Doing business in China

Lu-Hai Liang speaks to the founder of a successful Beijing-based startup about what it's like running a company here

Paul Afshar, 28, came to China in 2011, speaking no Chinese and not knowing anyone. He now runs a Beijing-based company selling consumer goods to expatriates living in China that's estimated to be worth over £100,000.

Everyone has a "fork in the road" moment in their career. Mine came at an awards ceremony. I had been shortlisted for a "Rising Star Lobbyist" award, a proud moment, but looking around at some of the old hands there I realised I wanted to be doing something more creative when I reached their age. The next day I resigned, and a week later I booked a flight to China.

A breath of fresh air

China for me represented an opportunity to build my career in arguably the world's most important market, and an adventure both in terms of professional experience and life in general. My plan, hatched out on the plane ride, was to learn Chinese, get a consulting job, and try my hand at doing business in the Middle Kingdom.

Some months later, after a heavy night at a Beijing karaoke bar, a Chinese friend (now my business partner) and I started throwing around business ideas. I felt we each brought different things to the table. He spoke Chinese and had sales experience in a western-run company. As a foreigner with western business experience, I could be the "prestigious" face of the company to other Chinese businesses.

That night we came up with our startup business concept: IwannaBuy, a Groupon-style online service for China's growing expat population. However, news came that Groupon itself was going to start an English language service in China. But I felt getting to market first would put the frighteners on Groupon and, in the end, Groupon didn't launch.

After several months of operation, business was good but not great. We decided to hone in on one area where there was particular demand - pollution protection products. Think air purifiers, face masks and water filters.

Challenges in China

Working in China couldn't have been more different to how I expected it would be. I arrogantly thought the experience I'd gained in the UK would put me ahead of the pack. But I'd ignored the fact that there are fundamental cultural challenges for us in doing business here that we wouldn't face in the UK.

As an e-commerce business targeted at expats in China we face two big challenges. The first is competing for space in a market dominated by huge companies like 360buy and Taobao (a Chinese B2C (business to consumer) online shopping platform).

The second is that it's very hard to negotiate competitive wholesale prices from the Chinese distributors who supply our products. When you're a company run by foreigners and targeting foreigners, the opening negotiating price will always be higher.

We got around this one by using my Chinese business partner more in negotiations. We also made a big change to our initial business model by deciding to focus on the more niche area of pollution protection products, which carry higher margins. That decision paid off as we were able to corner this market in Beijing, a city noted for high levels of air pollution.

Healthy prospects

We've overcome our initial challenges but new ones have arisen, particularly with suppliers. They've smelt our success and now they pitch to raise the wholesale price they charge us by 10 to 20 per cent as the size of our orders with them rise. It's all very cut-throat.

Looking forward, our plan is simple: grow. We're developing the business in other Chinese cities with large expat populations. We're also targeting more middle-class Chinese consumers as customers and have recently completed the Chinese version of IwannaBuy.

These consumers are now increasingly willing to invest money in products that improve their family's health. In the past five months, we've moved from having a customer base that was 97 per cent expat to one that's now around 85 per cent expat and we predict that this trend will continue in 2013.

Do I want to sell the company? There's a part of me that wants to cash in on our success in the past year, and IwannaBuy has attracted the attention of a Beijing-based media conglomerate that may buy into the company. But there's also a big part of me that wants to take the company to new heights and help it realize its full potential. After all, this business is like my baby - I'm keen to see it grow and graduate to a new level.

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