For Chinese companies going outbound, it is not only about creating new streams of revenue, but also about balancing risks, increasing value of the company, optimising operations, maximising inventory, running open innovation programs, and many other strategic aspects.
Going overseas is a process.
It can start with marketplaces or distributors but will require a more mature Chinese brand to think about independence at some point, for example, independence from selling only on Amazon.
Taking your brand to the next level requires various distribution channels after the use of online marketplaces such as brick-and-mortar stores, flash sales, or influencers who do drop shipping. For Chinese B2B brands, that might require the setup of a proper office that can bid directly in the targeted countries. After the first steps, maintaining momentum requires rebranding and adaptations to foreign markets.
What could internationalisation bring to Chinese companies?
Top-line sales increase: There’s no country bigger than China, and as such, sales increase can’t be the sole reason for going overseas. But in some segments, the potential is higher overseas. For instance, the market for camping cars is large in the USA but small in China. The internet makes it all the more easier to sell overseas and incrementally add revenues.
Moderating business risks: For instance, the suspension of new video game licenses in late 2018 in China was a blow to Chinese gaming studios that had no presence overseas. Those which had a presence outside of China were able to weather the blow.
Reducing inventory: The ability to be present in various countries makes it possible to sell inventories that did not find takers in China as well as using various distribution channels to plant use cases of the same product in overseas countries.
Inoculating innovation: Being an international company helps inoculate innovation within the Chinese company and also adopt newer solutions.
Consolidating a first-mover advantage: Some Chinese companies can leverage their first-mover advantage by going overseas and being the first to provide a product or solution that has already been tested and proved successful within the local markets of China.
Increasing valuations of the company: Some Chinese companies consider scaling overseas when they move to the Series D, E or pre-IPO stages to increase their value or to get chances of getting listed in NYC, HK, London or other places. For companies already listed in China, acquiring companies overseas could turn into a very easy value creation as P/E ratios are lower overseas than in China.
