual property to guard against infringement – before doing business in China – cannot be stressed enough. China has a first-to-file, as opposed to a first-to-use, system, which means that you will not receive any protection unless the trademark has been registered. Unfortunately, this also has the unintended consequence that, up until full registration – which takes around a year to a year and a half – a third party can use your trademark, flagrantly disregarding your de facto proprietorship. Furthermore, beware of “trademark squatters” who scout for successful brands overseas and appropriate their trademarks, with the intention of selling them back to their rightful owners upon their entry into the Chinese market.

Most importantly, be sure to register your trademarks in your name, never in your distributor’s name. Although there are often cases of the distributor registering trademarks on a foreign company’s behalf due to the latter’s tardiness in doing so, this is generally not advisable. If your distributor does not dutifully hand over the ownership of rights, you may find yourself caught in a costly and protracted wrangle, which may lead to the loss of your trademarks altogether.

As long as you exercise prudence and prepare thoroughly, working with a distributor could very well offer a softer landing upon your initial entry into the Chinese market. But if you end up being yoked to a rogue distributor, it may turn out to be a case of the blind leading the blind.

This article is part of a series on exporting to China. See all the articles in the series below.

Part 1: How to conduct market research
Part 2: Protecting your trade mark

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s Launchpad service gets your company boots on the ground in China quickly and cost effectively.

This article was provided by our content partner, CW CPA

The post Exporting to China: The Dos and Don’ts of Choosing a Distributor appeared first on Focus - China Britain Business Council.

Deciding on the right route to enter the China market is the first step if you want to export and sell into the country, whether that’s through cross-border e-commerce or a local distributor.

The second step is to evaluate your market potential. There is no point in coming into the market if you don’t know what opportunities exist and what they are. Knowledge is power; research and data mining are fundamental to establishing your business.

China’s Zero Covid policy is still in place, and unless you are willing to do lengthy quarantines, you may not be able to travel to China in person. It is important to know that there are companies on the ground that can do this evaluation for you.

Using cross-border e-commerce to gain a foothold in China

If you are interested in selling your products in China but are not ready to establish a presence in the country yet, then cross-border e-commerce could be a good place to start.

China has the largest digital buyer population in the world, home to more than 840 million online shoppers. In 2021, China’s e-commerce market was larger than the US, the UK, Japan, Germany and France combined, and in 2021, e-commerce sales reached 52% of total retail sales, making China the first country in the world to have more online sales than traditional ones.

According to The eCommerce Guide, Alibaba’s Taobao and Tmall and JD.com dominate the Chinese e-commerce market with 50.8% and 15.9% market share, respectively, followed by Pinduoduo (13.2%) in third place.

Instead of establishing a presence in China to sell online, foreign firms can choose cross-border e-commerce, benefitting from streamlined customs procedures through over 100 cross-border e-commerce-integrated pilot zones. Those zones limit Chinese consumers to purchasing up to RMB 5,000 (£601) per transaction and no more than RMB 26,000 (£3,125) per year. They must work with authorised partners to record customs transactions.

China has long led the world in aggregate e-commerce sales figures and share of total retail. However, the country may have reached a behavioural tipping point, fuelled by the restrictions of the Covid-19 pandemic.

The current cross-border e-commerce regime permits overseas sellers to sell goods directly to Chinese consumers through certain registered e-commerce platforms (e.g., Tmall Global, JD.com). The qualifying products can be imported on an expedited basis at reduced import tax rates. The products are either shipped from overseas or stored in a bonded warehouse.

Distributor or professional employer organisation?

Once the Chinese consumer is familiar with your product and you feel ready to have a presence on the ground, the next possible step could be to partner with a local distributor or a professional employer organisation (PEO). Both options have pros and cons.

As a new foreign business owner in China, investing in a corporate structure may seem out of the question when you first get started, therefore, you need to look for low-cost options. Using a PEO to enter the Chinese market could be the ideal solution. PEOs specialise in assisting small companies regarding benefits and human resources for their workers.

When you partner with a PEO, they hire the individual on your behalf so that you don’t have to incorporate a company in the country. All employment requirements are fulfilled, including the payment of social benefits, which allows you to start your business immediately. China has a complicated legal system, which can make hiring or firing an employee difficult. Finding a PEO that understands local customs and regulations may be of help for your business.

When you partner with a professional employer organisation (PEO), they hire the individual on your behalf so that you don’t have to incorporate a company in the country

When you sign an agreement with a PEO, you are adopting a co-employment structure. This means that your employees are also the PEO’s employees and that it will have authority over your tax and healthcare responsibilities.

If you think this option is not for you, a local partner could help you move your business forward. Using infrastructure and logistical know-how that already exists may prove to be more time and cost-efficient. The distributor model allows businesses to leverage local expertise and is a popular method among foreign companies. Finding the best-fit partnerships will be critical to your business success.

There are several advantages of working with a distributor, including instant market exposure, expanding brand awareness, benefiting from a local presence and leveraging existing contacts. They can help you access a wider network of customers and channels in new markets.

In general, distributors have processes and teams that know how to sell to their customers and deal with local customs and regulatory requirements. This helps businesses increase sales and make significant savings.

Nevertheless, you should be aware of the disadvantages. Being detached at the local level can result in challenges, such as identifying whether your products are a good fit for the market, or whether your distributors are selling through the most effective channels.

Be risk aware, not risk-averse

The distance from your target market in China can cause problems, such as the lack of brand control. Of course, it is crucial to protect your brand. Your distribution agreement should consider who is responsible in the event of a third party bringing a claim against distributors for products infringing on intellectual property rights, for example.

When researching a potential partner, use traditional web engines but include Chinese platforms as well. Make sure the partner’s address and phone numbers are real and ask to talk to clients. Small steps can take you a long way in China. They are the difference between a fruitful relationship and a catastrophic one.

Finally, take the time to design your business plan. Use a local professional to handle your trade needs, such as outsourcing to a media agency or hiring a local person through an agent.

You need to be a problem solver to succeed in China. Do not underestimate the challenges, but rather, be prepared to stay flexible to handle any situation.

This article is part of a series on exporting to China. See all the articles in the series below.

Part 1: How to conduct market research
Part 2: Protecting your trade mark
Part 3: How to choose the correct route to enter the China market
Part 4: The dos and don’ts of choosing a distributor
Part 5: How to find and hire staff in China

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s Launchpad service gets your company boots on the ground in China quickly and cost effectively.

The post Exporting to China: Choosing the correct route to enter the Chinese market appeared first on Focus - China Britain Business Council.

Singer Faye Wong is one of China’s most recognisable style icons. Her stratospheric rise in the 1990s as one of China’s first musical superstars made her a household name. Decades after she first rose to fame, hundreds of millions of women across China have wondered how this woman in her early 50s has retained her youthful looks.

All was revealed after her daughter posted a picture to social media of her mother’s dressing table, featuring a mysterious elegant black jar. The little black jar contained an anti-ageing serum by boutique British skincare brand Argentum – and just like that, the company became something of an overnight success in China.

“We have a really distinctive black shaped jar that really stood out in the photograph,” explains Argentum’s founder Joy Isaacs. “Suddenly everyone was clamouring to get hold of this product,” she says.

Isaacs’s company uses a patented combination of Silver Hydrosol and DNA HP (thus the Ag in the name) to create natural, restorative and super-hydrating anti-ageing skincare products. The brand has built a strong presence in China, where the demographic of luxury skincare spans a much broader age range, with more and more younger people investing in the future of their skin, says Isaacs. “In China, there is an understanding of silver and a focus on luxury skincare that delivers results. Our formulas score particularly high when targeting acne and blemishes which is a common skin concern in this part of the world.” But the demand created by Wong’s daughter’s social media post took Isaacs by surprise.

“We had two Chinese team members in London and Shanghai who were both helping us work with a number of different distributors in China, [but] it was very hard to align multiple distributors on different platforms and across different regions,” explains Isaacs. This made it difficult to effectively manage the growth they were seeing.

Joy Isaacs, Founder and CEO, Argentum Apothecary

“Large online retailers and cross-border sellers would have as many as 200 authorised resellers, and multi-brand stores would have sub-distributors,” says Isaacs. With so many different resellers, keeping up with pricing and offers was very challenging. Furthermore, UK or Europe-based retailers and distributors would resell to China too.

Sometimes resellers would discount products, not only affecting pricing but also making it difficult to control brand image, a common concern for luxury brands. “Some of our China distributors were investing tens of thousands into a campaign only for it to be undercut by external wholesalers, undermining the whole campaign,” she explains.

Eventually, after a number of meetings and working with one impressive distributor, they decided to create a more permanent partnership, selling a minority stake in the company. Having a local stakeholder means Isaacs and her UK team don’t have to get bogged down navigating regulations and controlling pricing. What’s more, now, “everyone is on the same train and heading in the right direction.”

“It really has accelerated our growth in China enormously. They have been able to support in registering our products on the ground and growing sales in a sustainable and authentic way. For example, we are launching in China Duty Free, which enables us to sit alongside the biggest international brands,” says Isaacs. “It also enables us to concentrate on our creativity.”

Isaacs has diluted the company by selling a portion to a Chinese distributor and growth accelerator, but, she says, “it was absolutely the right thing to do. When you see what they achieved for our brand in just one year – there is no chance we would have been able to grow this complex and fascinating market alone.”

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can help you find the perfect partner or supplier to support the growth of your business in China.

The post How a British skincare brand made it big in China appeared first on Focus - China Britain Business Council.

As Omicron outbreaks spread in many cities across China, there is little to no likelihood of China opening up in the first half of 2022, and just a slim chance that we may start to see signs of a gradual opening later in the year. For foreign brands with stakeholders based outside the Mainland, it is a challenging time. It is not only more difficult to build and maintain relationships with team members and key partners, but also difficult to keep abreast of the market and ensure that things are tracking as they should be.

With the inability of foreign staff to travel to China, many overseas brands have increased their reliance on distributors. Many brands have flourished through great relationships, but for others, the experience hasn’t been quite so rosy. A recent article from CBBC member company Rouse noted the risks of entering the China market with a local distributor, but many of the challenges could also apply to existing businesses already in market.

These risks include losing control of your brand if bad actors choose to release lookalike or counterfeit products, especially in the same e-commerce spaces you are operating in; losing your IP, social media or websites/domains to distributors after contracts are terminated; losing out on other opportunities due to exclusive distribution rights; another company registering your brand’s Chinese name; and discovering products bearing your trademark or product design being exported out of China (these are usually counterfeits unless you have a production line in China for the export market).

Yet the considerations of losing control of your brand in China span far greater than legal risks and rogue distributors. The simple structure of many Chinese marketing strategies hands over much more control than it should.

Live streaming with big-name KOL hosts is a good example. It’s a sometimes-essential, but often-lazy approach to shifting products. Yes, you’ll get a quick hit in sales. But you’re more likely to further reinforce the KOL’s brand than building credible brand equity of your own. Too much KOL live streaming activity is difficult to sustain, as can be seen with upstart local brands spending two to three times more on marketing than established brands – often around 70% of their sales revenue. As a partner at soft drink darling Genki Forest noted, “We need to resist temptation, to be self-disciplined and accumulate a lot of brand assets rather than just sell products and do live streaming all the time.”

The over-reliance on celebs and KOL live streaming has become particularly pertinent since stars have been discredited for everything from philandering to tax evasion. As a result, some brands are gaining back control by building their own live streaming presences. This is supported by consumer preference. During Singles’ Day last year, 83% of shoppers said they watched live streaming from brands they’re interested in, versus 43% who watched professional KOLs’ and 31% who watched celebrities’ live streams.

E-commerce platforms also give brands less ability to control their destiny. The e-commerce platforms own the customer data and relationships. A change in algorithm or preference for a competitor can see your brand and product sales tank. Cost of sales are also increasing, rising from 3% of GMV (Gross Merchandise Value) in 2017 to 6.3% last year on the Alibaba platforms.

Much like live streaming with KOLs, e-commerce platforms serve a great purpose at certain stages of the journey and should be ramped up to build awareness and trial, but brands would be wise to transition to having more control about how and when they talk to their customers, and ultimately how they control their brands. Smart brands are using brand-focused strategies on flexible platforms to give them more control. This is evident with the rise of stores on WeChat mini-programmes, which have seen transaction volumes surge 897% since 2019.

Whilst not quite the extreme of losing control of brands through distributors, KOLs or platforms, the inability to travel has seen many stakeholders become more reliant on teams on the ground in China. This isn’t always a bad thing – but it can be if stakeholders are flying blind.

For foreign brands, working with localised teams is a balancing act: it’s important to ensure on-the-ground staff have the autonomy to localise for the unique China market and make decisions swiftly. But at the same time, as stakeholders in the HQ in London or elsewhere, you’re ultimately responsible for ensuring your brand stays true to its roots and doesn’t stray too far from the very DNA that makes it successful and appealing to Chinese consumers. Once borders open again, the lines between products sold in China and those outside will blur again, so it’s critical that things haven’t strayed too much.

Firstly, it’s important to have an understanding of what’s happening on the ground. CBBC’s market research and analysis services can help you to make informed decisions, accessing deep insights and data updates and research specific to your brand, products and target audience that can end up saving you a lot of money, time and and ensure you don’t miss opportunities. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out more about how CBBC can help. These kind of insights can also help foster better relationships with local teams thanks to a more informed understanding and alignment about their challenges and opportunities on the ground.

This article originally appeared on The China Skinny. The article also includes insights from James Godefroy for Rouse

The post Are you in control of your brand image in China? appeared first on Focus - China Britain Business Council.