Supply Chain: Distributing in China

The Chinese market has become the eighth largest in the world and the second biggest in Asia. Better distribution channels are crisscrossing China every day, and leading indicators show that the antiaging, skin care and sunscreen markets will continue to expand and strengthen. Western products have tremendous weight in China, and as the market evolves, strong distribution networks will become absolutely vital to ensuring that products reach their targets.

Electronic tracking heuristics and taking advantage of already-established connections that people in the freight-forwarding industry have will become not an option but a necessity. When dealing with a market with as much tremendous potential as China, creating the groundwork now will lead to far fewer headaches in the future, and a robust system that can handle limitless growth and tumult will be invaluable when it comes to competing against local cosmetics companies.

The Market Moves West

Current volatilities tied to the sub-prime collapse notwithstanding, the Chinese economy is growing at a rapid rate. The Chinese mid-income group is especially fertile in the richer parts of China, such as Hong Kong and the country’s East Coast, and this has given rise to a demand for more cosmetics from American and European suppliers.

Additionally, the idea of the supermarket is catching on in China. As the situation improves for well-off and middle-income Chinese, the poorest also find themselves able to shop for consumer cosmetics at new supermarkets that are cropping up in the wake of increasing prosperity, bringing in toiletries and hygiene products never before seen in the East.

According to Euromonitor International’s yearly report, premium fragrances are seeing some of the biggest gains, as white collar females are finding themselves with new disposable income. Since fragrance is a status symbol in China, these women are the biggest purchasers of both men’s and women’s perfume, and are giving rise to the spread of specialized chain retail perfumeries, where other cosmetics are also sold. Euromonitor predicts strong growth across the board for those able to take advantage of the current bullish climate for cosmetics in China. While the multinationals still lead the market with their global brands, smaller domestic partners are making inroads, with their emphasis on traditional Chinese medicine and lower prices.

Boots On the Ground Vital

Chinese supply chain networks should not be attempted without help, and without relying on seasoned guides who know how to improve throughput, navigate an evolving market and deal with local bureaucracy both at and beyond the ports.

In China, it is important to have a method for collating data and keeping track of all freight in a way that creates a provable and thorough paper trail. Crime, loss and institutional corruption must all be taken into account. The modern supply chain strives to solve vendor problems by providing transparency and listening to the needs of the people at the receiving end.

Joint ventures with established Chinese companies that are looking for foreign capital and products are often a good departure point for companies just getting started in China and who are ready to learn the ropes without taking on too much risk.

Personal relationships cannot be stressed enough when it comes to understanding Chinese business culture and in cementing agreements. By taking advantage of established freight-forwarding agents in the region, a business can increase its ability to get results and track its goods effectively.

While things are constantly changing and evolving in the Chinese business world, there are centuries-old practices that require a deep understanding of the culture. Especially when dealing with such typically Western goods as cosmetics, a business has to be very careful about the way products are distributed and the way civic and cultural interests view the products that are imported into China, or the raw materials that are taken out.

Therefore, it is imperative to find people who know what they are doing and to rely on them for advice, help and leverage. A logistics organization won’t just be representing the interests of a single company, but the interests of an entire vein of cargo and supply chain nodes. The government agencies responsible for customs and clearance are more sympathetic to broadly-backed organizations.

The Future for China

It is almost certain that China will continue to grow in ways that are difficult to foresee. But laying the groundwork now for a self-correcting, modular, electronically-tracked freight-forwarding system will put a company on the road to a degree of control that will allow it to react quickly, effectively and decisively to any problems that may arise.

Additionally, taking advantage of the know-how of established freight-forwarding companies will provide an advantage over those who are going it alone. There is money to be made, and it is worth the risks. But that doesn’t mean that a company shouldn’t take advantage of all the precautions and help available to ensure that goods are protected and the supply chain remains stable.

Simon Kaye is the founder and CEO of Jaguar Freight Services, with operations and fully integrated door-to-door freight solution networks in Europe, North America, South America, Australasia, Asia, the Middle East and Africa. E-mail: [email protected];; 1-516-239-1900

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