Why start-ups have an advantage when doing business in China
On 16 February, I attended the Ready for Growth event in The Hague, The Netherlands, organized by World Startup Factory. The morning programme was ‘looking east’, which is what many start-ups do when searching for the best possible price to turn their innovative ideas into reality.
By Heidi Larssen, Supply Chain Princess
Although I found the event itself to be more of a match-making session between mentors/investors/institutions and energetic start-ups, it nevertheless gave me the opportunity to talk to a lot of inspiring newcomers about the challenges they face when setting up production – be that of an Air-Cleaner device or an app-integrated Cargo Bike, to name just two examples. Over numerous cups of coffee, I discovered that many start-ups think it’s impossible to attract even the slightest bit of attention from a Chinese supplier unless you place an order to fill a zillion containers.
Let me start by saying that this is not true. My company, Plus 7, helps start-ups to produce as little as 500 pieces of an item – at the right price and quality, including checks before dispatch and delivered on time. So it is possible – which is not to be confused with ‘easy’. But it’s definitely possible. Actually, I think start-ups have several advantages in China. Here is my (inconclusive) list of reasons why:
#1 Start-ups have a divine energy
They are driven by their vision, and that’s what makes them work around the clock to achieve their goal. Chinese suppliers respect that. What start-ups shouldn’t do is use a 3 or 4-week holiday as an excuse to extend the deadline – Chinese suppliers will not understand that.
#2 Start-ups have a lot of ideas
Chinese suppliers produce based on specs and (should) have extensive expert knowledge on how to produce a specific product. This insight will be of great value to the start-up. And suppliers LOVE to work closely with start-ups around innovation. This will make the start-up attractive for the supplier (but yes, do consider IP rights).
#3 Start-ups think creatively
In Europe, we (mostly) have rather easy access to government authorities, yet I see so few start-ups using this HUGE advantage! Why not invite the Chinese supplier to visit your company, and combine their visit with a stop-off at the local town hall to shake hands with the mayor or a government official? This will tremendously increase your guanxi (street cred, Ed.) and make you a strong and interesting partner for your supplier.
#4 Start-ups have a flat hierarchy
The (sometimes very) flat hierarchy means that start-ups could quickly clear their diary and dispatch a decision-maker to the negotiating table, should the need arise. This is seen as a token of true interest by Chinese suppliers and helps to establish a strong relationship.
#5 Start-ups have the opportunity to be flexible
This means that they could adjust their product or production line to be better aligned with the supplier’s current production schedule, resulting in better prices – and greater interest from the supplier.
#6 Start-ups will normally start by producing single items
This means that their supplier portfolio will (in the beginning) be manageable – allowing the start-up to spend time with the supplier to develop the all-important trusted business relationship.
#7 Start-ups (usually) have an extensive network
Maybe they know another start-up that is looking to produce a totally different product using the same raw material? If so, why not join forces and allocate more business to the same supplier?
So yes, start-ups DO have a lot of advantages – these are only a few off the top of my head. At Plus 7, we’re passionate about setting up supply chains for start-ups and SMEs – without them having to produce millions and zillions of items. I really hope that we will see lots of parcels being dropped off to new Cargo Bikes, which can be opened by the courier at the click of a button and still provide secure deliveries and track & trace options for the customer, or that every office will have an Air-Cleaner that monitors the indoor air quality and alerts you to a potential asthma attack before it happens. I think both companies have great potential. I hope they will also have the courage to ‘look east’ and set up a scalable, sustainable supply chain from the start – that will help them to grow at the pace they dream of. I hope to see you out there!