British SME entrants find trust is the key in a land of promise

When Robert Costelloe, now 26, arrived in China two-and-a-half years ago, his agenda was clear: to build a strong network of relationships that would allow his father's business to prosper in the country.

But the first thing Costelloe, son of the Irish fashion designer Paul Costelloe, needed to do was to master Mandarin, so he enrolled in a one-year course at Tsinghua University in Beijing.

Robert Costelloe (third from right) and his five brothers close the Paul Costelloe menswear show at 2010 London Fashion Week. Provided to China Daily

That commitment was born of a belief by the young Costelloe that building business trust takes time and effort, something that he feels can be tediously slow but ultimately rewarding.

Costelloe, the head of international business development of Paul Costelloe Design, is involved in building the family business in areas including global business strategy, legal affairs and marketing and communications. The company markets not only clothing but jewelry and other fashion accessories.

Paul Costelloe Design is one of many British small and medium-sized enterprises seeking to enter China or expand their market share in it.

Among the British companies that have entered the country over the past 30 years, corporate heavyweights have dominated, but a new wave of British investment making its way into the country is dominated by SMEs that are known to few Chinese now, but which have the potential to become multimillion-dollar brands.

However, achieving that involves building trust and forming reputations, which in turn is built on hiring the right people and taking account cultural differences, Costelloe says.

"One of the most important aspects is building openness and trust with potential partners that is essential to successful governance and development."

A major challenge for a previously unknown brand to operate in China is to gain the interest of distributors and retailers, encouraging them to place products in their stores and retail spaces, he says.

When most foreign brands arrive in China known to few it is natural for retailers to have many questions about their potential in the country, Costelloe says.

His company's strategy is to disseminate a key message showing the strengths and unique selling points of the brand, as well as establishing physical contact, meaning retailers can touch and feel products to better understand the brand philosophy.

Rita Kwok, founder and director of Interlink Direct Ltd, an established high-quality food and beverage distributor offering premium Chinese and oriental products such as spices and frozen stuffed buns in Britain, says anyone wanting to become a sole distributor for many popular brands needs to put in a huge amount of time and effort.

"To pitch for sole distributorship successfully, we can show our strengths, such as having a distribution network to exhibit our market penetration, customized services and expertise in the food sector, but we also need to demonstrate trust to suppliers. That includes making advance payments to them."

Being aware of cultural differences and taking heed of them is also vital.

Gary Wilcox, the director of JAG-UFS group, which provides logistic solutions, both by air and sea, to importers and exporters, says: "We British are a little more reserved, and sometimes I feel this can frustrate our management in China."

In China, once a reputation is established "things happen very quickly, with investment being made ready a lot more quickly than in the UK", Wilcox says.

"In the UK, consideration of risk is more calculated, which can lead to decisions not being as quick as our Far East management team would like."

For Interlink Direct, Kwok says, "tailoring to the Chinese way includes using popular Chinese social media platforms and mobile apps such as WeChat and Weibo for very efficient and effective communication".

"It is always better to have a Chinese-speaking contact person or agent representing the company due to time difference and language barriers."

However, finding and retaining talented staff can be difficult, so seeking professional assistance including expert advice, is extremely important.

JAG-UFS, which entered China in 2003, has steadily grown in the country, and it says having its own offices in the country has greatly helped customers and allowed the company to offer value-added services, but along the way it has not been short of drawbacks.

"The setbacks we have experienced were down to having incorrect personnel in management positions," Wilcox says.

"The biggest problem in tackling this was the distance. When faced with this sort of problem, you rely on having a local presence. At this time we sought a lot of local advice, listened and acted on it. Carefully selecting the right personnel is vital."

The leaders of many SMEs say that building relationships and networks is the key to success.

"Business in China is heavily influenced by guanxi, says Howard Leigh, Lord Leigh of Hurley and senior partner at Cavendish Corporate Finance. "More than just networking, guanxi is predicated on establishing trust between parties, built not just by honoring contracts but by developing goodwill over time through strong personal relationships.

Costelloe says: "We want to be successful in China, but I do not want it to simply be a case of selling products to Chinese consumers. It has to be much more two directional.

"By creating platforms that bring strong win-win situations, we can grow in a way that is long-term and sustainable rather than just driven by short-term profit."

In China, building business cannot simply be about revenue and profit, Costelloe says. The Chinese government needs to see foreign companies making contributions to the development of the country's industry, business and society. So it is essential for British SMEs to have strong engagement and dialogue with key decision makers that will allow them to build expertise and knowledge-sharing in China, he says.

"We want to be in a position where we can contribute to the development of China's domestic fashion industry as well as providing the tools and expertise that the young and upcoming Chinese designers and students need to succeed in creating and building their own brands in China as well as overseas."

Costelloe says he is building initiatives that can help Chinese companies in their desire to go out and be successful overseas and hopes that these partnerships can lead to new opportunities for his company in China.

For China Daily

(China Daily European Weekly 09/05/2014 page22)