Matthieu David interviews Vincent Djen, Director of Cheng Kung Garments and CEO of REMAKEHUB. The textile industry has consistently been a labor-intensive industry. In this episode, we explore what the future hold for the garment industry and how a circular economy fits into that. Are Chinese consumers already requesting fashion products made from recycled materials? Can textile factories be digitalized yet or is there still a long way to go before that happens? Find out the answers to these questions and more in this new China Paradigm interview.

• 0:00 Guest introduction
• 5:59 How did the current outbreak affect the garment industry?
• 7:51 Is the winter collection delayed as a result of the coronavirus outbreak?
• 8:17 The story behind Cheng Kung Garments
• 10:31 How and why did Vincent Djen decide to take over the family business?
• 13:28 Cheng Kung Garments – the current size of business
• 14:27 What are the highs and lows of a season in the garment industry?
• 17:05 How much of Cheng Kung Garments’ production is in-house and how much is outsourced?
• 20:53 Is China still the best place for the textile industry?
• 24:31 Why is the textile industry still so labor intensive?
• 26:39 What are the costs of using robotics for manufacturing instead of people?
• 28:56 What are the initial costs for entrepreneurs who would want to get into the textile industry?
• 33:01 Is there support from the Chinese government to make factories more innovative?
• 37:03 How is 3D printing helping the textile industry?
• 41:09 How does Recycling fit into the day to day activities of the Cheng Kung Garments factory?
• 44:06 Mechanical vs Chemical Recycling – how many times can a product be recycled?
• 46:42 REMAKEHUB – what and why have specific products been picked for recycling?
• 48:12 Why was adding traceability for waste products recycled by REMAKEHUB important?
• 49:42 REMAKEHUB – following the “Cradle to cradle” design concept
• 50:50 Do big fashion companies already use recycled products?
• 52:50 Is it easy to tell if a finished product is made from recycled materials or not?
• 54:03 Is recycling mandatory for companies or is it still an optional feature?
• 56:18 Are consumers already buying products because they come from recycled materials?
• 57:51 What are the challenges of creating a brand in the fashion industry?
• 1:00:26 What is Vincent Djen’s greatest business goal?
• 1:01:28 What books have inspired Vincent Djen in his entrepreneurial journey?
• 1:02:43 What does Vincent Djen read to stay up to date with China?
• 1:05:24 What productivity tool does Vincent Djen use to run his business?
• 1:08:25 What unexpected business success or failure has Vincent Djen witnessed in China?

One relevant episode

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm 116: Contributing to the Chinese circular economy is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David interviews Nathan Siy Founder and CEO at Evoke Motorcycles. The company aims to be a market leader in the transition from gas to electric propulsion motorcycles. There is no doubt that going electric is the future and Evoke’s electric motorcycles seem to be the right type of products for this emerging market in China. Making a strong partnership in terms of manufacturing, how Evoke Motorcycles approach product development, and how do they compare with what Tesla is currently doing in the automotive business – all these topics and more are discussed in this new China Paradigm interview.

• 0:00 Guest introduction
• 3:00 Evoke Motorcycles – current position on the Chinese market
• 5:56 What is the pricing policy of Evoke Motorcycles?
• 8:06 What was the initial investment for Evoke Motorcycles?
• 10:58 Guanxi – how important is it to build trust before establishing a business relationship in China?
• 12:52 Working with Foxconn – how was Evoke Motorcycles able to make that happen?
• 17:38 At what stage was Evoke Motorcycles before partnering with Foxconn?
• 19:36 How did Foxconn impact Evoke Motorcycles’ business strategy?
• 20:57 Riding the Industry 4.0 wave – how Foxconn is able to pivot so fast
• 25:25 Building the product – how does that process look like?
• 29:21 How did Nathan Siy decide to build electric motorcycles?
• 33:03 Software – does Evoke Motorcycles have a software development team?
• 34:06 Who are Evoke Motorcycles’ clients?
• 40:19 How hard was it for Evoke Motorcycles to obtain proper certification to be able to sell their products on the Chinese market?
• 44:51 Is Evoke Motorcycles’ development process a client-focused or a product-focused one?
• 47:15 How does Nathan Siy see sustainability evolving in China?
• 50:59 What is the core feature of an Evoke motorcycle that would be aligned with the concept of sustainability?
• 52:37 Why is Tesla not building electric motorcycles?
• 54:28 What books have inspired Nathan Siy in his entrepreneurial journey?
• 57:21 What productivity tools does Nathan Siy use to manage his company?
• 58:51 Should he have extra time what other business would Nathan Siy like to pursue?
• 1:01:22 What unexpected success and failure has Nathan Siy witnessed in China?

One relevant episode

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm 115: Learn how this hardware start-up partnered with Foxconn to create a product-lead vision is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Welcome to China Paradigm, a show powered by Daxue Consulting where we interview season entrepreneurs and experienced managers in China about their business and experience in the country.

Matthieu David: Hi everyone. I am Matthieu David, the founder of Daxue Consulting and its’ podcast, China Paradigm. Joining me today is Philippe Ricard, the founder and still CEO of the restaurant called La Creperie. For those who have lived in Shanghai and now, in Hong Kong, and Vietnam as well, they all know La Creperie. That’s kind of the restaurant which we can call an institution because they have been in place for 13 years and, you know, when a restaurant becomes an institution when other restaurants around them have changed, when the Greek restaurants become French restaurants in front of you and all the restaurants are closing and opening again and they have different names, but they are still here. That is why I am calling those restaurants an institution and I went yesterday to your place in Dong Ping Lu to check the reopening a restaurant after the Coronavirus’s crisis. The restaurant, but also the people inside and how the place was. It is still the same; very nice lighting, very nice environment, a lot of decoration, music just at the right level in terms of volume and very welcoming staff. The only difference I could see is that change in opening hours and the fact that you insist on the fact that everyone has a green code in Shanghai, that they have this green card code. Anyway, I am not going into too much detail. Thanks for being with us. I am very happy to have you here and as I said before, La Creperie is for me a little bit like a well-known place like Starbucks because I can tell someone, “Let’s go to La Creperie.” I don’t have to send the address; I don’t have to tell them where it is. They know it and that’s why I am calling it an institution. Thanks for being with us again, Philippe and so what is the situation of the restaurants now?

Philippe Ricard: Thank you for all the nice words about La Creperie. It’s true that we’ve been in Shanghai for more than 13 years. It is also pleasant to hear that we are kind of an institution. At least we try to really do our best to always provide quality in terms of products and service that is very stable, and I think that’s what we have been recognized for and I think this is what makes us successful today in running a crepe restaurant in Shanghai. I am not here to pretend to be something that we are not like fine dining, but what we try to do is to provide a food experience, as we say to our customers. It goes to a lot of details like the music, like the small salt and pepper you would find on the tables and so that’s what we are trying to do. We are trying to make people travel when they come to our restaurant with the food and the environment.

Matthieu David: Could you tell us now, more about the number of restaurants you have? I didn’t say precisely how many restaurants you have and what kinds of restaurants you have. As far as I understand, you have your first one in Shanghai; two with this specificity of crepes, which is like small pancakes, for people who know French food and for people who don’t know, I will explain. It is very light pancakes from Britany, and you can eat them for breakfast, lunch, and dinner inside different ingredients. You have two of them; one is in Dong Ping Lu, one is in the city center and you have La Cabane, which is more kind of food from the Alps if I understand correctly, with fondue and so on and then you have one in Hong Kong and one in Vietnam as well. Is that correct?

Philippe Ricard: Yes, that’s right. Three restaurants in Shanghai and two La Creperie and La Cabane, which is like a restaurant that specializes in food from Savoy; so, the French Alps. We have one restaurant in Hong Kong now. We had two and we had to close one last January, but we were kicked out by the building because they were renovating the whole thing. So, we are now looking for some new opportunities. Other, we have one restaurant in the city, but that has been open already for many years. We opened in December 2008.

Matthieu David: And you are living in Hong Kong?

Philippe Ricard: Yes. In fact, I’ve been based in Shanghai for 14 years. I have been in Hong Kong for two years. It is also nice to see the city from the inside.

Matthieu David: Today is the 20^th of April 2020 and everyone is thinking about one thing, which is the crisis sparked by the virus and the first businesses which have been impacted are restaurants, coffee shops, places where you have to go to consume something, even though you can deliver more and more. I got some statistics. If we look at the restaurants in China, it is about two-thirds of them that were closed and about coffee shops, it is about 80% (learn more about the post-lockdown situation for restaurants in China). The right statistic is I think 85 or 88%. Anyway, it is massive.  That has lasted for some time, for weeks, and even when you went back, I understood form actually what your restaurants’ information that you open only for lunch or only for dinner. How was the situation for you, more in detail? How has it been financially speaking, because I believe that what happened to you can very instructive for people currently in the West? In France, Europe in the U.S; they have to know how to react, what to do when reopening a restaurant after the Coronavirus’s crisis, and how to soften the loss maybe with online delivery or maybe by readjusting and doing different things (learn more about the delivery sector during the outbreak in China)?

Philippe Ricard: Yes indeed. It has been a terrible time. Mostly for restaurants, it has been a really challenging time to find ways to survive, but I think somehow we are lucky because our restaurant has been in Shanghai for so many years. So, we have a cash flow that helps us to survive this time. Also, we have a good team and I am very happy and proud of them because when the time came when we had to close and to shut down the restaurant for a few weeks, it was not easy and until we started again, they all agreed, for example, to risk the time they would be working on the salary that they would get in proportion and this is something that helps our business. So, it is everybody’s effort that makes the difference in the end. This is something that is going to help us to rebuild and to face the situation.

Matthieu David: What was your first reaction when you knew you had to close down? Was it that you would you go to contact someone to see how you could deliver more food, was it that you would send an e-mail to all your past clients? I am not sure if it would be possible to contact them all on WeChat or whatever to tell them, “We can deliver to you” or you had to close down the whole kitchen? What were your first actions?

Philippe Ricard: In fact, we didn’t have a choice. We had to close everything. The kitchen had to be closed. We couldn’t do any delivery for a long time and then finally, when we could reopen the restaurant after the Coronavirus’s crisis , that is one of the main changes that we decided to operate, is that we wanted to push even more the delivery because that is one way to also increase our sales and making possible the fact that we are going to cover all the fixed costs, I would say. It’s working. We have done the same in others, where we faced the same situation and where delivery is becoming more and more popular. There are many restaurants I know who didn’t do deliveries before who has started to do it now. In La Creperie we have always been very cautious with delivery because we wanted to make sure that we keep quality in our products that is really at the highest and when you do deliveries, sometimes when you do control, it means that at the end at the customer’s place, it could be different, but we are taking this time to rework our recipes, our presentation, our packaging to make sure that the product at the end is still the same. The feedback we get at the moment is very good. So, we are going to push even more this possibility of delivery.

Matthieu David: Actually, very interesting to see how you thought about deliveries, not only by delivering just the product you eat but also the packaging and surroundings. Would you mind sharing how you could actually give a similar experience to people who go to your restaurant because they don’t only go to your restaurant for your food? There’s such a beautiful environment. When you go to La Creperie, you feel Brittany. When you go to La Cabane, you feel you are in the French Alps. You have paintings and you feel you are in the French Alps. Have you thought about how to convey still this feeling in some way, also through delivery?

Philippe Ricard: That’s a very good question. That is very challenging when running a crepe restaurant in Shanghai. I don’t know honestly how I could make this option, but I think that is part of the deal when you go to the restaurant you come for a real experience, and I am not sure we could find a way to make it the same at your place. What we do I beside delivery, if the people really want to have the full experience is that we do catering and it means that we can go to a person’s place with our machines and a chef and then we would make the crepes at their place.

Matthieu David: This is new or post-virus?

Philippe Ricard: It is not new, but this is something that we have been doing in the past sometimes, and now we are also pushing it, let’s say because of some people like the city experience and of course we are not going to do it for one or two people. That would be too costly for them, I guess, but if there is a group offer of let’s say 30, 40 people gathering, which becomes possible now I think it’s something that many people could be interested in because what the people like is that they can order on the spot and we do the crepes on the spot in front of them and so there is like illumination. So, if there is like a birthday party, for example, or any kind of celebrations, people would be very happy and then t is not only a question of serving the food there, but we can also allow the people to try to make the crepes, which is also fun. The people really enjoy that.

Matthieu David: True. So, we talked about the time during the crisis and you had a spot where you can compare three different locations; Shanghai, Hong Kong, HCMC and how do you feel the crisis was managed differently from different cities and what tips do you get from those cities that could be useful for people now in Europe or in the U.S while looking at the time when people will come back or things will go to a new normal because we know it’s not going to go back to normal. There is a new normal.

Philippe Ricard: Yeah, I think that is a very complicated question to answer. I think the visibility today on the market is still not clear. The markets are different between Hong Kong and Shanghai, even in terms of response from governments on the restrictions. In Shanghai, it’s been very effective because we had to shut down. In Hong Kong, we didn’t have to shut down, but we can still do deliveres and takeaways.  In Hong Kong, we didn’t have to shut down. We could have some customers come in, but of course many just didn’t want to go out. So, the business was very little. Now, in Hong Kong, the restriction makes it that we cannot have more than 50% of our restaurant full. So, it means that 50% of the tables are unoccupied and so it makes the business very complicated because of course, the sales are still not high enough to cover all the costs.

Matthieu David: How many people do you need in your restaurant to cover the costs or to be two-thirds full or what is the level?

Philippe Ricard: I think it’s that we need to be almost full because the cost is so high for the rent. In Hong Kong, if you don’t have a business that is really working very well, it is very hard to adapt and to keep alive, so you need to be good at rent negotiation in China. So, yes so, we just hope that it is going to come back soon. There is a good sign and there are good signs. Last weekend, for example, and this weekend it was very good. We had many people come in and so it shows that we are in the right direction. We just hope that there won’t be a whole new wave of cases coming after reopening a restaurant after the Coronavirus’s crisis . That’s always the risk. We have to live with it. In Shanghai, we see that it’s already one step ahead, compared to Hong Kong. From the feedback I have because I have in fact, not been to Shanghai for several weeks now, but the feedback from my team shows that more and more people are coming back to the reopening the restaurant after the Coronavirus’s crisis . People are willing to react and enjoy it a bit more. They feel less at risk. I understood also that the westerners maybe are keener on going out than the locals who are more cautious. We believe that it’s going to come back probably not as like a big after a crisis, but probably something more progressive, but it is coming back. I think there is a trend and I am not so convinced like many people are saying, “Well, things would be very different.” I think most of the things will be the same as before because people have a tendency to forget about the problems, which is a good thing because there are so many problems happening. If we have to remember all of them all the time, that would be terrible. So, I think in a country like China where the economy is still good at developing where I think everybody is still enjoying a better life the following year. I think things will come back to what it was before. That is my opinion. Of course, there will be some little changes happening, but it is not going to affect the global change in the economy of the country. Of course, there are problems, but China is strong. It is not going to be a big problem, in the long run, let’s say.

Matthieu David: You make me feel that China is following a V curve like when it is down and coming up and Hong Kong is like a W curb because it had problems two months ago, then things went back. I was in Hong Kong a year and a half ago and things were pretty okay, actually. People were going to the gym and everything, like normal and then now it is still more strict again. So, indeed we see a few different perspectives from Hong Kong as well as China. I’d like to go back to the beginning because that is not the first crisis you went through when running a crepe restaurant in Shanghai. In 2008, just as you started actually. 2010 was not that good either. So, you went through different crises, but I would like to go to the start. You had no experience in the restaurant in 2007 and you actually worked before in optics and glasses. Would you mind telling us what was in your mind at the beginning to running a crepe restaurant in Shanghai? Was it opportunistic, was it something you planned for some time and then you were able to put everything together? How was the beginning?

Philippe Ricard: In fact, yes, I am not from the business at the beginning. I was in the optical business. I was sent by my company in France to open a subsidiary in Shanghai in 2004. I was in charge of all the regions of Asia Pacific and so some subsidiaries and some distributors. In fact, I was even before that, I was traveling a lot because I was a director of this company. I think at some point in time, I wanted to stop traveling so much and still meet people because this is what I love and one of the ideas I had was that maybe I should just settle in Shanghai, stop traveling all around and make a business where the people will come to me and rather than me going to see them. I studied different projects and very naturally I would say, one that really popped up was running a crepe restaurant in Shanghai because I am originally from Brittany and Brittany is the region in France where we do all these kinds of crepes and I knew at that time there were a lot of people missing this food in Shanghai. So, I decided to change my life. I went on to be a new entrepreneur, but I did it with knowing a lot of people already in Shanghai who could really support me in running a crepe restaurant in Shanghai.  I think that is something that was really important at that time because I had already been in Shanghai for several years. So, I had some network. I had already opened a business and so I knew how to do it, but yeah after I had two neighbors and that was also quite a challenge, but it was really a passion and since then I never give up on this.

Matthieu David: What are the other ideas you were looking at and how did you compare to them?

Philippe Ricard: Well, the first idea I had was to open a bakery because at that time there were not so many people talking about bakeries; French bakeries and I learned that there was probably at the time a big French baker coming to Shanghai with big money and the will to invest and develop. So, a few people I knew at that time told me, “Maybe it’s not a good idea right now because it would be too competitive for you.” I decided to quit even though my grandfather was a baker. It was not easy to forget that idea. Then I had the second idea, which was to open a fine grocery. So, in fact, there was also no fine grocery in China at that time. So, I went to France to find a lot of products, but also there I had some friends in the logistics and they told me, “Well Philippe it is not easy to import products in China. Many times, they will be stuck in the past tense and then if you have perishable goods, then for sure it is very dangerous. You have a big risk that you are going to lose everything.” The rules change very often too. So, finally, I decided to also give up on that project. So, the shared project was La Creperie and I said, “Okay I am not giving up on this one. I am going to go to the end of running a crepe restaurant in Shanghai.” That was the beginning of that story.

Matthieu David: Got it and how did it evolve, the businesses from 2007 until now? I see a couple of evolutions in your sector and tell me if I am correct or not. One is clients, many foreigners, many French who maybe have two-thirds of Chinese now. I went to your restaurant yesterday at Dong Ping Lu and I think it was like a strong half of Chinese. You have 4/5 people eating alone, actually and Chinese and then you have two or three couples of friends eating, and you have a French family. So, it was quite mixed, but it was a strong half of Chinese people. La Cabane was similar; strong half or two-thirds of Chinese. I believe that is one and the second element is that when we talk about 2008, we all think about the crisis, but in China, for food and beverage, it was another crisis. When this scandal happened in China, then China became much stricter on food and food safety, controlling much more. That started in 2008 and that’s another evolution as well on how to running a crepe restaurant in Shanghai to have a much stricter rule than in the beginning (learn more about the 2008 food crisis). Can you tell us your perception of what is the evolution of running a crepe restaurant in Shanghai from 2007 up until now?

Philippe Ricard: Yes, it’s true that there has been ups and downs because of the crisis, but I think what our strengths were, was that we were able to adapt quite quickly to our environment because we remained a small business. So even I opened all the restaurants, I try to manage my business with a lot of flexibility in trying to adapt very fast. I think that’s the main key. I have also tried to do all the time is we are always focusing on quality and quality is not about only the things that you see in the surveys or in your dish. It is also what is behind in terms of process and in terms of groups, in terms of knowledge of our staff, of training. I think it is very, very important that all the things that the customer doesn’t see are also very well organized and controlled when running a crepe restaurant in Shanghai. I think this is very important for me because I come from a background and a big experience in Johnsons & Johnsons, for example. It is very house oriented. It is a company with a lot of ethics, and I think this is something that for me is very important. It is not only superficial. I think what we try to do is even in the back office, I would say, in the kitchen everything we do, we try to make it very clean, we try to make it well done as probably what a customer is expecting it to be. So, after I was also lucky to have people with me who are very strong, who are very competent, who are in different fields and that, of course, is helping a lot for the scaling up a restaurant chain in Asia. It is not Philippe alone. It is Philippe and his team. Without a strong team, it would be also very difficult to scale up a restaurant chain in Asia.

Matthieu David: How have the clients evolved? Is it true to say that it was mainly foreigners and now it is much more mixed with Chinese and what is the perception of your restaurants towards Chinese because I am not sure if it is very well known La Cabane from Brittany is in China, right? So, you have to talk about it to explain it. What image do they have of your restaurant?

Philippe Ricard: I think we have a very good mix now of customers; foreigners and locals in every city where we work and it’s really true in Shanghai. At the very beginning yes, we had mostly French people come in and then more and more foreigners and then locals. We can even see now that in one of the restaurants it is like 50/50 maybe. It took some time for sure to make the people know about our products, but I think with the time I think we were able to gain more confidence, more I’d say people get to know our place from friends. There are many, for example, French families or French companies who are bringing their staff or their friends to our place and that makes our place more known from the locals. That’s for sure. Something that I really enjoy is that when they come to our restaurant, we have a big map on the wall and many people; whether they are from Brittany or they would know Brittany because they go there for their holidays in France, they love to show to their Chinese friends, “Oh, this is Brittany.” They tell a lot of stories about it and it is really nice because this is why I opened this restaurant. There is a big culture behind it and there are many stories to tell about this region of Brittany and the culture.

Matthieu David: You found something in your box to deliver and it came with a map to Brittany. Another question I had is, I feel that the scaling up a restaurant chain in Asia is not easy, but you did it with three restaurants and actually, you did it internationally with Vietnam and Hong Kong. How do you scale up a restaurant chain in Asia because I feel you need to restart again? You need to find new clients; you need to find a new place. The only thing you get from your experience in Shanghai is intuition, you have the sourcing of food and material because also one thing that people may not know if they have not been in your restaurant, it is very well decorated and since I know the restaurant; the chairs are the same. They are the same style. I believe you have to replace some of them, but that’s such a style and as you said, the paper is very Brittany and so on. So, you have those assets, but that’s it. You don’t have more skill. When you sell a product, you can sell it everywhere. You just have to export it to go through the borders and so how do you scale up a restaurant chain in Asia? What is the use of scaling?

Philippe Ricard: Yes, there are many people who told me in the past, “Philippe, why don’t you centralize a certain number of services or open central kitchens” or this kind of thing, but I have never been much into this because I think it increases the cost a lot and before you do this, I think you need to have a lot of restaurants open to making it really efficient. I think when you work in different countries it is even more difficult. So, we don’t make much savings because of the scale, I would say. We have to restart a bit from scratch; everything in every restaurant or every city. We are quite strong anyway at controlling our cost. The experience from the first restaurants is at first, rent negotiation in China, for our products, with our suppliers and we know also better where we can get the quality we need. We sell a lot of cider; apple cider because this is the main drink in our restaurant. I have suppliers in France from whom I order directly because of the volume that we do; we are bound to get some good prices. So, that is one thing you can do.

Matthieu David: I’d like to stop on one thing. You said you learned how to do rent negotiation in China. I think that’s a topic that would interest a lot of people. How do you negotiate with a landlord in Shanghai? To give a bit of an idea, we did some research on the cost of renting restaurants and when we look at another restaurant; an Italian restaurant, it is about 88 000 NMB for 100 square meters, per month and it represents something like 16-20% of the revenues. That is something I have and it’s about 15-20% of the revenues in the rent and that is much more than New York, for instance, but on the other hand, the labor cost is lower. Could you tell us how you do rent negotiation in China? Do you sign a contract for 10 years or is it stable with an increase every year or what is the way of negotiating?

Philippe Ricard: I think it’s a very complex strategy to get the best from the landlords. It will depend a lot on the locations and on the size of the place. One chance we have is that we have quite a unique concept and so it happens also regularly that some locations are asking us to come or if we are competing with some other restaurants or other shops, other brands; we have them because first, we are not new on the market. We have some experience and we can show that our business is profitable and then it means that we can pay our rent. Also, we are stable in the timing. So, that is what some landlords are looking for because we are not a challenge for them. We don’t pay late. They don’t need to find another tenant. We can show this. Also, I think I have also a background from business and so, of course, one of my duties, when I was in other companies, was to negotiate and so I have probably some skills from that experience. For every landlord it would be a different rent negotiation in China, I guess.

Matthieu David: Did you get a discount because of the crisis (learn about the government measures during the oubreak)?

Philippe Ricard: With some of them I would say, yes. With some of them, not that easy, but yes globally, we can manage.

Matthieu David: I interviewed a lawyer in another podcast we have called Daxue Talks. It’s another format where he told me that some people got one month rent for free when they were renting through the government or places owned by the government like for the month of February it was for free. Offices got a 20-30% discount on their rent for the rest of the year. So, is it something similar you are experiencing lie one month for free, one month, or lower rent for the rest of the year?

Philippe Ricard: Yes, in fact, again it depends on the locations. There are locations where we could get one month free. There are locations who say they will give something, but we are still waiting. Some gave some detail about what they would offer. We are still negotiating and still waiting for some feedback on this. We got some confirmation already, but we need more. I think it is very, very important. I think that the fight is everywhere the same for the tenants. If the economy, the environment is falling apart for some time, all the tenants need some support from their landlords because it is just impossible to survive, otherwise. In Hong Kong, we were lucky to have some subsidies from the government also, and so that is really helpful.

Matthieu David: Was money given to you, was a loan given to you? What was it?

Philippe Ricard: It was money given by the government in a very short time after the application It was really, really good. We were also lucky to have someone like Li Ka-shing, who is one of the richest men in Hong Kong who was also helping at some point in time the F&B business (learn more on how Li Ka-shing has helped the local F&B industry). So that is really good for us. Every small thing is welcome. In Shanghai, I know we also have some support from the government with postponing some payments. I guess they are also pushing the landlords to give some support and it is true that as the government in China is controlling a lot of real estates, then it is also quite easy for them to push it. So yes, we need all this help, for sure.

Matthieu David: You mentioned something I am very interested in. You said that some department stores and malls are asking you to join. They are calling you because you have been the place for some time, and they recognize you as a brand? So, that is something I had the feeling you have built a brand. What was your idea of building this brand? It was structured in your mind, initially or it came, it happened naturally that it was recognized as a brand?

Philippe Ricard: No, it came after. I think what I really wanted at the beginning was to build my restaurant and really enjoy the contact with all my customers. Many of them have become friends. That is what I really had in mind at the time, to enjoy the work, even becoming a waiter, a bartender. All the jokes in the restaurant, I just didn’t touch on the kitchen too much because I think it was better to have a real pro to take care of it. I was so much interested in being on the floor and talking with my customers and that is where I wanted to be. After I think it came quite naturally later on that I developed from the time when I opened the second restaurant in 2010 in Hong Kong. We were very successful from the beginning, there. Then we decided to open another one. Then one more and then it is true with the fact that I really wanted something different from one restaurant to another in terms of the image because I wanted the people to experience the same thing. I wanted them to really feel like they go to Brittany when they come to our place. So, of course, I tried to design a lot of things that would make the people travel and feel the same, even if they are in Shanghai or in Hong Kong and that’s the way naturally the bone came together.

Matthieu David: Did you get the trademark La Creperie in all those countries? I believe when something has lasted for some time and you are successful, you get copied with a similar name or the same name.

Philippe Ricard: Yes, La Creperie is a registered trademark. To copy is not only a question of making crepes. It is a full concept. I think people can easily recognize if it is a real one or a fake one because there are many details that people can see when they are in the restaurant and it is true that when they come to Shanghai or Hong Kong or the other, they would immediately feel the same spirit. They will see the quality of the dish. There are some brown, some ciders that we use and that is where we have some exclusivity and I think it is easy to recognize our brand.

Matthieu David: When you opened in Vietnam was it because you had someone over there who maybe worked with you in Shanghai and had to go to Vietnam or is it because you had the idea that the French community was big enough to start also in Vietnam? What was in your mind because it is far and complicated to run a crepe restaurant in Shanghai and in other locations. You have three countries to manage. You have different legislations, too. It is a very different way of managing the business.

Philippe Ricard: Yes, that’s right. I think I developed my business a lot at the beginning with opportunities, meaning that I had someone coming to my restaurant in Shanghai who loved La Creperie in Shanghai and he was not living in Shanghai. He lived in France, but his wife was Vietnamese. He had a son in the F&B business in France. Then he told me, “Okay Philippe, you know I love your restaurant. My wife and my kid would love to go back to Vietnam to work there and so do you think we could do something together?” That’s the way we approached that market. We made the study and thought, yes, indeed there were a lot of French people living there (learn more about our market research methods in China). It as a dynamic city. So, we thought it could be great. There is good potential in that city.

Matthieu David: What stopped you from franchising because that is a bit of what you did in Vietnam sort of franchising with your branding. When you do a franchise, you bring the branding. You bring the sourcing very often and the way to easily decorate your restaurant.

Philippe Ricard: Yes, so far it has been a kind of franchise. It works like a franchise even though I have some shares in every restaurant. I think what is important for me is beyond the franchise system is although the process that goes with that, I try to bring also in all my restaurants and that is something that is very important for me, is that every restaurant, even its… you can recognize La Creperie. They all have their own soul brought by their team, their manager, by the partners because I don’t want to just make a copy and paste. I think it is… I see the soul of the restaurant and that is very important. We are not fast food; we are not fine dining. We are a bit in the middle. We are a traditional restaurant and I think the contact with the manager or the team or the chef with the customers is very important. It creates a relationship that we love.

Matthieu David: Because you invested money and time into it, even if you may share the equity, what would convince you if someone comes to you to give him your branding, give him your knowledge and actually give him some money to start as well?

Philippe Ricard: There are several things which are important. I think the main point to scale up a restaurant chain in Asia is, to feel good with the person I have in front of me. When you start a business, it is going to be for many years. So, the money is, of course, important, but it is far from being everything. Money comes and goes. The person you have in front of you is going to stay there for a while and he is not going to change that much. So, it’s super important for me to have someone I can talk with, with very open and easy to talk to. Not everything is positive, I would say in business life and so there are some very complicated decisions to take sometimes and we need to be able to talk about them so we can move on in good conditions.

Matthieu David: You are talking about personalities. You talk a lot about the personality, but what makes you believe that a business plan is going to work, that it is going to be successful at some point, I understand that it may be for years, but at some point, it has to be successful otherwise it’s a waste of time and money. Do you come up with numbers, do you do research on how many French people are in the city? What would you look at? What are your criteria?

Philippe Ricard: I would say now it depends on where I am open. There are places that I know quite well because I have been living in this place for many years, like Shanghai or Hong Kong. Saigon, I know also a bit less. So, of course, we need a study and we need to understand what is going on in the district, in the city, but I think it is like marketing. You can put on the paper a lot of things about what’s going on. On marketing, it just helps you ask a lot of questions for the market study, but it could also bring you to the time where there is no end to these questions. I mean, also because the answer is changing all the time. So, I think for me now, what is very important is to have a good knowledge of what is happening, but also not to think too much long term to scaling up a restaurant chain in Asia. I think it is very important today to control the fixed cost because you never know. The virus, the protest in Hong Kong; you don’t know what is going to happen in 3, 4 years from today. If you were not able to control your fixed cost, then it is going to kill you, for sure. Today the main idea I keep in my mind from this experience, having inner flexibility in your business to be able to survive the bad times.

Matthieu David: We are close to one hour of talking. You have sustained for one hour. Before we started, we were saying how long do you have to survive. It is like already an hour. You have survived. I have a few questions I ask in the talk, usually. The first one is about the books; the books which have inspired you in business as an entrepreneur. Would you mind sharing a few resources? It could be a book and it could be also other sources like newspapers or others like blogs.

Philippe Ricard: Okay it is a bit difficult for me to talk about some specific books or reviews. In fact, I try to diversify a lot of the things I read. So, it’s, of course, there is part of the business, but business is mostly about the economy. I would say what is happening; like for sure today I think everybody is focusing on when is the COVID going to disappear so we can finally come back to normal life? Even for this, I mean I try to follow different sources to compare to get a better understanding. For example, I read something on the Washington Post.  I would read some notes from the government and I would also read some articles from different newspapers; non-diplomatic even. I get also a lot of insight from my Chinese wife. I don’t read Chinese, so she can then help me with that. It is good to have different points of view.

Matthieu David: Do you work together with your wife?

Philippe Ricard: No, she is not working in the restaurant. So yes, I think it is good also to escape from work. It is also something I love to do is to really read some what we call in France like travel experience from different people around the world. That’s for me important. That is what I like to do in my restaurants. I also need it myself.

Matthieu David: I see you are really from Brittany. People from Brittany love to travel all over the world. They are the strongest community of French all over the world. I would like to end with two last questions, but I will ask them at the same time. What success have you witnessed in China and what failure have you witnessed in China? Not about yourself, but about what you have seen that was surprising to you? Why I am asking this question is because when you look at the success which was surprising, very often you give an idea of what is changing. It’s a signal of a bigger picture of something that is changing. I arrived in China a few years ago and people were paying cash when they get deliveries and now it is like, middle ages. You pay with WeChat and Alipay. That is a success I would not have expected. What about you? What success or failure did you see that you did not expect?

Philippe Ricard: I think there is one thing that I could mention. It was in 2010, during the international expo (learn more about the 2010 expo in China). I experienced that time in Shanghai and I must say that I was very impressed with the way China is able to organize events and make very successful experiences for people. I think this event had a lot of Shanghai to really open. It was already open to foreigners, but I think at that time it made it even more open. For me, I mean I would think I would speak more globally. I think I am very amazed by the way China is moving on. It is very fast. Of course, nothing is perfect anywhere, even in France. I think the way that they are doing it in China is incredible. Managing one billion, 300 million people is certainly not the simplest thing, but they do it. Everybody is moving. We all know that there might be some big challenges ahead for them because of the economy, but still, I think they have this power to build and this power to bounce back, which is very strong. I think that is what I like in China. There is this dynamic. People are very different here in China or even mini Hong Kong or Vietnam. Everybody has their specificities and for me, I am almost more international than French today because I have been living here a lot and traveling a lot. Of course, I love my routes, but I love to see the difference between the countries, the people and I see everybody is doing well in China, compared to all the problems that we are facing and I think China is particularly doing well when we look at all the problems they have to face because of such a big community.

Matthieu David: What do you think about when you shave in the morning because a journalist asked him before and he said, “I am thinking of 1.4 billion feet which are going to touch the ground” and indeed the massive amount of people is something which has been managed. You talked about success, but what about the failure? Some way Paul came with a lot of money and means and didn’t succeed (learn more about the failure of Paul in China). What about a failure in China which has surprised you?

Philippe Ricard: I would say there has been a lot of success and failures. Of course, along the road. In my own company I opened, but I also closed some restaurants.

Matthieu David: How many did you close?

Philippe Ricard: I closed two restaurants for different reasons. One in Taiwan several years ago. It was too early for the market. For the restaurant industry, location is the key point.

Matthieu David: In Taipei?

Philippe Ricard: In Taipei, that’s right. Hong Kong I would say is we had to close, but we had no choice because we were kicked out of the building. Yeah, failure is part of the business. I mean, I think if you don’t lose anything at some point in time, you are very lucky. I don’t many people top who it doesn’t happen. If I need to say one example that I have in mind, then of course it is one that everybody had in mind in Shanghai is the baker. I would not talk about the reason for his failure, but that was a very tough time after a big success for many years. Nobody could have expected this.

Matthieu David: Yeah indeed, to the people who don’t know; Fahen was a very, very successful bakery and it was shut down again it seems from E-chain things and it brought a lot of doubt into the community about managing a business in Shanghai and it was very successful before. Actually, no other case happened since then, that massive and that talked about. Thanks, Philippe, for your time. I hope that things are going to go back to ‘normal’ or new normal as people are using now when we are getting out of this virus. I hope you enjoyed it. I did and I hope everyone enjoyed listening.

Philippe Ricard: Yes, it was very interesting. It was nice to talk to you. Hopefully, your words will help others and I wish all the best to everyone to cross the crisis.

Matthieu David: Thanks, everyone. Bye-bye.

Philippe Ricard: Take care.

This article China Paradigm transcript #103: Running a crepe restaurant in Shanghai in a post-coronavirus context is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Welcome to China Paradigm, a show powered by Daxue Consulting where we interview season entrepreneurs and experienced managers in China about their business experience in the country.

Matthieu David: Hello everyone. I am Matthieu David, the founder of Daxue Consulting and its podcast, China Paradigm. Joining me today is Yoann Delwarde. You are the co-founder of Infinity Growth and what you are doing or what you have written on LinkedIn or well, that will be one of the questions that we have. You are helping B2B companies that need to scale up and sell more with integrity. The word “integrity” is something I’d like to know more about and why you insist on it. You do B2B sales coaching, sales training in Shanghai, and consulting and you have been in China for – from my calculations – for at least 7 years. It may be actually more. So, it is a sizeable amount of time that you have been in China.

You have been working in a company and you started your company and you are also on the side, very active by lecturing, mentoring, and something that for me, firmly defines you for some time, which is Toastmasters. You are very involved in Toastmasters clubs in China. I feel along with Chinese communities because Chinese communities are also very involved in Toastmasters here in Shanghai. Thanks, Yoann for being with us. I am very happy to have you here. So, what do you do with your company now, Infinity Growth?

Yoann Delwarde: Thank you, Matthieu, for the introduction, amazing. So, actually, at Infinity Growth, we are helping B2B clients, as you mentioned to get the service they deserve. So, this is really the one-liner, “Get the service you deserve”. We help them to scale up, as you said, so to increase B2B sales in China and also selling with integrity. We’ll come back to the word integrity later in this conversation because I believe, now, that’s what people want to buy. They don’t want to be sold. They want to buy something they believe has integrity. So, this is what we do, basically.

Matthieu David: Tell us more about what kind of teaching you give to your clients? Do you have products; meaning like specific teaching and segmented or everything is adapted based on what you think they need, or it is both of them?

Yoann Delwarde: So, that is a very good question. If I take you as a potential client, you are the CEO of your company and I am sure you want to be a successful CEO. You are already and if you want to be even more successful one thing is to have more sales and one of the prime’s of this year is that we are in a recession. So, you may feel stuck or you may feel pressured and so actually at Infinity Growth what we do first is, we really understand you because we have privacy executives and so that’s really the key. Why I can say that is because actually we got 90% of our clients by referrals.

So, we don’t just care about numbers. We really care about you and how we usually do it is, first, we start by getting an assessment of how you do the sizing of your company today, and then based on this assessment, we build a plan together and then execute this plan with passion and with great care and enthusiasm to increase B2B sales in China.

So, usually, if you want to have the rhyme, we say, “We meet up. We team up and we raise our glasses up.” So that is how usually I introduce myself. So, coming back to your question on how we practically do it. We have a series of methodologies and tools because I believe that sales is a science. We have the mindset, the methodology or behavior of the way to talk, the way to ask and I think that this is no further than that. That is why it is a mix between methodologies, processing tools and processes; sales processes, and also about the mindset and the behavior.

That is how I would maybe put an umbrella on everything we do and as you said, we already have lectures or courses and we also have trainings and so we already have our set, but actually, 80% of what we do is really customized or tailor-made because everyone has different challenges. So, we look at different situations and we identify what could be the weak parts because each situation has a strong and weakest link and then we work on that with different sprints and methodologies of scanning everyone in our niche. Every quarter we have a sprint and we grow.

Matthieu David: Are you a member of EO? Are you a member of the ChinaAccelerator or EO because scaling up is a book that is used a lot about by EO; Entrepreneurial Organisation, which is for people listening to us who may not know, which is a big organisation in the U.S.? They have entrepreneurs, which are mentoring and teaching other entrepreneurs on how to scale up. So, we have four chapters.  One is about cash, one is about money, one is about; I don’t remember actually all four of them, but you certainly know them and it is very, very organised and to the opposite to what you can release in podcasts, books, whatever success is not random. I think that the basis of the thinking is that success is a methodology, success is a habit, like the Rockefeller habit (learn more about the Rockfeller habits[MOU1] ) also that they communicate on. So, are you a member of EO and do you inspire yourself from this organisation?

Yoann Delwarde: Actually, this is interesting because of why I started this company; the main reason is because of ChinaAccelerator and so I am extremely grateful for this organization. I have wonderful friends there and now I am a mentor since 2018 and actually, they inspired me because my first client was one start-up from ChinaAccelerator who basically asked me to charge them because they were loving what I was doing when they received it.

Matthieu David: We interviewed them as well in the podcast.

Yoann Delwarde: Fantastic and so actually when I started in ChinaAccelerator I realized that I was very successful in my previous company, however, if you want to have… because they have a star-up every 6 months. So, if you want to have ten start-ups all in different fields, you’d better have tools, you’d better have a process, you better have habits because it is not bout experience-sharing anymore. Because they have all different industries and all different challenges; the size of the plans. So, you really have to go one level deeper and for three years, I realized that ChinaAccelerator batch after batch, challenge after challenge, success after success and also failure after failure, because a start-ups’ failure rate is very high, even for ChinaAccelerator. So, that really forced me to find the methodologies and tools and as you mentioned also about EO; actually, I have many clients from EO.

I am not a member yet, but I know very well their committee and actually, we are thinking to register EOP this year because they are changing their criteria. Before, if you wanted to enter as 1 million dollars as revenue, but now they are more flexible and actually I am even thinking to join faster. I was thinking next year, but maybe I will start this year.

Yesterday I had a phone call that was fantastic and that’s why I am so happy today, with Jack Daly and actually, he is one of the sales guru’s and I had such a nice phone call with him and he shared with me the experience that when he started his business during the first 3 years he was spending so much time with EO, PO and global CO because they are for him, the center of influence. That’s where he got most of his leads and clients.

I am doing the same methodology with the American Chamber of Commerce, with ChinaAccelerator, with EO and soon with other organizations through my panel who is contact also maybe with the more businesswomen in China (learn more about how businesswomen are changing the corporate culture in China). This is definitely a big plus for our business, and this is where I believe we can find the people who are most coachable and who are really willing to change and have sales training in Shanghai, and that’s the clients we love to work with.

Matthieu David: Let’s try to be specific. You mentioned tools to increase B2B sales in China. Would you mind being more specific about the tools? Are they digital tools? Is it something like Trello, CRM that you are using, or are there tools that are more conceptual that you are using, like Lean Canvas or other elements? Would you mind being specific on the tools you may use?

Yoann Delwarde: Of course, so before we talk about the tools, I want to talk about the funnel because maybe for some people in this phone call, that would be a good introduction. So, I believe there are six steps of the funnel. They actually mention 5, but I believe there are 6. So, the first one is targeting when you have to choose who your ideal clients are and who you want to work with, and then it is the interaction.

How can we communicate with them to understand the needs that they have and then it is the proposition stage; how can you set up the value proposition and then you mentioned business Lean Canvas. That is a great framework. Then there is the closing stage where basically you need to close, you need to sign, you need to shake hands and then there’s the stage of exceeding expectation where you need to deliver or over-deliver and then there is the last stage, which is growth.

This is about key accounts, cross-selling and renewal, and also referrals. So, each stage has different tools, methodologies, and principles. So, if I take an example, for the interaction; the product you are selling is the mindset when you ask questions so that you can dig into some clients’ needs and then you use the embassy for you to understand them, you use the authority to explain who are the clients you are working with and so all of that can be framed in a one-page strategy with a graph and then, of course, it needs to be executed through the different tools and checklists, for example of questions.

Through recording with the CRM; Customer Relationship Management system and again, the tools for me are not the most important because when the people use the tool and they don’t know why they don’t use the tool well (listen to another episode on CRM in China).

So, first, we focus on the why and we make role play because actually role play is a key for us. It’s like CRT share and you have a competition and you send your students, or you send your sports team to the match. Of course, they will lose if they don’t train before, right? This is the same for salespeople. Not only about the process itself. It is really about the ecosystem that you can build around at each step of the funnel. Is that helping you to visualize more?

Matthieu David: Yeah, 6 steps, very clear and we talk about B2B so, it is very clear. Talking about how you support this sales training in Shanghai and this transformation, do you interact with them with an initial understanding of who they are and what they do and their challenges, but then how do you work on the transformation with them? Every step you organize a workshop every week, every month, or is it… could you give us ait more of an idea so that you can project yourself in how you interact with the companies you are coaching, mentoring, and supporting?

Yoann Delwarde: So, the first “F” is Focus, the second one is Fun and the third one is Follow-up. So, focus means actually every week we have a clear focus and I usually spend one or two hours coaching, with the executive; sales executive. So, actually, at the beginning of the quarter we have a plan for 3 months and then every week we have something specific following this plan and also, we have some time to sit with the challenges. So, that is usually how we do it. We have the coaching and then if we see the team needs something specific, we set up a one-day training or two-day training. So, this is a mix between coaching and training however, most of the time what I realize is that people don’t need theoretical knowledge.

They need advice and they need to reflect, and they need to ask questions because they don’t know who to ask and so that is basically what we do; 80% of what we do. It is practical. So, they have a closing and how to close. They are talking to this client in an industry they have never approached before; how to do it. They are trying to expand into a client. They have so many businesses. They don’t know where to start. So, that is really practical.

Matthieu David: When they have questions, that is something I am always wondering. When we have a question for more clients on Daxue Consulting, we have to do research (learn more about the research methods at Daxue Consulting). We have to collect data. We need to interview people. When your clients have questions, you are talking about one specific topic. Daxue covers a lot of topics, so we have to update ourselves and so on. You have one topic. Does it require you to dig into the industry, to go further, or basically you have most of the concepts in mind and so you able to answer them? Or does it require you to take one day at home to work on your training, to go back one week later with answers to the questions they have raised?

Yoann Delwarde: For sales training in Shanghai, there are two key roles. The first one is sales; that’s my passion and the second one is coaching. Actually, there is the spirit of coaching, which is we believe that the coachee; the person we are coaching, has the answer already. So, the key is not about the answer that I can give. It is about the question I can ask to make them realize what they know and what they don’t know and then, how can we ask questions so we can know what they don’t know and most of the time in sales, this is not about them. It is about what the client wants; their needs, their motivation, their political agenda.

Once we know that, the sales race because actually, I believe sales is a transfer of trust. So, maybe my goal with the salespeople is, how can they build trust with their clients and how can I give them the confidence to ask the question in a proper way and so that I really a lot about changing the way they act with the clients.

I thought sometimes you would have to go back for some research, but most of the time there is no need because first of all, it is urgent. They need to apply right now and second of all, it is most of the time based on the behavior and they already know. It’s just they don’t execute it in the proper way or sometimes they forget or sometimes they have the stress of all the things going around and they don’t take the time to focus on one thing.

Matthieu David: I see. You said that sales is a science and then you said a bit later it is an art. You know, the word of Peter saying entrepreneurship is neither a science nor an art. It is a practice. If we look at the word, science art, and practice, how do you articulate them because you used two of them and I believe the practice is not to overlook neither in sales.

So, how do you feel about those three? If it is a science, then it can be taught at university, it can be lectured and after that, you are done. You know how to do it. If it is an art, then it needs talent. Not everyone can do it. Science everyone can learn, right with some time and investment. If it’s a practice, it requires time. You have no choice. You just have to spend time. So, how do you articulate those?

Yoann Delwarde: Actually, I use those because they are opposite and now it is true that if you bring practice it makes it look like a triangle and this makes me think of the three from Aristotle. Credibility, logic, and motion. It is the same for me. These three need to be combined with each other and if you only have one, you will be just okay sales, if you have 22 you will be a good sale, if you have 3, you will be the great sales. So, this is what I believe about those three and if I make an example, starting with practice when I don’t practice sales, I lose my saleability. It is like when you don’t work out for 2 months, your body just cannot forget.

Of course, it is easier to keep up if you were a previous athlete or you are used to doing sport every day, but still, you are using your physical abilities and it is the same in sales. If you don’t close every week, you lose your ability to close. Or if you don’t make a phone call every day, you lose your ability to make phone calls. It’s like public speaking, basically.

I gave 500 speeches in the last 5 years, and I can feel it. I am not as good as before because I don’t speak as much as before. That’s it. It’s simple. The second one is about art. Why is it art? Because you can really see who the most successful salespeople are. They are usually not the ones with the highest IQ. They have the highest EQ (learn more about the importance of IQ and EQ for salespeople).

So, they are really the ones who can adapt to the environment and to the person they are facing and make them feel good, make them want to hear what they want to hear and help them and support them in a way, but at the same time, if you are just an artist, but you don’t have the science or you don’t have the process, how can you build a team? How can you scale up because that’s actually does one of the great sales of the funder? They sell a lot and then when they recruit their team, they don’t know how to share the knowledge.

So, actually, for me, these three are really inter-dependant and this is a triangle and if you have a triangle you are extremely strong. So, what we do is we are trying to understand for each part, what each client could develop because everyone has already their strengths so that they can become more systematic and they can scale up and be something that is sustainable.

Matthieu David: You just anticipated one of the questions I had, which is what are the main failures or mistakes that you see among the people you are coaching, and one of them, you just mentioned is that funder can be good at sales. He can be good at a lot of things, but he has to be good at sales otherwise his business won’t take off. So, he is good at increasing B2B sales in China, but he doesn’t know how to get more salespeople and I have seen that. I have seen that a lot. The struggle to actually get people to sell something valuable. That is one mistake or difficulty you are seeing. What other difficulties are you seeing in B2B sales around you?

Yoann Delwarde: If I make categorize, as you said from 0-1, I would say 0-1, 1-10, 10-100, 100-1 billion. I have those 4 categories in mind. From 0-1; this is about the funder and as you said, if the funder is not able to sell, his company will never grow, or if you don’t have a co-founder or someone on your team that is good to sell. All the start-ups that fail for me, most of them is because they don’t have the right sales mindset.

They think about their product, they think about their features, but they don’t think about the benefits if I could summarise. So, that is really the most important challenge for me. From 1-10 it’s about training, coaching the 3-10 salespeople that can help you to sell more than only yourself. So, it is really about giving your knowledge because if you are in a small company you need really to explain how you did in the past and then if you want to go from 10-100 it is about the departments. It is more about the culture. I’m thinking about the incentives, about the rules, how can you make them collaborate and not compete.

Then, when you go from 100-1 billion, it’s more about the strategy and so it is more about the vision and the direction. I am not saying that the vision or direction is not important from 0-1. I believe it is less important if you make the priority. So, depending on different stages, you have different challenges, different failures and that’s actually why I think some companies have some bottlenecks in the kind of numbers of employees and I think ion scaling up, we both read the book talking about it because there is something to do and they don’t really know why they don’t really know what and they need some external point of view to help them to go to the next stage.

Matthieu David: We talked about it already. You said that you are helping companies to increase B2B sales in China to let’s say the right formulation; which needs to scale up and sell more with integrity. How do you feel that it was important to mention you with integrity? When you think about salespeople, we think about aggressive people, we think about people who are going to make big money to sell as much as possible. Integrity is a basis, but it is not seen as something like a tag line. It is more to have hyper-growth. People will say, “I helped you to reach hyper-growth.” You say selling with integrity. Would you mind sharing with us why you use integrity?

Yoann Delwarde: Actually, that is interesting because I come from very modest family background. I am the first one who got a high degree diploma, I am the first one who got an engineering diploma and I am the first one who is starting a business. So, in my family, the culture is not really about entrepreneurship and I have to say I have some challenges to start with sales because I was like you. I was thinking basically sales are not really honest people.

They are just trying to take benefits or take advantage of you, but the thing that I realized is that actually, we can really build a high level of trust when you are not selling when you are helping and here, I have a clear example. In my career, I told my potential client, “Listen, I don’t think I am the right one for you. I know someone else who can do better at a cheaper price.

That is what I can do”. Doing so, I got so many more customers because this one was trusting me and he was seeing me as a trusted advisor and then he referred me to the people who would really need me, eventually. That’s when I started to realize that selling with integrity and honesty can play a very big role. In all the sales guru’s I would say, or all the salespeople who are successful entrepreneurs, they all have this mindset. They are not trying to cheat people.

They have a higher value behind it. Why integrity right now is very important for our business is because actually, my co-founder is involved in many sustainability projects (learn more about the “green industry” in China).

She is helping people in need, etc. and we discussed a lot and we realized that actually, we can have so many companies. So why not choosing the one that really has a higher value, that take care of their employees who want to have a positive impact on society, on the environment because if we help them; I know it is a small contribution and I know it may be a dream, but in the book that we are writing, if we take, for example, these nice companies, then it will inspire more people to believe that actually they can do something great and it is not because they are making money, that they are doing something wrong.

So, that is the mindset behind it and that is why we are so passionate about this key role. Just yesterday I was with a client and he was telling me maybe I should fire our sales guy and I asked him this question. I said, “Have you tried your best with this sales guy or not yet?” He paused for 5 seconds and he said, “It is true. I didn’t try” and I say, “Why didn’t you try?” That is how we do it every day.

Matthieu David: I remember I was part of EO for some time and I remember that one of the coaches said for the values you choose, choose the values that will really resonate with who you are. He took the example of; I don’t know if you remember at the end of ’99, beginning of 2000; before the crisis in 2001. This company or one of its values was selling with integrity.

They cheated their investors and accounts and accounting and so on. They could have said, “My value is growth, whatever it takes.” That could have been a valuable line. He was in some way cheating the investors because it’s growing whatever it takes, but then use integrity, which was not adequate, actually. So, you are talking about B2B, but you are also talking about digital because you do sales training in Shanghai on LinkedIn on how to increase B2B sales in China. Would you mind sharing with us, what the learning is that you have to use LinkedIn to increase B2B sales in China?

That’s my first question and the second question is about China. Is LinkedIn a digital way to sell in China? The learning that we got in the past 10 years is that Baidu is a good channel to increase B2B sales in China. It is not a good channel to increase B2B sales in China. LinkedIn is a good channel for B2B all over the world, but in China still, not all the professionals are on LinkedIn (learn more about LinkedIn in China). You may not find all the contacts on LinkedIn. So, would you mind sharing more about LinkedIn and digital in China?

Yoann Delwarde: Yes, that is actually a great question and I want to make a small remark. I use LinkedIn a lot and I advise my clients to use LinkedIn a lot related to the stage targeting. When they want to get some people in the organization that they are targeting and then interacting. However, once you interact then for me it is to increase B2B sales in China and LinkedIn is actually not so useful. So, this is how I use LinkedIn because in sales, to have the leads you really have 4 ways. The first one is through SU and you mentioned it; Baidu, when people type a keyword and the second one is inbound marketing, copyrighters, and marketing agencies. The third one is outbound, where you send a lot of e-mails and the 4th one is targeting where you are more precise.

So, I use LinkedIn for the targeting part, so just to make it clear. The content marketing one; there are people who would advise you much better than what I can do, so I prefer to stay in my circle of expertise and actually what I realized with LinkedIn is as you said, not everyone is there. However, in most of the companies now, there are at least 5-10 people.

At least in the biggest companies and actually, when you interact with them and when you really take the time to listen to them, they can introduce you because you have two ways; bottom-up, bottom down. On LinkedIn it is very easy to do bottom-up, then from the top-down, what I realize in China is that there are many of what we call the center of influence and the center of influence; they are connected through the whole industry. You are one of the centers of influence because you have interviewed more than 100 people already.

So, for someone that is willing to have access to the circle, if he or she would contact you and make a good level of trust with you, you could probably introduce him/her to that network. In China it is working a lot like that because in every industry you have some I would say a key opinion reader, who can really connect you and this is actually what I realized, as I was really hopeful for my clients to help them to detect who could be those centers of influence that are not competing with their business.

Because, of course, your competitor doesn’t work and then how together you can create a partnership so that you support each other and you create an ecosystem where you can actually really support the people who are our clients. If you have a client who wants to improve their sales, now you interview me and if I am meeting the clients that need your service, I would love to do a podcast I would have introduced you as well. So, this is I think a way that could really work to increase B2B sales in China.

Matthieu David: On a more technical side of using LinkedIn, what you are mentioning is that when you create your own connections on LinkedIn, then you will do the hashtags, the hashtag of those people to mention them on your post. So, actually, we gain visibility with their feed and with the people they are connected with and will give them visibility as well to the people you are connected to within your feed. You also give strength to the algorithm of LinkedIn because you are doing hashtag the name and that is why you are mentioning partnering because the word ‘partnering’ or to partner with someone is so much overused that sometimes we don’t know what it means and in this case, you are meaning the mentioning, the liking, you are mentioning, sharing and commenting on those people you are actually posting.

Yoann Delwarde: Exactly. That is a really good example. That I something that we are doing a lot of recently, especially this year because now most of the people are at home. So, I think it’s also about creating content, but thus far, again I am not the expert. As you said to interact with the people, so they like, comment and add them, try to create some value together, and again, this is not a sales approach. This is more of a conversational approach, where you try to build trust, you know each other and that doesn’t mean that they will be your direct line, but one of the networks could be, as you said.

Matthieu David: On LinkedIn, when you contact someone it is an e-mail. There is a mailbox on LinkedIn, and you send an e-mail. I found out over time that a good e-mail can be very powerful. A good e-mail… I have some theory on it, and I have some thinking about it, but I’m pretty sure you thought a lot about it, and you have a lot of practice in it. What would be some of the key elements to remember when you write an e-mail? Would you mind sharing that? I have some tips from myself, but I am not as organized as you are or as conceptual as you are. What would you advise people to do?

Yoann Delwarde: That’s a question that all my clients ask. So, now I have a very standard reply. I use the triangle of Aristotle; credibility, logic, and motion. So, I always start with credibility and so I always start with the fact that actually people love, love stories, and also when you are talking about them, so I always start from them.

So, I would say, “Hi Matthieu. I saw that you are a CEO at Daxue Consulting.” So, you know that I know about you. I am not just randomly writing one thousand e-mails, right? And then I will mention your credibility. So, who am I already with that you know, or who could give me the authority so that you would want to reply to me and in this case, if I say, “I know that you are doing a lot of podcasts and I know that you interviewed Sophie from ChinaAccelerator and I saw that she is amazing in a lot of your podcasts” the credibility is there.

So, you know that I know Sophie and since you interviewed Sophie, you believe this could be interesting, right? So now you have more interest to look at my profile. Then the last one is about logic. So, it is to give them a clear next action. So, the next action could be, “How about we have a 5-minute discussion so we can know more about each other? I would love to share more stories with you and to see what we can do together. I wish you a wonderful day.” That’s it; 5 lines and he will probably reply.

Matthieu David: My experience is that I am very careful with e-mails within the team. I try to also have a high standard because indeed, you can receive some very bad e-mails sometimes and good e-mails, which are adapted. I would have one thing as a comment, is that I saw some bad experience mentioning people we don’t know, or mentioning people we know, sorry, but we don’t know the relationship with this person and I know it was not by e-mail, but it was by speaking. I mentioned, “I know this one. You also know this one” and actually, they hate each other, and actually, it was not a good mentioning and I realized that I had to stop to say that we know someone in common. So, there is a bit of risk in mentioning someone in common that we know.

Yoann Delwarde: That’s true and that’s why I usually mention companies. In your case, I wanted it to be adapted for the people who listen to the podcast, so I mentioned someone who was in the podcast that I know and she also knows me, but usually, I mention companies because companies, as you said, you cannot hate a company, right? If you hate the company, you need to explain to me how you can hate a company. So, I usually mention the company, but the key there is about credibility. Why should they listen to you; because you are a big company that is similar to them and so they want to know more about you.

Matthieu David: The concept, the knowledge you have got; you mentioned one book which is scaling up or scale-up. What other books would you recommend for people, specifically on sales, on learning about increase B2B sales in China, if you can narrow it down to B2B?

Yoann Delwarde: I have a list of 15 books that I can send you later on because it is also a question that I often get. I have to say that I have read many sales books. Actually, I have a belief. I don’t choose a book; the book chooses me. So, when I go to the library, I look at all the titles and there is always a challenge that I like two books and I open them and go through the agenda, table of contents. If there is one thing I like, I open it, I read it quickly and if I like it, I buy it. So, that’s how I do it.

Matthieu David: Interesting, so you go to a bookstore to find books you don’t even know. You don’t go online to check what people say and so on. You would go to a bookstore and look at the title and then you would go inside to see what’s inside?

Yoann Delwarde: Exactly and also every time there is someone that I trust who read a book that liked it, I ask them what they learned and if I liked it, then I just go and buy it online. I have two ways to buy books. My library is full. I think I need one hundred years to finish all the books, but that’s okay because I know if one day, I need something I can go find it there in a book. That gives me a lot of feeling of enthusiasm and I also bring books with me. I have a book that I am reading actually, every day which is called the Sales play Book by Jack Daly, the person that I had the chance to talk with yesterday.

That is my new Bible. That was alive before I met this book and it is alive after I made this book. This book is gold because most of the time a sales book is full of stories which is amazing because you remember stories, but there is nothing conceptual behind it. For me, there are stories that are very structured. I really like it because when I have a chance I go back and I also have some videos from him, and he makes me reflect. So, that is really the book I would suggest and also, I will send you the fifteen books that you can also refer to.

Matthieu David: Last question before we go to the usual questions I ask at the end of the interview and you already answered some of them. It is about Toastmasters. You have been with Toastmasters clubs in China for a long time. Chinese people are very involved in Toastmasters clubs in China, more than French people. I am French. You are French and you are French, right?

Yoann Delwarde: I am.

Matthieu David: I am not sure because we speak French in different countries, so we were not that involved in France with Toastmasters. I think that China is very involved in it and you are too. Would you mind mentioning what you got from Toastmasters clubs in China and what Chinese you feel they get? I have a sense that they are looking for English learning or English classes, some of them more than public speaking learning.

Yoann Delwarde: Toastmasters is one of my passions. I discovered it 5 years ago actually by chance. It is actually 6 years ago now. What I got through it is the confidence to do public speaking in China, because actually, public speaking is the biggest fear in the world. People fear to do public speaking in China more than spiders or death, just to let you know how strong the fear is of public speaking.

Matthieu David: Sorry to interrupt, but there is an anecdote; Warren Buffett was scared about public speaking and he learned from decalogy, I think and he had his diploma in his office and actually I think he doesn’t show his diploma degree. It helped him to learn how to speak in public and that changed his life and changed the business he was to create.

Yoann Delwarde: I fully agree and what I can tell you is that there was a life before Toastmasters and there is life after Toastmasters. I feel more comfortable to do public speaking in China in front of 100 people than to speak to you now because I got used to it. I got stressed if I talked… what is Matthieu going to ask me? If I stand in front of 100 people, I feel more natural. It is kind of a new feeling.

The thing is, if you can speak to 100 people and 100 potential clients, you save so much time because if I have to speak to all of the people in China, but if we organize a conference; no matter online or offline and there are hundreds of people listening to my speech, there will be at least one or two that will come to me at the end of the speech to say, “I love what you said. I need you. Let’s have a talk.”

Matthieu David: To be more specific, what did you learn at Toastmasters clubs in China? I understand the one thing you get is practice. That is clear. For people who don’t know Toastmasters, we didn’t say what it is but is I the regular meeting where you give a speech to an audience within your community. It could be your university, a district and I don’t know how long the speech should be, but after there are some discussions and feedback from the audience on the speech, but you are going to tell us more about it.

Yoann Delwarde: What is the goal of Toastmasters? So, it was created more than 90 years ago and now we have more than 170 000 members across the world in almost every country and this is NGO. So, a non-governmental organization, so a non-profit organization and in China, in the district that we are we have east district and east district has more than ten thousand members and as you said, that is getting more and more trendy and the goal of Toastmasters is to help people improve their communication skills and leadership skills and actually the leadership skills is something that people don’t really know, but that is where I learned the most. I was leading a team and I was helping actually; in my last project, I was helping 80 people to run a project that had an impact on 5000 people within a year.

So, this is really a strong leadership common line there. For communication, as you said, there are 6 steps. The first step is you have the objective of the speech and so, what is the goal for you to make the speech? It is not just to speak. You have a key objective and it could be about body language, it could be about coaching, it could be about sales. You have the objective before the speech and then you do the speech and after the speech, you get an evaluation; an evaluation that is very constructive and empowering where they tell you what you have done well on and where you can improve.

Actually, it is like a step by step process because you start from scratch, and then at the end, you can become a keynote speaker and then we even have some certification for public speaking that we are doing at every year in the international conference. That should happen in Paris actually, but due to the situation maybe we do it online, but again actually that is one thing that I got from Toastmasters is the network.

In 2017 I was in Canada and I had the great chance to meet Tony Buzan, the inventor of the mind map; one of maybe the top ten most famous people in the world. He was there and I had the chance to spend the whole night with him because we went out with some friends, because actually he happened to know one of my Chinese friends and there are so many people like that in Toastmasters.

They are willing to share and that you can reach out to them, shake their hands, and get their book. So honestly, I really advise everyone to go there. That’s just amazing. More than 90% of the fortune 500, have a Toastmasters clip. So, most of these are extremely encouraging and so I would not be surprised that Bill Clinton was a member. I am not sure I had the chance to meet him yet, but if I meet him, I will ask him.

Matthieu David: I think he was. So, the last question I usually ask, and I may not ask all of them because you answered already some of them about the books. What do you read to stay up to date about China because you have specifically coaching, mentoring, and helping companies in China? So, you have your concepts, but you need to implement them in China. What do you read to stay up to date?

Yoann Delwarde: I will be very frank with you. I believe that even if I read all the books, as soon as they go out, they are outdated. So, what I really do, I talk to people because I believe that every ordinary person, they have extraordinary stories to tell and I ask them questions. I am a very aggressive listener.

When I listen, I really listen. I even mute myself and when I am not sure about something, I try to ask 5-10 people in my network, “Okay I have this challenge. This is what I am thinking. What do you think?” or, “You hav some experience in that, how do you think they will react?”  If all of them tell me, “Yoann, you are going through the wall.” I back off. If they tell me, “Yoann, that could be good, but think about that.” Most of the time this is something that helps me and so I read a lot. I meditate a lot and reflect a lot, but also, I talk to people even more. I think that now, again, most of the challenge is you need to ask people how they would react because they are all complex.

Matthieu David: Yeah, you begin by saying, “Can I be honest,” but actually that is certainly a swirl that many people mention is to… I would not say to meet and talk is to refer to their contact. It could be WeChat, it could be LinkedIn, it could be Talk, but it seems that a lot of the people get information from WeChat and LinkedIn and so on. Do you have anything you read? I read from the New York Times and The Morning Post to know what is going on in China. Would you have some sources you would like to share?

Yoann Delwarde: What I am trying to do is I am always trying to have different sources of information and so I like Frog, for example. I like the New York Times and also, I read some newspapers from China. What I am always trying to do is to cross the different information because obviously when you only read one newspaper or one book from one nationality, you are biased.

So, I am really trying to see different angles and different perspectives, but I have to say the really good books are written in Chines, which I cannot read yet so I really rely on my Chinese friends and my Chinese partner. When there is something trending in China, I’d rather ask and I am thinking about the new social selling communities, I am thinking for Alibaba, etc. I just go and ask because if I read a book written in English, I lose so much information already because of the translation, etc. So, I prefer to ask people who read Chinese books.

Matthieu David: I feel you are someone who can think a lot about productivity and productivity tools. What productivity tools do you like most?

Yoann Delwarde: I am trained from GTD; Get Things Done and I did two training’s and so I really like this methodology by David Allen and this really helps me to be effective. I don’t believe inefficiency. That’s actually what I say to most of my clients. If you want to be more efficient, you will get a 5-10% growth every year and I don’t want to work with you. I want you to be effective. So, I want you to get 50% or 100% growth every year. So, it is really about mindset shift and not about 5-10% saving every day.

Matthieu David: Is there a specific tool or software you really like? We may use simply sometimes a calendar or notes on I-Phone. That is something I use a lot. Will you have some tips to share about software tools?

Yoann Delwarde: Actually, it’s funny because I have a buddy. We are coaching each other every month. He is an extremely organized guy. The thing is that it doesn’t work for me. So, what works for me is a very simple Excel file, I have a book and I reflect every week what I have done, what I want to do the next week. I am a bit old school in that, but I have seen people who are using their phones, but for me, I still like pen and paper. What is really important is about the mindset and no matter the tool, it doesn’t matter.

What matters is first, you collect, your mindset, or everything in your mind, you write it down. Then you organize into the next action and then you prioritize and then you have your yearly plan, your quarterly plan, your monthly plan, and your weekly plan. Just make it happen. So, first is, you plan, you do, and do something I that plan. I try to decrease the doing something in the plan and actually it doesn’t really matter. I plan and I do what I plan and when I do what I plan, I am present and mindful.

Matthieu David: There are two questions that I ask at the end of the interview, which comes from Peter Drucker. You can assess innovation when you look at a success that was unexpected or a failure that was unexpected. So, it gives you an idea of what is going on in the market. An example I often use is carpooling leaving China, which is unexpected and it shows that e-commerce is taking over the economy.

What would you be able to share from your observation over 8 years in China? Something the company; events or something in society that has been successful or a failure that you were surprised and it shows something bigger happening in the society or the economy.

Yoann Delwarde: This is very interesting, because when you asked me this question, I had the same discussion with my parents last weekend, and actually I told them that China was already advanced and actually this outbreak of Covid-19 is just a catalyst that makes China even more advanced. Why do I say that; because everything that is happening online right now is just amazing. I mean the fact that you could stay at home when people could not go out and you could still get your food.

When I talked with my friend in Europe they were just out of the blue like, “Wow. How can you do that?” And about the robots, about the drones, I see even the healthcare how they can improve and then again I say that as purely when I look at the business, the way they are trying to speed and I am not talking about the values because this is something that I think many people are getting emotional about. The speed that they have and the vision that they have is tremendous and yeah., I think this is just a catalyst. I think they are already advanced on many topics. It’s not that I’m surprised. For me, it is no surprise. It is just that I think it is just making it happen, fast.

Matthieu David: Yeah and in some way, we are all more aware now that China has reached a level of development, which is in some aspect more advanced than the so-called…

Yoann Delwarde: I am talking about technology here.

Matthieu David: What about failure? What failure have you witnessed that was a surprise to you and shows that something is going on?

Yoann Delwarde: Well, actually the last one that I saw because I have one client at FNB and I heard the news by a local coffee and I was surprised because the way they started, I mean 3 years ago you see no drinking coffee, right and now you see drinking coffee everywhere, even more than Starbucks. I was thinking, “Wow, they must be super successful” and the way they were approached at the beginning, they were trying to learn from Starbucks the ideal plan, etc. Go to the building and target the best clients and also to have cheap prices seems to be working and then when you see it dropping and them falling behind, you realize, “Hey, sometimes it looks good, but actually behind it is not so good.” So that was a good reminder.

Matthieu David: What’s even more surprising is they could have said fake things to so many people and so many investors and that they could have worked its way. I feel that that is a failure we need to learn from.

Yoann Delwarde: Actually, it is more related to the start-up community because I am in this one and I can clearly see. There is a bobo and there is a bobo especially in China that is exploding now. So many start-up’s fail because it was built on nothing, especially the ones that were purely Chinese on and Chinese invested, especially from grants from the government which has no sales behind, no business model behind and it is just going to poof and so I think this was good because it was like Internet bobo in early 2000. I think it is the same now for start-up technology. Only the one that really has something tangible and a good business model will survive. All the rest will be out within a year.

Matthieu David: Thank you, Yoann for your time. You took your morning for us and I really, really appreciate it. Congratulations on what you did. I’ve known you for a long time; 6 years I think because we organized together with a forum with SME and big French groups and actually when we look at them, some have left or some have changed or some have grown and some have left.  So, this landscape has changed, but yeah, thank you very much. Congratulations on what you did for the foundation of Infinity Growth. It’s such a good name, by the way. I don’t know how you got it and I don’t know what domain name you have. I’d like to check that and I hope you enjoyed it. I hope everyone enjoyed as well the talk and thank you to everyone for listening.

Yoann Delwarde: Thank you and if you want to reach out to me just add me on LinkedIn and I will be happy to talk to you. Thanks, Matthieu for the interview. That was perfect.

Matthieu David: E-mail; do you want to share your e-mail?

Yoann Delwarde: You can just add me and you can see my profile and then you can write to me. That is much better.

Matthieu David: Okay at least they know that now they need to write a good e-mail.

Yoann Delwarde: They can say they listened to the podcast and I will add them directly. Matthieu David: Thank you Yoann, for your time. Good-bye, everyone.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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This article China Paradigm transcript #102: The way forward to increase B2B sales in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Matthieu David: Hello everyone, I’m Matthieu David, the founder of Daxue consulting and its China marketing podcast, China paradigms and today I am with someone I’m very impressed by when I looked at their resume, Dr. Renata Thiébaut. You are a partner and head of the business intelligence of Web2Asia since 2013. On the side, you’re a researcher at Harvard University and you have a Ph.D. from Jiao Tong University in Law. So that’s why I’m saying that I’ve been very impressed by your resume.

But we are here to talk about Web2Asia. Web2Asia is a TP – so Taobao partner or Alibaba TMall partner agency– you will tell me which formula we need to use, which is an official name for companies that are able to represent companies and sell on their behalf and manage marketing budget and media buying on Alibaba. So, you need to be accepted by Alibaba to get this name to be an Alibaba Tmall partner agency. Size of business, you started in 2006, it’s about 200 people now. You can work in eleven languages and you have worked for companies like Marks & Spencer, Esprit, Bausch, Swarovski, Intersport and one I’m very interested in – Metro, Aldi, and JellyCat which you won a reward for by Alibaba, and I hope that’s something we can talk about. Thanks, Renata, for being with us, and could you tell us more about Web2Asia?

Renata Thiebaut: Thank you Matthieu for welcoming me today. Web2Asia is a full e-commerce service provider in China, so we have three different core services. The first one is the market entry strategy for foreign brands that want to open an online shop in China. The second service is the e-commerce operations in China and sales. As you said, we have around 200 staff that take care of the design of the shop, also customer service and company preparations. So, we have the whole ecosystem to offer to our clients, especially foreign clients that want to come to China. And the last service, as an e-commerce service provider in China, is digital marketing, because it goes hand in hand with e-commerce to leverage the sales.

We’ve been in the market since 2005 and we were doing more marketing at that time. Around 8 years ago we switched to do more e-commerce operations in China and we were one of the first ones to do cross-border e-commerce in China. So, let’s say we have very deep expertise, especially in cross-border e-commerce in China, since the beginning that everything was manual – we need to collect ID cards manually. It was a bit complicated in the beginning but now we narrowed down the whole process. And we’ve been awarded a couple of prizes from Alibaba group. The latest one was with Aldi and we won the innovation prize from ele.me which is Alibaba’s food app, and most of our clients are from Europe, are from North America so we focus more on foreign clients that want to come to China.

Matthieu David: For all the revenues, could you share a bit an idea of number of clients, revenues, some idea of where you are now? 200 people is not small, so I believe you are a sizeable business now.

Renata Thiebaut: Yeah it is very interesting that when we started we had roughly 15 people right, so we had a very start-up mindset and a do it yourself – we had a lot of struggles in the past but because of our positioning as one of the few foreign owned TP’s in China – also our management is all done by foreigners, myself and other partners as well, so we could tackle better different foreign markets, especially Europe right. So, we have many German clients, many British clients because of our background. So, it was a matter of positioning, of having a clear strategy of how to position our business and define where we want to go to, and I think 5 years ago we started growing a lot. Now we have clients either for consulting or e-commerce operations in China and we have more than 30 fixed clients let’s say.

Matthieu David: About 30 clients now you manage operations for?

Renata Thiebaut: Yeah for operations only for TMall but we have other services as well.

Matthieu David: I see, that’s something I’d like to know more about is that you mention a lot TMall, you mention a lot TP – that’s something I’d like to understand if Pinduoduo or WeChat is part of your work as well, but let’s go back – let’s talk about this later. So, what you are doing is to mainly manage – you started in 2003 when Taobao just started. I think TMall was not existing, just to think about it – it was pre-iPhone – the iPhone is 2008. 2003 I think Taobao started, Alibaba was started in 1999 – it was a B2B marketplace and they had no C2C, and Taobao was C2C, then TMall appeared much later (read about setting up a Taobao shop). You seem to talk about the beginning as if you were at the beginning, but I think you joined later. So at the beginning what was the vision? Was it about selling on Taobao which like eBay or like the C2C platform? What was the vision initially?

Renata Thiebaut: Well the vision was purely C2C platform and I was working at that time with Taobao, so I have a Ph.D. in law and I was doing a lot of IT protection, so my role was to shut down all of the stores on Taobao that were selling fake products. So at that time, it was very interesting because there were no rules or regulations to tackle this issue and we had to do everything manually, we had to do mystery shopping and contacting the store to ask them to close. So, my first big client for this type of service was Swarovski. There was a very good finding actually that most of the products were actually not fake. They were original. So, there is a big problem with the supply chain that the factories leak the products. The products are original from the factory.

So, there are many situations like these that China has this problem with in the past, but it has improved a lot. So yeah – at that time Taobao was clearly C2C but now you can even have some brands opening on Taobao, a store on Taobao. Miranda Kerr – the Australian model for example, she opened her brand first on Taobao and then she migrated to TMall Global. So, this is a tendency actually from all of these platforms. They do not only adopt one business model; they try to follow consumers and see the tendencies to shift their business and it happens quite often.

Matthieu David: Initially, so Taobao is a C2C platform that’s maybe where some people would sell products, some Chinese companies would sell products, but at that time in 2003 I don’t believe there were many European and American companies which wanted someone to help to sell on Taobao, so initially when Web2Asia was started – what was the vision? Was it to be a TP? It could not be because it was not even existing. Once TMall was created the word TP emerged. So, what was the vision initially – it was to create websites? To be in the digital space? And then it evolved into a TP? Is this the story?

Renata Thiebaut: Yes, this is the story. At that time, we were doing more websites and more marketing on Baidu for example, and then we had to shift our business model because we saw e-commerce was booming and there would be many opportunities in this industry. So, we became Alibaba certified Tmall Partner agency when e-commerce started in China basically and now, we are one of the top three TP’s from Alibaba, so most of our clients are referred by Alibaba. We have a very close relationship with Alibaba, because they are the marketplace and we do the store operations. So, there is a lot of coordination we have to do on a daily basis.

Matthieu David: So let’s talk about some of the rewards you got from Alibaba – one of them is of course attracting the eyes of everyone, reading your presentation which is JellyCat.  Would you mind sharing a bit more about what you did for them as a case study for those who don’t know JellyCat, it’s a British toy, but in China it seems that what you have done is that you’ve found a different market in China. You a massive amount of the product on TMall, I read in your presentation double digit million USD if it’s correct, within a year I believe, and you have been rewarded by Alibaba for those campaigns’ management of this shop. Would you mind telling us some more about what you did and how it was successful?

Renata Thiebaut: I think JellyCat is our biggest store – biggest successful case actually, because it is a small brand out of the UK and when they started in China back in 2015, they had no awareness in China- yet their price point is a bit higher compared to other local products. So, we had to position ourselves very well to have a very strong storytelling to prove to consumers they should pay around 300 RMB for that instead of 50. So, we used a lot of UK related elements to show the product was premium and to create a storytelling, and the royal family was the theme that we used at that time. We could use also some pictures because some Hollywood actors or actresses, they give JellyCat to their kids, and also the royal family itself, they use JellyCat toys. So, we could use all of this materials to show to consumers that for foreign people and for famous people as well they all love JellyCat.

So, Alibaba created a video for us, we were featured in one of the best case studies of Alibaba group, and the video was very interesting because the story was all of the JellyCat were coming from the UK to visit shanghai. So again, content was the key for JellyCat to be successful here and they have cute products. Chinese culture is a cute culture – so the product is good. Sometimes of course we cannot make miracles if customers do not really like a product or if it’s not suitable for the Chinese market, but JellyCat we could adapt the content, we could create new content, we are very flexible about that. Also every year we launch the animal of the year, that is related to the Chinese zodiac and this is very important, this localisation to the Chinese market. So, within one year we became the top one plush toy in the Chinese market and we keep winning awards for JellyCat, expanding their business here in China, so now they sell on different platforms and also, we are going offline with them. So JellyCat I think for me is the best successful case because it’s a very small company. So, if you have limited budget and if you are not well-known, it’s much more difficult to develop your brand in China, which was the case – so that’s why I like sharing JellyCat’s story.

Matthieu David: And Alibaba like it too – they share it and they gave you a reward. May I summarise and see the key point is that the royal family is using JellyCat, was it the key point? I feel it is something when you have an endorsement from a very famous and very respected people, Chinese would tend to buy it. Second question you said in your presentation that it’s not used as a toy, would you mind sharing then what it’s used for?

Renata Thiebaut: So, we even had a Chinese artist using JellyCat. We never paid for any KOL for any artist to showcase the plush toy. It was purely because of its cuteness. So, we had for example Angelababy, the Chinese Kim Kardashian – she was holding a JellyCat in one of her TV shows, so of course it was a free PR for us.

Matthieu David: Incredible, it’s incredible. For people who are listening and may not know China very well, she’s one of the most famous person – KOL I would say – people would love to have, would give millions of USD to have her as a KOL.

Renata Thiebaut: Yes, so as soon as they like a product, they can do some free advertisement and we were not even aware of that and we got a lot of feedback from consumers and we were like – oh what’s going on! So, we found out that she was with a JellyCat in one of her shows. So, it happened quite often in China actually, not only with her, but even with some others. So, we could grab all of these materials and use as a marketing material to promote our brand, without having any extra cost.

Matthieu David: The thing which is surprising and in some way it’s something – it looks random. The way you talk about it, it looks that by chance you were successful, but I don’t think that’s the case, I think it requires a lot of work and a lot of thinking. So, what’s the strategy behind it and the tactics which were not costly, but made a big effect?

Renata Thiebaut: The first thing that I believe was the key milestone for JellyCat in China was data. We saw in the beginning that our approach was wrong. Our strategy was wrong. So, within 6 months we had to re-shift and to re-strategize the brand, because like you said – we thought it would be a toy for a kid, but in the end most of our consumers were 25 years old plus. Young women going to work and they had the need because they work so hard, they had the need to be with a JellyCat either inside of the bags, to bring their JellyCat around, to go to a coffee shop, or also go to work with a JellyCat. And this is so true because most of my colleagues they have a JellyCat on their desks and they work holding the JellyCat.

So, we positioned ourselves at that time – we had to change our mind-set and also our strategy to show that JellyCat is a fashionable accessory. So, you have these smaller ones that you can carry around, put inside of your bag. So, if you go to a coffee shop or if you go to work and also of course we cannot just eliminate the case that it’s a good gifting for new-borns. So, we had to differentiate different audience and to work in a different communication message to these different audiences to show that the product is 100% safe, you not have allergy with the product. So content was the second thing that we really, really worked hard on to position JellyCat at the top plush toy in China.

Matthieu David: How did you find out that you had to change the positioning, because you were targeting children and it seems that it was not working, so you found out that the few sales you had were actually more 25 year old and from that – with the few sales you had, because I believe it was not many – you tried to differentiate and started a campaign targeting them and that worked. And then you scaled that and you put even more investment into it because you saw there was a momentum – is that correct?

Renata Thiebaut: It is correct – so in the first 3 months sales were very low, but we saw this tendency that most of the buyers and the visitors of the shop for example – the ones who would put the product in the basket but not convert — were 25 year old plus. I think the most important factor that year in the first year was 11/11 – we were definitely not prepared for the campaign.

Matthieu David: Which year was it?

Renata Thiebaut: It was in 2015. So the first 11/11 we sold so much more than we expected, let’s say 10 times more, 15 times more and the warehouse of JellyCat in the UK they were shipping the products 24/7. So you know in Europe usually people do not work on weekends right, you have restrictions with even transportation, trucks are not allowed to transport during the weekend and especially on Sundays. So, it was very stressful but we managed to deliver all of the products we had and from that time on, the first 11/11 on, we became the top one plush toy brand in China. So, I want to say that – 11/11 was very helpful for us as well.

Matthieu David: As I’m listening to you I understand that the shop is managing the cross-border e-commerce in China, so it is TMall Global right – and the warehouse – for people listening to us who are maybe not very familiar with TMall and the ecosystem of e-commerce in China — you can sell in China when you have a warehouse outside of China, and this is called TMall Global, JD is doing the same, JD Global, and you don’t need to have the registered company in China – you ship from the warehouse which actually could be a free trade zone as well in Shanghai, maybe as what you do now, with the free trade zone in shanghai or in Hong Kong to ship, and at that time it was UK.

Renata Thiebaut: Yeah, so that time it was the UK – we are using Alibaba’s logistic network which is called Cainiao to ship the products out of the UK to the final Chinese consumers, but then we were only on TMall global at that time. So JellyCat started expanding. And this is what I tell all of my clients, I do not think it’s a good strategy for you to come to a new market like China and have many sales channels for example. Sometimes they want to open on JD, on TMall and on different platforms like Kaola, The Little Red Book – it’s always good for you to start slowly, to choose first the best platform and then you do a trial in the market – if the product is not good you can adjust or the communication because you need to select a hero product for you to push the brand in the Chinese market.

So, we started first with TMall global shipping out of the UK but as soon as we expanded our business and we opened a JD store, then we open on TMall domestic that business model was no longer valid. We needed to again re-strategize. So, this is the message I think with JellyCat we always needed to rethink your strategy and think fast actually because e-commerce is so dynamic in China.

Matthieu David: It took you about 3 months before changing – as the sales were not good, 3 or 6 months I don’t remember how many months. Initially when you have a new product –and let’s take JellyCat as an example, how do you get clients? It is said by many people that when you need to get a client and you’re not known – and JellyCat was not known at that time in China I believe, you have to spend a lot of money in marketing, and you said this was a small company that did not have a lot of money to spend, so how did you get your traffic on your TMall? Was it still on Baidu what you were doing initially? Was it purely on Alibaba platforms? Could you tell us more about how you drive traffic and the specifications of JellyCat?

Renata Thiebaut: The best way for you to drive traffic to your online shop when you have a limited budget is to focus on the marketplace. You have a banner display, you have keywords, you have many different ways of driving paid traffic to your store, plus all of the free traffic that you can also have if you join a campaign for example if you do corporation with other brands. So, there are many ways for you to drive traffic.

So, I do not think Baidu would be a good strategy in the beginning if you have a limited budget because you might not convert. So, the focus should be to do marketing within the platform. As a rule of thumb, we suggest a marketing budget of around 20% compared to your sales target to be invested within the platform. So, it is a bit high but as soon as you gain more free traffic, you can drop it to let’s say 15%.

Matthieu David: I see, I think the next question for someone listening to us and who would like to have his shop on TMall is – yes, I’m spending 20% but then do I have the data, or is it owned by Alibaba, and can I retarget them? I believe you can retarget through Alibaba platforms and everything which is owned by Alibaba, including ele.me and so on, but I don’t believe you can really drive your traffic and convert them through WeChat or email because I believe it’s still the ownership of Alibaba. Would you mind sharing about this investment that companies do – 20% as you said of sales – it’s sizeable, and then do they own the data?

Renata Thiebaut: The company does have access to the data. If you have an online shop, you have access to the industry data and also to your shop’s data. So, you need to be able how to use this data for you to understand what is wrong and what is right in terms of strategy. So that’s why we are 100% data-driven and especially myself, I am in the business intelligence unit of Web2asia so my role is really to take data and strategize the business or re-strategize the business of our clients.

I can give you a very clear example of what I did with Aldi. We are selling milk – fresh milk and UHT milk of 1 liter in China. Sales were good but we noticed that we are not selling as well as other brands, especially European brands and I tracked all of the attributes of this type of product in the industry and also the top-selling brands or Chinese brands as well, and we saw a trend that Chinese consumers would prefer two different types of milk. One was 250ml instead of 1 liter, and the second one was milk with enhanced calcium for kids.

So, if you do not have this data, you are not able to understand the consumer’s behavior, right.

Matthieu David: I’m sorry to interrupt but you got this data through the fact that TMall or Alibaba is sharing with you industry data because you have a shop on TMall. When you have a shop on TMall you have access to data on the industry – but you cannot access all the industry but only your own industry. One thing I’d like to add about Aldi – people may be surprised by listening to us that Aldi is selling through a platform – a marketplace. Like Aldi is not selling on amazon or – but TMall is a place where you open a shop. It’s like a street. It’s like a department store and you open a shop. So, you find out the data on TMall which helps you to reallocate your effort and maybe redesign the product?

Renata Thiebaut: Yes, we needed to redesign the product, we needed to be able to follow all of these trends and see what the Chinese consumers want. We localize a lot of products as well. Aldi is a German supermarket so we are very, very strong in Europe, but European food consumption is very different from China. So, in China, we sell hotpot for example, that we do not sell back in Europe. So, we need to do this – whenever you go to a different market, you need to have a certain level of adaptation and localization of the product as well.

Matthieu David: My understanding is that the key advantage of Aldi is the ability to source European products which are more qualitative and maybe at a discount price because Aldi has a bit of image of discount in Europe if I’m correct, and the ability to actually bring in a hotpot – European vegetables, European products would be the asset – that’s what you concluded?

Renata Thiebaut: Yes, so we adopt a very different strategy in China, we wanted to be very competitive with lower prices just like in Europe, but also offer products that Chinese consumers are used to, like hotpot, or noodles. Chinese noodles. We ship from Australia because of the cost. It’s much cheaper to ship from Australia than Europe, but then our Aldi started procuring within the Chinese market as well, but with European standards. So, for the Chinese consumer, food trust is the key. So, you can manage to leverage what you do in Europe, cheap products but very high quality, and to adapt to the Chinese market as well. Because there were many food scandals recently in China, so this is very important. And Aldi like you said, they started with a TMall Global shop. I think this is their standard strategy so you can test the market first. Then you move to TMall domestic, then you start opening your own shops. So our first store was launched in June last year in Shanghai, and right now we have a few of them in shanghai, around 5 and we plan to expand to other cities as well, for a couple of thousand shops within the next 3 years.

Matthieu David: Yeah, for people not to be confused when you’re saying shop now – you’re saying offline shops.

Renata Thiebaut: Yes, simple shops.

Matthieu David: Yeah and it started with the TMall global and then they had a beautiful shop actually – very well designed – are you managing them at all?

Renata Thiebaut: We manage the shops and we integrated our system with the physical shops and the online shops as well on ele.me or on TMall, for example, because we also need to understand the consumers, if they were repeated buyers – how we could target these offline consumers to drive traffic to our online stores and vice versa. And, our key strategy for Aldi is O2O, online to offline (more on O2O in China here). With the integration of this data, from all of the sources that we have of the sales channel from physical stores, online stores to also social media on WeChat, Little Red Book – that’s what we use to strategize the business.

To give you a concrete example – we were expecting to grow around 23% this year, it was our very let’s say, simplistic way of thinking last year to take things slowly and really use data to grow the business more in China. But because of the corona virus I think our projections are off and they are going to expand much faster and much, much more than this. Only in February and in March we saw that the sales grew 20 times more than the average.

Matthieu David: So, the crisis was beneficial to Aldi because people were delivering home.

Renata Thiebaut: Extremely beneficial. For some industries we could see an impact of let’s say 40-50% in their sales. Fashion industry – perhaps a bit less, and shoes for hiking for example – we saw a drop of 40-50% in sales. As for other mummy and baby products and also food related products, there was a big increase. So, in Aldi’s case I can tell you, it was around 20 times more than our standard sales.

Matthieu David: Interesting. What about now, the post coronavirus because – people who may listen to us who are in Europe or in the US may not know, but in Shanghai now we are going out, bars are open, even night clubs are open, everybody’s wearing masks but everything is working. Is it back to normal or people keep their habits?

Renata Thiebaut: Right now, we’re still very, very up because not being the whole of China is normal. So big cities like Shanghai are slowly going back to normal. Even though it’s not 20 times more than the usual sales, it’s going to be much higher because you gain awareness, so people who did not shop from Aldi before now know Aldi, and they’ll probably keep shopping from Aldi. That’s why it was also beneficial in the sense that the brand will gain awareness and also more buyers. Our delivery is very fast, it’s up to 30 minutes in Shanghai for example if you’re nearby. Since we are going to expand to other cities in China, this will spread all over the country. So, we’ll keep these 30 minutes – our consumers should be comfortable. If they either want to shop online and receive their products in their office or at home or if they want to pick up offline.

Matthieu David: How did TMall react to the fact that you opened offline shops? Because in some way you are driving traffic out of their shop, I mean you are getting your independence which is something that I think Alibaba tries to avoid, even working with JD, they may try to avoid that their brands work with JD.

Renata Thiebaut: Now I do not think that the market places are as concerned as before for two reasons. One is we are facing a new era of new retail. So, this is the trend, even Alibaba is doing the same with Hema for example. So, we needed to change the mentality that offline compete with online. It really goes hand to hand, because the more people know your brand, they can also go and shop online, so you can leverage also the data you have from offline to convert to online. So there are many ways to do this, if you offer QR codes with coupon discounts for example or when you do an online campaign you can have offline events to drive traffic to your online shops so you really need to be creative when you do O2O when you have different sales channels instead of thinking that it will hurt your online business, but actually it will create more awareness to drive more traffic and business to your online shop.

Matthieu David: How do you organize your team? That’s one thing I’m curious about – you seem to expand in very different directions and to do a lot of different things. Managing a TMall shop is not only setting up technically speaking the TMall shop – it’s creating banners, it’s about managing PPC, managing media buying, it’s about also doing brand reputation on Baidu and it’s listed on your presentation, for instance, social media, and now offline shops! How do you organize your team to have the talents? Could you help us understand do you have designers’ insight or do you actually partner with other company’s?

Renata Thiebaut: We do mostly in-house, and actually we did a change management implementation in the company. Before it would be a very up-down model that we had in the company and let’s say you had a director – an account director, then you had the manager and you had different people like a designer, customer service representative to do different tasks and nobody would be aware of what the other ones are doing, which is not too good for e-commerce because we all need to speak the same language and to be 100% aligned to grow the sales and avoid returns or problems that may arise with e-commerce.

So, two years ago we changed our management structure to be more project-based and it is called flat management. We divide the teams by different projects and they only take care of projects that are in similar categories, so they can have more expertise. For example, if you have a food client, all of the team members will take care of food-related clients, or mum and baby, or fashion, because if you do food and fashion at the same time, you cannot really focus and have a concise strategy because it’s completely different. So that’s how we work. Even though we have people to do different tasks, all of them need to be aware of what they are doing.

Matthieu David: In terms of talents and functions, how is a campaign organized? You have a creative person, who is going to design the campaign, then you have some people who activate the campaign? Would you mind describing a little bit the different steps of a campaign and the different people involved in it? It seems to be a lot of different talents and resources.

Renata Thiebaut: Yeah it requires a lot of resources. I’ll just say between 7 – 10 people per project because customer service is so important in China to not only upsell the product but for crisis management as well if the product is broken to avoid bad reviews. So, we start with customer service and you need to train them, they really need to understand the brand and all of the characteristics of the product. Because they are the face of the brand – they really represent the brand.

Then it goes to design, you cannot write the wrong price on a design for example to set up the wrong price within the shop. So, you always need a double to triple layers of double-checking, because the campaign period is so stressful that you need to have everything in place before midnight. Right. If the campaign starts at midnight. So, you need to allocate one project manager who will coordinate with all of these different people in the team.

So we divided the campaigns to give you a concrete example into stock first, we do the stock preparations and also the pricing strategy. And then you have the pre-warming campaign, so only a few selected products will be part of this pre-warming campaign. Consumers pay a deposit and they get extra discount or they get a special gift, limited editions, and things like that, and then you have the campaign day which might have another set of discounts, another set of gifting. So, you need to prepare the campaign through different phases and to be ready before the campaign starts.

It was very funny actually – well, of course, it was interesting, very stressful, but thinking back at the beginning, especially cross-border e-commerce in China, or even e-commerce in China, the campaigns they were so stressful, when a lot of manual work that we had to do and the system – like the marketplace system would freeze for a couple of minutes and you would not be able to buy the product and then by the time the product was online, it was sold out. So, these were the type of issues we would have before with the campaigns but every year it becomes much better. I would say around 6-7 years ago, the system would freeze for about 30 minutes, so each year it was less and less. 20 minutes, I remember 2 years ago it was only 3 to 5 minutes. So, this 11/11 in 2019 it was nearly perfect.

Matthieu David: Yeah, you’re talking specifically about Double 11 campaigns which are nationwide campaigns (learn more about the online record-breaking sales “Singles Day”).

Renata Thiebaut: Well 11/11 is the world’s largest campaign. So, we are talking about trillions that are sold within these one-month long campaigns. But it is not the main campaign. For some industries, you sell much more in other campaigns than 11/11 itself.

Matthieu David: Which one would you emphasise, there is 9/9 for one, there is 12/12 – which one do you think is interesting and not well understood?

Renata Thiebaut: The main campaigns in China are mainly for the Queens Day which is March 8^th, then you have 6/18 – then you have 11/11 and Chinese New Year, but Chinese new year campaign is very good for food and beverage, for example, it’s not too good for other industries, so we see sales really down in that month for different industries, and very high for food and beverage. So, these are the main campaigns, and then you have the smaller ones, like Black Friday type of campaign, 12/12 and then you have Chinese Valentine’s Day. Back to School is a very good campaign for kids for example, not only for backpacks or products that you usually buy for your kid to go to school, but also shoes and clothing for kids. So you need to think also that your campaign is not only 11/11 driven – so there are many campaigns, let’s say once a month or even more, that you need to consider, and Flash Sales as well that you can be a part of, it drives a lot of traffic for your brand. So, when I talk about preparing for a campaign, it’s not only 11/11 – it’s pretty much every month you need to have everything ready before a campaign starts.

Matthieu David: Does it mean that it isn’t worth making a campaign on your own, does it mean that you have to target those moments? Doesn’t exist some independent campaign – you want to celebrate? Maybe the brand is from the UK and they want to celebrate the UK’s day and then you do a campaign on your own. Is that something which is existing or it’s something you don’t even have to care about, you have to focus on those big days organised by Alibaba?

Renata Thiebaut: No it really exists, you can do your own internal campaign. Especially if you have a CRM system in place, you can target your silver, gold, platinum members and you can offer different discounts but it is not as big as being part of an official campaign because you are going to get all of the traffic from a bigger campaign. So, this is the difference – traffic-wise, and being part of an official campaign will give you much more visibility within the marketplace than just doing on your own.

Matthieu David: To share one data on Metro, one of your clients, and again the same as Aldi. People will be surprised that Metro has a shop on TMall. That’s very common, so you go through another distributor to sell and within one day in your presentation, it was 11/11, Metro sold 17 million renminbi, if I understand the graph correctly, because next week you put TMall, which is 91 billion and we were thinking, you made 91 billion! And then I saw it was TMall. So Metro did like 2 -3 million USD within one day, for 11/11.

Renata Thiebaut: I think it was within one hour, because usually what shops do for 11/11 are much more than these, let’s say 50 million or 20 million, depending on shops like Zara, Uniqlo, it’s nearly 1 billion renminbi.

Matthieu David: Yeah, I don’t understand then the graph correctly, it should be more you say – or maybe it’s in USD I don’t know.

Renata Thiebaut: Yeah it should be in USD because the campaign starts one month before, so it is not a one-day campaign. So the way that TMall does is, you need to have the pre-warming part. Let’s say 11/11 starts around October 20, so people start putting products in the basket, or they pay the deposit, and then before the campaign starts you have another round of the pre-campaign phase, and the official campaign starts at midnight of 11/11 and it will last 24 hours. So, from midnight to 1 AM, we have a huge peak of sales, and then it goes down a lot so around 1 AM, who paid the deposit will have to pay the remaining one at 1 AM. So, this will be much less – we’ll have fewer sales at 1 AM than at midnight and then again – sales will slow down and in the morning around 10 AM, you’ll have another peak and before the campaign starts around 8 PM or 9 PM, we’ll have another peak. So, we’ll have let’s say different peaks of sales throughout the campaign, but the main one that you have most of the sales, most of the traffic is at midnight.

Matthieu David: We talked a lot about TMall, we talked a lot about Alibaba, but now JD has emerged, I think it’s been already 8-9 years that JD was created. WeChat is selling; you have also Pinduoduo; you may have Douyin preparing something to sell online. What’s your take on those other platforms? JD is very similar to TMall, but what about WeChat, Pinduoduo and other platforms?

Renata Thiebaut: The best platforms in China are the ones that are more relevant but you need to consider also your type of product. So, if you compare TMall global and JD worldwide in terms of let’s say health supplements, for example, TMall global is much stronger than JD worldwide. So then when a brand wants to select a platform, they would prefer TMall global because there you have more exposure.

So, you need to see that JD is very good with electronics, I actually think they can be better than TMall for this, even though TMall is trying to catch up, JD is very good I think with logistics, first of all, and also with electronics and house appliance. There are other platforms that are doing super well in China, one of them is Kaola, especially for cross-border e-commerce in China.

Matthieu David: Owned by Alibaba now. I didn’t mention it because it has been bought by Alibaba at the end of the day, I wanted to talk about other platforms, but let’s talk about Kaola because it has been recently bought by Alibaba.

Renata Thiebaut: Yes, so Kaola is a very good example, they are out of the Tencent, JD, Alibaba ecosystem, and they are from NetEase which is their traditional business model is to have the search engine and online games. So Kaola adopted a direct import business model to sell foreign products, especially beauty products and supplements, and they started growing a lot. So that’s why they got acquired by Alibaba, but only their cross-border business branch got acquired by Alibaba, especially because they were doing very well.

And the same happened to The Little Red Book, it is a social media app, or it was a social media app, but now its social commerce. You can also open your e-commerce website within The Little Red Book, but it’s very good only right now for beauty products or health supplements. It’s not good for house appliances or other products. So, you need to see these categorizations (find the ultimate guide to leading digital platforms in China). Some platforms are better for some types of products and others are not. So, Alibaba also acquired Little Red Book –

Matthieu David: Oh really? I didn’t know that. Very, recently right?

Renata Thiebaut: Yes.

Matthieu David: So, what you are saying is that platforms are segmented now. The maturity of the internet in China makes it possible to segment with JD, with its origin in electronics, to keep this identity into electronics, maybe male-oriented. TMall is a lot of fashion and so on and there is a platform for health supplements. Is it what you’re saying?

Renata Thiebaut: This is what happens in the industry, especially because of JD’s background, they were purely an electronics platform before, but this is not what they intend to do. JD really wants to grow their business to fashion and to cosmetics, to beauty. They are doing a big push also to expand their categorization, so people do not think that JD is very electronic-driven and it is happening very often with many marketplaces in China. Suning was also very electronic-driven with home appliances, then you have Yihaodian, which was very food-related before, a top food seller marketplace in China, but now they sell everything as well. So they really want to adapt and move very fast to cover different categories.

Matthieu David: It’s evolving fast. We are at the end of the interview and I’d like to ask you more personal questions. My team found out that at Harvard you published some papers, how do you find the time to cover topics like an analysis of the US-China trade war, how the section 301 China intellectual property case may impact new directives to promote the Made in China 2025. Seems so technical, how do you find the time? How do you organize your days?

Renata Thiebaut: I know that e-commerce customers are a lot of work and also energy from my side, but I am at that stage of my life let’s say that I really want to pass the knowledge I acquired as being one of the first ones to do, especially cross-border e-commerce in China. And I do believe that this is very helpful for business in other regions as well. So, whenever I publish something, either a book – I have published a book with them and I just finished the second book, our second series and I really try to be very practical.

Matthieu David: What’s the name of the book?

Renata Thiebaut: The book is about the digital supermarket, One Belt One Road, how we can bring cross-border e-commerce in China show to this area. So everything is related to my work, which makes it very easy because I want to write about something very practical, like how governments and how companies can learn from China and what we have done in terms of cross-border e-commerce in China strategies, for them to also grow their domestic business to disrupt technology in their countries. So, this is for me more of a contribution to the students and governments to learn from China and apply these strategies or business models back home.

Matthieu David: It’s interesting and I do the same. You are saying, we are Chinese, and I do the same with Chinese people living overseas and they say, why do you say “we”? Do you consider yourself as Chinese?

Renata Thiebaut: Well, I’ve been in China for 14 years, so I am very proud of being half Chinese, let’s say, I do not look Chinese but I really consider myself as a local and I am very proud of being able to represent China somehow in my own way.

Matthieu David: I have a few last questions. You have been contacted within my team and we sent you the usual questions that I ask interviewees, what books inspired you the most in your China journey and entrepreneur journey?

Renata Thiebaut: I like a lot of philosophical books, for example, Sun Tzu was the very first book I read about China.

Matthieu David: Art of the War?

Renata Thiebaut: Yeah. So, I really try to take the main meanings and the main teachings to my career, so this is a very good book, The Art of the War, to how you strategize your business and also your career plans, your goals.

Matthieu David: What would you like to share, what did you learn from The Art of the War?

Renata Thiebaut: You should not compare yourself to your competitors, for example. So, I think this is very good learning, even at Alibaba, Jack Ma repeats this, I do not want to be like Amazon, right. So we need not copy each other’s business model, but also try to innovate and to bring different perspectives, different offerings to consumers. Everything is about the consumers, right. If you are stuck at being like your competitors, you’re not going to provide the best you can to your consumers. So, I think this is the meaning I got from the book, that even though he does not directly say like this, but this is how I translated this into my business and into my career. I keep pushing hard in terms of data, for example, to really innovate what we currently do.

Matthieu David: I remember a conference I attended where the founder of 360 was saying — I kept looking at Baidu because at that time 360 was also a search engine and it failed, it was actually just an anti-virus software at the end because it was too much focusing on the competitor. We have this actual feedback from Chinese entrepreneurs as well. What do you read to stay up to date about China?

Renata Thiebaut: We need to read daily, right, all of the news about e-commerce, regulations. Well, I have a lot of background, I really need to actually know all of the new regulations, the new laws regarding e-commerce and cross-border e-commerce in China, advertisement law. So there are some good sources. Some good websites like TechNode, even your reports from Daxue Consulting – I read them a lot with consumer trends. So, I would suggest your reports, for example, McKinsey, PwC like the ones that we can trust. Because you see so many things online, sometimes they are not necessarily a good source for you to be inspired by. You need to be very careful when you read things and the things you can really trust and take that as learning as well.

Matthieu David: What book on China you would recommend to someone who wants to know more about China? Maybe it’s not a book, maybe it’s a movie or something else, but what would you recommend to read, to watch, to do, to learn more about China?

Renata Thiebaut: There is one very good book about AI and China in the US – so I would suggest this book because it is about the future.

Matthieu David: AI Superpower by Lee Kai Fu?

Renata Thiebaut: Yes, AI Superpower, it is a very good book for you to understand the future and how to adapt your business to the future as well, because many businesses – you know, you need to go tech. you need to implement AI for you too – let’s say, survive in the business. You cannot just keep˙ having the same traditional type of business as before.

Matthieu David: Yeah, I was speaking to someone on the podcast mentioning this book and it has been really a very best – it’s a bestseller right, has been very successful.

The two last questions I would be very interested in your answer because you have been in China for 14 years and you have been in a spot where you could witness a lot of things and see a lot of evolutions. What unexpected success and unexpected failure have you witnessed in China which was a surprise to you? As an example, I always use Carrefour. When I arrived in China it was successful, they were all over the place,˙ and then they left. They sold to Suning and I was crossing Carrefour there were two logos, that was so surprising to see the two logos.

Renata Thiebaut: I think failures can inspire us more because we have to avoid committing the same mistake, and mostly it’s the same mistake that they do. They do not understand the Chinese market, so most of these foreign companies, especially the big ones, when they come to China, they adopt the same business model as in Europe or in other countries or in the US. Marks and Spencer, they had a very wrong strategy for China. We worked with Marks and Spencer before with the social media, for their content, but the thing is, if you are not willing to adapt to Chinese consumers, you are prone to fail and that’s what happened – they had to leave China.

Matthieu David: Yeah, they had an offline shop as well close to People’s Square in Shanghai right? And, what’s surprising you actually is that even though big companies who are making so much efforts to succeed don’t make the efforts to actually really understand the Chinese market.

Renata Thiebaut: Yes, this is true, plus the competition. So, you are competing for price with other Chinese brands as well. If you do not want to change your style because Chinese consumers, they do not exactly dress the same as British consumers. So, they were very classic, everything was black or grey or white, so nothing different that they could buy from Taobao for a cheaper price or nothing that it would strike the eyes for the Chinese consumers to buy. So that’s why they didn’t adapt, plus price point – that’s why they failed in China.

Matthieu David: And the opposite, what success has been surprising to you in China? I’m asking this question because the thinker and consultant Peter Drucker was looking at unexpected success, unexpected failure, to assess innovation. I think your perspective is very interesting to that concern, to see what success you have not seen coming and which came?

Renata Thiebaut: I will say Intersport is a very good example, because they resell other brands, like Nike and Adidas, and this is a very difficult thing for you to be a reseller in China, especially if the brands you are reselling, they have established business in the market. Nike, Adidas is very well established in the Chinese market. So, what Intersport did to be the first one sports brand in China or retail in China was to focus on limited editions for example, or products that Nike and Adidas official stores would not have. Also, they did a partnership with Alibaba to implement technology and to give a better consumer experience to the buyers. For example, in Beijing, they have a big screen that is automated, so whenever you pass by, let’s say it’s a woman that is passing, they offer women related products and you can see the products. Then you enter the store, in which everything is touch base, you can try on the products, you can shop online, you scan the QR code; so this is very AR driven. They use a lot of technology to leverage their business in China to be more competitive and to be more well known. So usually consumers could buy from Intersport instead of the brand itself.

Matthieu David: Intersport was a success you were not expecting initially to be as big as it is?

Renata Thiebaut: I would not expect because they resell other brands. That’s the reason. So, I worked with them for this consulting strategy on O2O and how to leverage their brand. We had to do product selection, push different products, and then they signed this agreement with Alibaba to do special technology to leverage their brand in China. I think they are doing very well, it’s a very cool brand, a very cool case, let’s say, that we could learn from.

Matthieu David: Thank you very much, was very, very instructive, was very interesting. I have to say – I was a bit nervous before interviewing you because of everything you did and you do and you are doctor, you have time to write papers, you are a researcher at Harvard and you work on e-commerce in China, managing a business. That’s very, very impressive. Thank you for spending time with us and I hope that you enjoyed it and I hope everyone listening to us also enjoyed it.

Renata Thiebaut: Thank you very much, it was my pleasure.

Matthieu David: Bye – bye everyone.

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This article China Paradigm transcript #101: Managing cross-border e-commerce operations in China: Successes and failures is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Welcome to China Paradigm, a show powered by Daxue Consulting, where we interview season entrepreneurs and experienced managers in China about the business and experience in the country.

Matthieu David: Good morning. I’m Matthieu David, the founder of Daxue Consulting and its China marketing podcast, China Paradigm, and today, I am very happy to be with Liang Sun. You are the founder of a company called Generate and you founded it 7 years ago, in 2013. Generate is focusing on supporting businesses, especially B2B businesses, but I feel you do more than B2B, especially focusing on B2B sales networks in China. So, supporting B2B businesses in their sales in China. You are very close to Belgium. You have an office in Belgium, an office in Shanghai and you are very involved in the Belgian community. And as for now, you are up to 100 or even actually over 100 independent sales and marketing associates. So, as far as I understand, for people who are listening to us, your company, Generate, has a B2B sales network in China of sales associates, whom you call sales associates or salespeople in China. You are in 6 cities, as far as I understand, and those people have a duty to develop the businesses of the clients you have, especially in B2B. So, thank you very much for being with us and the first question I ask is, about the size of the business and you can always correct me if you think there is additional information to add, but what is the size of your business?

Liang Sun: Thank you very much for inviting me. It’s my pleasure to share our experiences and expertise. So, as I said the core competencies of Generate is our B2B sales network in China, the network of independent salespeople. For Generate itself, we have a small team of four full time in Shanghai and a handful of part-time staff. So, in total, we have roughly seven people and capabilities internally, and half of them are managing the independent sales and the other half of them are siding sales support for our customers or project management for our customers.

Matthieu David: I’d like to understand better on how you work, and I really liked your website because when I went on your website, I saw your very organised way of working and that is matching quite well with my way of thinking. You have sales navigation, sales outsourcing and management, and sales recruiting. It looks like very thorough, very organised and very systematic. Could you tell us more about the service you provide to your clients?

Liang Sun: Sure. When a company wants to export their product or technology to China, whether they are experienced already, whether they have some projects already, we feel like they need help when it comes to sales, localizing the sales force, and therefore, our solution here is we help you, starting with the sales navigation program. We help you select the market segments. For example, the other day my clients told me they have three market segments: material handling, theme park and machineries. I said, “Let’s start with material handling.” Then we would help them understand what is the market competitive landscape. What are the key players? What are the channels to market? How do customers make their buying decisions? Who are the decision makers and influencers?

Then, instead of going on with the tech search, we start mobilizing our independent sales force. They are either networkers or experienced key account managers. We would bring the products to their portfolio, which are usually complimentary products, for them to sell the different products to the same key accounts that they have been serving for the past years or decades to monetize their B2B sales network in China. Once there are a few deals going through, the customer would want to hire their own salespeople, but then they may not have the legal entity to do it, nor do they have their offices to do it. Then we help them with recruiting the right person and then putting them in our payroll and our offices for a couple of years until the customer wants to set up their own office and their legal entity and then we would do the rollover to let them go on with it themselves.

Matthieu David: Got it. I feel you are a very systematic person. I looked at the website and the way you express yourself. I feel you are systematic in organizing your services in very clear steps. How do you charge your clients? For instance, we are talking about sales navigation, sales outsourcing, and sales recruiting; I believe you have a very clear way of charging them and a way of incentivizing on success, as well. What is your business model?

Liang Sun: Yeah, indeed we have our pricing scheme and we are structured as we believe that even small companies should have a process or structure in place. In the meantime, we are flexible, and the small companies, medium companies, and enterprise customers may have different preferences on how they want to pay for our services. So we work on hourly rates, or we work on their rates or we work on project fees, plus commissions. So, it is flexible.

Matthieu David: What is the typical way for a B2B sales network in China? I believe the first step is… sales navigation would be like a product. We look at the product, we investigate the market, we talk to the associate. What kind of channel could work? What kind of channels would not work or maybe your product is not ready for China? You need to work on a new product and come back to China. So, I believe that this is a project. It could be I don’t know, 100 000 RMB, 200 000 RMB, but I feel it is a product and then you have recruiting. Here, I feel that it’s more like a percentage, maybe of the salary of the people you recruit, like head hunters do, which is very typical of headhunting and then you have the sales outsourcing and management and I believe as far as I understand that it would be a retainer, plus performance fees (learn more about recruitment). Would you mind sharing a bit more about, if someone is listening to us and would like to project himself in working with you, what should he expect in terms of investment, and at the same time, an incentive to you?

Liang Sun: Sure, as you said, the sales navigation program is a product. It has already indicated a certain level of commitment, should the customer choose the product, and before that, usually the customers have experience in navigating the sales themselves or through us, so, often than not we would start with a day or two’s work. They would give us a clear mandate. “Liang, can you talk to three potential customers or three sales? Give us feedback on our product. Could you investigate this competitor?” What are their products? How do they sell? How do they charge? So, then for us, it is quite easy. It is a few phone calls because we have a professional network for B2B in China to get the information.

Matthieu David: This navigation is a few days. It’s nothing exceeding a week, right?

Liang Sun: No, sales navigation as I said, it is a certain level of commitment. It could take three months. Before the customer commits three months, we want them to have a feeling about how does it look to work with us. So, if a mandate is a few hours, we will take it with an hourly rate. If the mandate is two days, we will take it and then deliver a one-page report. That takes us two days to work on.

Matthieu David: I see, so sales navigation you feel that within three months is enough. Three months is a pretty sizeable amount of time for a company when they want to make decisions. It’s not short either. So, three months is good for you to go through different aspect, to explore things with different associates. So within those three months, are you dividing the different steps or you spend time and explore whatever you can? How do you organise those three months?

Liang Sun: Yeah, so the scope is to select the market segments, contacting the market competitive landscape research, and mobilizing my sales force. So, in practice or operationally we would induct my full-time project manager for up to a week and let him or her get familiar with the product mandate and then what we would do is up to 5 independent sales associates to the project manager, for her or for him to induct those sales associates. Then those sales associates would bring the product in front of their customers over tea or dinner after their own product is selling, they will say, “Hey, would you like to see something else that is cool?” for their feedback. If the Chinese customer wants to initiate their business discussions or put their customer in the shortlist. So, after three months, we would be given our European principles. The feedback from the sales associates, the feedback from the customers, the shortlist of the prospective partners or customers and a cost indication on how you want to move forward and usually, the sales navigation program would end with a proposal for a one-week commercial agenda arrangement in or near Shanghai for the European process to come over here to meet 10-15 potential partners or customers.

Matthieu David: I see. I am on your website and indeed, so you talk about the scope and then the deliverables and so it’s a few pages of feedback and prospects and so on and then you have the options and options is more of activation options, being exhibitions, commercial agenda or execution of the program and it would be more what you would do next, which is to actually sell for them; sales recruiting in China and so on. Is it correct?

Liang Sun: Yes, because sometimes the customer wants to participate in an exhibition, sometimes they need us to induct them on the Chinese business culture and so we have add-ons for them to choose from. 

Matthieu David: I see. So, that was the question I often have for people who do exhibitions. We have clients who go through exhibitions and we know companies who only organize exhibitions for them and so on. How useful is it to go to exhibitions, because every time I go to an exhibition, I see someone who wants to sell me something and I want to sell something to him. It’s a one-way talk only. So, everyone is here to sell, but nobody is here to buy. So, what is your feeling on exhibitions? Do you still feel it’s useful? What do you feel or maybe I was not at one of the good ones?

Liang Sun: I am very glad you asked me the question. We don’t believe in exhibitions to put it in a simple way, although most of our clients still want to participate. It is good for them because they can have a feeling about what the industry looks like in China just by talking to the people during the exhibition, and if we were the European company and we want to go to China, we would not have a booth; it’s an unnecessary cost. We would simply walk around. We did a test with a customer when we said, “Could you give us half of the budget for the booth and let us do something creative?” I asked my entire team of 4 people, wearing the customer’s T-shirt and then we brought cardboard with our tops and we had lollipops or mint or flower or whatever, the promotional products in our pockets, just to catch random participants or visitors for a few minutes’ conversations. “Have you heard of this product? What are you doing here? Would you be interested in our product or could you give me some feedback? We are new here. We don’t know what to do. Where should we go?” Often than not, it is so much more efficient. You have no idea how willing the visitors or participants are willing to share as long as they don’t consider you as a competitor. So, rather than sitting in our booth, waiting for the people to come and sell us something, we mobilize our team to walk around actively looking for buyers.

Matthieu David: Yeah, I feel though to add on, exhibitions could be good to understand your competitors. I have a sense of partners or people who may have additional products to sell with you, as you said with your sales associate and their B2B sales network in China, you make sure that they don’t sell them products as a conflict of interest, but they may sell a door because actually, a door system or entry system because they are in the building industry and the new mall needs an entry system, but that’s not their core business, so, it is complimentary. So here, you may find complementary partners, but indeed, trying to find clients within exhibitions, exhibitors should not sell on it, right? They shouldn’t talk about finding clients for exhibitions. That doesn’t exist, right?

Liang Sun: Actually, more often than not, our customers leave the exhibition with a few solid prospects or even purchase orders. So, it works. Whether the purchase order is solid or not is another matter. Still, they find that their return on investment is fine, but what I want to say here, is the follow-up after the exhibition is more important than the exhibition experience itself because when they are back in Europe, how are they going to follow through with the process, given the different language, the different time zone, and the different response time expectations. It is quite challenging and that’s why we provide sales outsourcing so that our project manager can be their part-time or full-time representative in China following up with the process.

Matthieu David: Going back to your sales associates and the B2B sales network in China, I have the feeling that something you emphasized, you mentioned on average that they are 42 years old and so that means they have experience and they have at least 15 years of working experience. There are several questions: How do you recruit them and how do you make sure they are good ones. And finally, how do you make sure there is not a lot of conflict of interest, because you may have one guy who may want to have a lot of things to sell, but actually within the different things he is selling, you may have a conflict of interest selling the same products as competitors.

Liang Sun: Yeah, let me answer the question in this way. First of all, it is a private network. It is a network built upon trust. I would say everyone in our team, including me, work with less than ten sales associates directly and our sales associates may have their sales associates. So, we know each other. It is not like we only have a few phone calls. We meet each other on a weekly basis and working with sales associates is a cost-effective way, meaning more variable costs than fixed costs and also, it’s easier to get started with and easier and also less commitment. Your full-time sales know a lot more about your company than the part-time external sales force. Whether you want them to avoid conflict of interest or not, you can’t control them because they are out meeting customers. So, working with part-time and external sales force it is safer.

Coming back to your questions about conflict of interest and overlaps, it doesn’t matter to us because we sign the non-compete, non-circumvent, and confidentiality agreement with our principles and then we co-sign the confidentiality and the non-compete with the sales so that they can get on with it. We gave them a questionnaire for them to pre-qualify the Chinese customers’ interest. Once there is a qualified lead, we nominate the leads at our European principles. Once the nomination is accepted, we bring the buyer directly in contact with the seller for them to initiate the business discussions and our project manager may assist in the communications and our sales associates, who are closer to the customer over dinner, over drinks or karaoke, often than not may influence the customers buying decisions. That’s how it works. So, as a result, more qualified hot leads coming and also, the deal closing rate gets increases.

Matthieu David: I see. Your clients are incentivizing you to the volume of sales you do and also the number of leads you bring, or the time you spend because it could be a very long process in B2B sales in China. They may spend a lot of time to translate, it may be technical. It may be very costly for you, and if they pay only with the volume or most of your earning comes from percentage of sales. You may have to wait for a few years before being profitable. How do your clients reward you?

Liang Sun: Yeah so, we are a consulting company and we are not a sales agent working on commission. So, we do have our overhead and expenses covered. In the meantime, we are result-oriented, and we consider ourselves pricing quite aggressive. We often describe ourselves as street fighters, helping customers find shortcuts on signing deals, and getting projects. So it is competitive and yet, we cover our overheads and expenses and make a small profit on those fees already.

Matthieu David: So, the second step is sales recruiting. When you say sales recruiting in China is it that you recruit full-time sales for your clients or is it the associate you activate?

Liang Sun: Yes, so after the three-month navigation program, often than not, there are prospects that are ready to buy or that are already buying, and then we would say you need a full-time salesperson and to follow up closely or to serve your existing customers. We can help you find one and we can put them in the office. The principal would pay us a monthly fee, which includes the offices, employment, and sales support. They can stop the project and the whole recruitment with a months’ process and then we will take care of the hassle. So, again, for them, it is less commitment, but faster setup and same results.

Matthieu David: So, you recruit for them and you hire the people for them with your structure, right?

Liang Sun: In the accounting book, yes. They are on our payroll. The customer pays us a monthly fee to cover the employment and also the cost of our sales support and payroll services.

Matthieu David: I see, but when they sell actually… the company in Belgium, where you are going to involve the client because you cannot invoice for them.

Liang Sun: No, so what I do is I invoice the customer in China. They get the project fees, they share a commission with us because we also charge a commission, so that our fixed or upfront fees are quite aggressive and we want to get rewarded by commission mainly. Then we would give part of the commission to the sales because the sales representative has a job. It is a low risk for them and it is comfortable. But we take all the risks and so we have a higher sales commission than the full-time salespeople that we employ for our customers.

Matthieu David: I see so, so what’s going on is that those clients you have don’t have to create their own company in China. If they do sales, they would invoice directly from Europe, their end-client, and then they would give you some commissions as a reward, or percentage of sales. You are consultants and so you are a consulting company, advising on how to negotiate a dealing and supporting them, but you are not invoicing for them. Am I correct?

Liang Sun: Nope, unless their customer requires it, but sometimes the Chinese customer will require RMB invoices. Typically, it is a service contract for IT serves, project management services and we will assist because we have legal entities both in Belgium and in China and so we can help in that.

Matthieu David: I see. Then, the tricky aspect of your business is that, if you are successful or if you do well in your job, you should lose your client. Your client at some point would start a company in China, have their own structure and so on and that is actually what you say, that after 12 months or until your objective that your client has a company in China and he is successful in his company, what is the next step after the recruitment of a sales advisor and sales in China, by your structure?  

Liang Sun: So, we consider ourselves successful if the client wants to leave us within 24 to 36 months because that means that we have succeeded in helping our customers enter into the China market and have a solid footprint. We usually don’t charge a rollover fee, which means after 24 months, our sales can become your sales. They are free to go and please, refer other customers to our business. This is the way that we believe, and in two years clients are already better than a market research firm’s three months clients. You will be surprised how often our customers come back to us for due diligence support or other supports because they trust us. 

Matthieu David: Is it the reason why you have now digital marketing, brand strategy, design, and social media campaigns, trading? It seems you expanded and that I think I was not very clear on. Those words, digital marketing, brand strategy, design, social media campaigns and talk about Weibo and WeChat, are B2C? (read about optimizing Wechat marketing in China)

Liang Sun: Not exactly, because B2B sales and marketing in China also need WeChat.

Matthieu David: Can you elaborate on it? I think it is a misconception with a lot of B2B businesses, thinking that WeChat is B2C.

Liang Sun: Okay so, the reason we started the digital marketing exactly, is because our clients were asking for it. We have succeeded in helping them sell and they want to market because they have a budget to spend, to create a brand, and market awareness. We tell them honestly, the path on WeChat you need to outsource the work to professional firms and more often than not, we outsource to Chinese firms because we believe they are cost-effective and their foot is on the ground, they are local. Then the customer needs our support on project management and language communications, and they believe in our model. We work on project management fees and to answer your question on the B2B marketing and sales in China, yes, WeChat is a good B2B marketing tool in China (find a guide to B2B marketing in China).

I will give an example. We are helping one of the largest Belgian companies in industrial machinery sector on managing their China marketing and the starting point is starting up a WeChat account, they have a factory in China, for their sales people in China to use as a tool. So when they are done with meetings, they can say this is our company brochure. There is our QR code, please subscribe to our WeChat account to see our project references and news and exhibitions that we are attending. With WeChat, it is so much easier to share news or project references or information to the prospects who can then share internally or externally to other people because everything in China is on WeChat these days.

Matthieu David: I see, so basically even B2B when you are at an exhibition, people follow you on WeChat and that means that it is also used for B2B sales network in China because you build a connection, not only through a dinner and lunch, but also through WeChat and people keep your contact and follow you, right?

Liang Sun: Yeah.

Matthieu David: Talking about sales recruiting in China, how do you recruit a good sales person in China? What is a good sales person in China? To give you a bit of what people think, it’s that a good sales person is someone who is good at networking and relationship building in China. So, basically you would always favour people who are 50 years old with a lot of experience, more than someone who is let’s say very inventive, more than someone who is actually a good speaker. I found that a lot of people tend to think in terms of sales people and recruitment by their guanxi, network, which is very often difficult to assess (learn about leveraging guanxi for business in China). People may say, “I know this one and a lot of people,” but how do you assess it? So, basically an open question: how do you assess a good sales person in China?

Liang Sun: Yeah, let me start by saying that we believe sales is a service, it is an art and most importantly it is a process and we divide the process into three aspects; the lead generation part, the sales follow-up part, which is usually technical and the deal closing part, which is where the network comes into play, guanxi. It depends on the principal’s needs. If they need a sales engineer to follow up on the existing leads that they have, or they need a lead generator, a door opener to get new leads, or they have leads and engineers, but they need a super networker and client relationship manager to close the lead, spend time with the customer to understand what they want. So, typically one person can be very good at one or up to two of the three parts in the process, and we think we can do the sales recruitment because over the last 7 years we have done many cases. We only recruit sales people, because we as a company or me as an individual are sales person in the core and we believe it takes a sales person to understand what a good sales person is.

Matthieu David: Maybe I should have started with this question, but I really want to understand your business first and I think the people listening to us also want to go in depth in understanding what you do and how you serve your clients. But if we go back in time, 7 years ago, what made you start this business?

Liang Sun: That’s a very good question. I started the business 7 years ago because I was lucky enough to have a mentor and he taught me one day, he said, “Liang, never hire sales people.” He came to China for the first time in 2013 to close down a factory and office because the sales people were turning the company inside out. The invoices and goods were going out, but they never saw the money and so they fired everyone. Then this general manager, my mentor, turned the payments terms from 60 days post-payment to 100% pre-payment and because of that, they lost 80% of the customers and kept 20% of the customers, and then the company started to be profitable. So, he taught me, Liang work with sales agents. Let them get on with it. Give them commission. Don’t tell them too much. Hence, I started this model because we believe in partnerships. We respect people’s privacy and we work in teams. We believe in incentives and transparency, and we share referrals.  

Matthieu David: How do you build this professional network of references in China because what you described from outside looks like a perfect world, but in fact when you have intermediaries, you have people you need to share with and so on, it is something difficult to have a contract with someone. It is somehow difficult to make everyone happy and to make sure that everyone understands what you are doing as well. How do you work with all this?

Liang Sun: Yeah so, I started business when I was 26 years old; just a fresh graduate from grad school in Belgium. So, the same mentor introduced his best sales person to my network. Now, we are talking about the sales person that was generating the best revenue, whether the revenue cancelled or not was another matter, but a great sales person in their own way; they make money for themselves and their customers. Then, I spent enough time with them to let them understand what products I have. They were in the construction industry, selling floors, selling roofs, waterproof membranes, selling walls, paintings and then I said, “Would you like to sell Belgian roof top solar panels? Do you want to sell the warehousing racks?” It is all to the manufacturing facilities or project directors, general managers. So, clients and our sales people were motivated because they are money driven and they want to be more helpful in front of the customers and at the same time, they are very careful about sharing their professional network for B2B in China. So, I have to pre-qualify the credibility of my European principle so that I will be comfortable to bring a mandate to them because we care about our relationships and our reputation. This is how I started and this is how I work.

Matthieu David: What direction of the leads you meet with when you may describe those kinds of networks? I believe some European or US companies believe it is a bit too blurry now to go through networks, or guanxi and relationship building in China. It may create a bit of anxiety and people may be a bit nervous about not understanding what’s going on and you talked about trust again, trust enough to contract. American and European businesses want to contract. They want everything clear and written, transparent. I mean transparent by the end client and everyone to be and here, you have to protect their own network, their own wealth, right for the people who introduce you, the good salespeople? So, how do articulate this?

Liang Sun: So, you mean the cultural difference, one is contract-driven and in China it is relationship-driven, right?

Matthieu David: It’s kind of culture, but it is basically a business practice. The business practice is that people own networks. They don’t want really to share it because of the wealth they have, it’s a property, and to go further I longed so that LinkedIn could not have been as successful in China as in the West because people don’t want to show who they are connected to. I studied in Beijing University and I really have this feeling that people wanted to show that they are connected and are relationship building in China, but they don’t want to tell with whom.

Liang Sun: Yeah let me give an example. We were mobilising ourselves here to sell the Belgian rooftop solar solutions and we let ourselves introduce a prospect factory in Suzhou, and all of a sudden my sales people and sales associate disconnected and disappeared for one week and after a week I called them up and said, “Hey, what happened? Are you okay?” He said, “Liang, sorry, I was busy with managing the relationship with the security guards at the door and the decision-makers. We had a lot of fun and they are ready to sign a contract.” He gave me some invoices after dinner and said, “Look, you guys had a lot of fun. Good. Let’s sign the contract then.” I am result driven. I don’t ask questions too much. I trust my sales, but they do bring results.

Matthieu David: Yeah typically, I mean fortunately you are here because a lot of European and American businesses would not be comfortable by this kind of absence of communication, having to spend so much money on entertainment, when you have so many regulations in Europe on the amount you can spend on entertainment, for instance.

Liang Sun: Yeah that’s also why we exist, because we can be localised when it comes to our operations and also, we comply with the European and American anti-bribery or anti-corruption act. So, to give our European principles and production and comfort that they need.

Matthieu David: What is the expectation in terms of timeline to get some sales? What is your experience when you entered B2B sales network in China? Should your client expect to get some momentum after 3 months, 6 months, 1 year? I know it can depend on the kind of business. It can vary from one industry to another, but could you give a sense of what expectation they can get?

Liang Sun: Yeah, B2B sales network in China and it really depends on the sales cycle. It can be as short as 3 months; It can be as long as 3 years and the customer understands it. The company that I mentioned that has 3 market segments, material handling, machinery and theme parks, for the material handling, for example, they want to sell to China Railway and they know it is after 3 years.

Matthieu David: It depends, but I think what we can remember is that minimum 3 months basically you are saying it is not serious to expect results before 3 months. It is a minimum of 3 months to get a bit of something and it can go up to 3 years when it is a very large partnership unit with like China Railway where it will take time and we understand it.

Liang Sun: Let me give another example. If the European company sells floors or furniture, then if we manage to give them the right contacts to the distributor that wants to try the container, then the deals can go through very quickly. So, it really depends.

Matthieu David: We are in April 2020 and everyone is talking about the same thing in all the media. It started first in China and now it is Europe talking about it, impacted. It is the coronavirus. How did it impact your business and your clients?

Liang Sun: Let’s talk about our clients. If they are in manufacturing settings in Europe, then they are busy with business continuity planning. Overall, they are quite busy conducting the business the best way they can and therefore so are we. We decided not to take new projects for the foreseeable future to focus on supporting our existing clients to go through the crisis. At the beginning of the year, we signed a few new projects and for the sales navigation program and after the virus outbreak, we gave the customer the option to postpone the project or even cancel the project because we told them simply, we are not comfortable with conducting the market research because it may not be valid in 6 months and the people in China have other priorities. Thankfully all of them took their money back, so our burden is off. To give you a question, it is going to be a very hard year for us which is fine, because we are financially strong. We believe in long term. We believe in value we create and the money will come, eventually, but so far, we focus on the existing projects and we don’t take new clients for the next say three to six months.

Matthieu David: The clients you were representing with your sales associates and your B2B sales network in China, those people that you hire for them, what is the situation now? Do you feel we are back to business in China? I am currently in Shanghai and I see a lot of people in the street walking. I see all the shops open, but I see a lot of shops are also closed, who didn’t get back to business. It could be restaurants; it could be coffee shops. I also see much fewer or people in malls and stores. I was checking the Apple store and it was pretty empty. Maybe it was too early. I went early to check, but I think it is not back exactly to the level we were before the crisis. What about you in B2B? Do you feel business is back?

Liang Sun: People in China are going to all places, which is a really good sign and whether the business is back, I still think it is too soon to tell because the impact on the businesses and the revenue loss, which is negative, but the government subsidies are positive. How will it impact the industry on the macro level and the individual businesses on the micro-level? It is too soon to tell. It takes a few months. So, right now we feel like the business conversations are still going forward, but whether they would make a buying or selling decision, would still take some time to go back to normal.

Matthieu David: I saw on your LinkedIn profile that you are lecturing and among the topics you are covering, there is made in China, 2025 and this topic seems very wide and a bit theoretical. So, my question is what practical do you get from this made in China, 2025. What practical conclusions do you get that you could bring to your clients and in your lecture?

Liang Sun: In a nutshell, we believe that made in China would help the Chinese manufacturers to export more and more high-value added products to the world and those products are created in China and they are made in China. This is also a business that we are starting to get involved in. We ourselves, buy and sell high-value products from China to Belgium and we also have our clients finding not sourcing and not manufacturers, but we call supply chain partners from China. Because of the incentives, it’s a trend that we believe and we ae spending more internal resources supporting the European companies buy high-value products from China.

Matthieu David: So, the next step for your business would be actually to do what you did from foreign businesses in China, to do it for Chinese companies in the west?

Liang Sun: We decided not to think of it that way. We decided to keep our clientele as the Europeans and the Chinese companies that we introduced to the European companies are our stakeholders, but now some of them are becoming our suppliers because the relationship and trust is there. We told them that there is a market opportunity in China and our European clients may become our clients again, but not for export into China, but for buying from China. It is all about relationship building in China and trust and product and the money flow and good flow from an operational level. The network is built upon trust.

Matthieu David: Very interesting. It is time for the last questions and you received them before the interview. Typical questions that we ask at the end of the interview, what books inspired you most during your entrepreneur journey?

Liang Sun: I would say it’s the Robert book, Rich Dad Poor Dad. You probably have heard of the book. I only worked for a company 6 months in my life and I will never work for a company again. Part of the reason is the book. I believe my capabilities in managing my money more than the government and I equipped myself with good lawyers, accountants and bankers and so, this book made me start and continue and made me keep my head up when I had bad times, because I will never work for someone again and I may fail, but I will never go back to another company and I believe eventually I will succeed because I need to succeed once. 

Matthieu David: Can I ask you a personal question because I understand the desire of working on your own and as an independent, but it sometimes is made at a price. The price being that you postpone some decisions like getting married, like having kids. Are you married? Do you have kids because I believe when you’re an entrepreneur that is something you think like 10 years after others?

Liang Sun: I totally agree with you. A lot of people say that they want to keep a work/life balance. I don’t believe it, or a work/family balance. I also don’t believe that. I believe that either you go fully committed to your business or career development or you connect to your family more. I don’t have kids, but when I do, I want to sell my business and be a freelancer so that I can afford to be a good father, which is the most important job of all time. Right now, my business is the most important job.

Matthieu David: Yeah so, the good side is that you are independent and you make your decisions and reach that conclusion you have in mind. The down side is that indeed, you have to postpone some things in your life. Some people don’t realise when they start a business just after studying that it will cost a lot of things. What do you read to stay up to date about China? What are your favourite newspapers or magazines, even Chinese ones? Are you reading  Caixin, Renmin, SCMP?

Liang Sun: All of them. I would say I only read the titles nowadays and I do read the Economist and CNN, BBC and then I read the titles in the Chinese media channels so I can make my own judgement, which news is true or false, in my opinion, but most of the time I keep being informed by talking to my network and the successful people in the industry.

Matthieu David: What kind of resources would you trust more or what newspapers would you trust more in China to get very accurate numbers, good information? I tend to like Caixin. How about you?

Liang Sun: I would say I remain skeptical on all news channels. Every media outlet has their own agenda and they are trying to be as objective as possible. So, all the numbers and the data and opinions I use them as a reference and combine those resources with my network and my own judgment, and then I can make my business decisions. 

Matthieu David: What book would you recommend on China? A book that you would recommend to foreigners to understand China better or a book that you liked because you understood your own country better as well?

Liang Sun: Well, I think if you ask a foreign entrepreneur living in China, they can answer the question so much better because I believe there quite a few good books in English, written by foreign entrepreneurs living in China and so I read them. What I do is, I live in the country I do business with and now I am spending a decent amount of time in Belgium, because that is what I believe is the best way to understand how business is done in Belgium and living in the country itself is like reading books. I learn so many new things everyday by talking to the people there.

Matthieu David: What productivity tool do you like best? I don’t think WeChat is that productive. We waste a lot of time on WeChat, I feel. What productivity tool do you like to use in your daily work?

Liang Sun: My team uses quite a few tools that I introduced them to: Monday.com and Pipe Drive as a CRM tool, Trello as a management tool. I still use Trello every morning or what I do is I put less than 3 things on the to-do list of the day and the other 5 forecasts I have is urgent and important, which is what I do today. Urgent and unimportant, I let my team get on with. Important, not urgent I schedule another day to do it and another thing is the unimportant and the unurgent, then I will remove them. So, the reason I make sure there is less than 3 things is that I want to be free before 10am. I start my day very early. I start my day at 5am. In China I start my day at 7am, after the workout. It is quite cool and then I a full of energy and so, the purpose is to empty my to-do list and forget about all the tools before 10 am and from 10am to 6pm I do the things that my mind tells me to do and usually I am very productive. I call the customers or suppliers I need to talk to. I call the team I need to talk to. I call my government officer contacts for tea. It is productive and it is the way I find productive.

Matthieu David: It is very interesting. I am happy we met through the nonimportant, nonurgent for the podcast. I am glad you considered it as important to schedule the call. I am very curious about the tools you are using, Monday.com, Pipe Drive, and Trello. The first thing I am surprised of is they are all western tools. Second thing I am curious about is, how do you learn about them? I knew Monday.com because it’s everywhere on YouTube. I know about Pipe Drive because I listen to a lot of podcasts and I think they were sponsoring one of the podcasts. I know about Trello because I will use it at some point. My third question, sorry, I have questions on this because I feel that you have a very organised mind, so I am sure you have a process. So, the third question is how do you choose one tool over another one? Pipe Drive is in competition with Salesforce, with Zoho, with so many other CRM and so on. I understand it is more B2B here, so how do you choose? The first question is, why only western tools? The second question, how do you find them and third one, how do you select them?

Liang Sun: Yeah so western tools is because we have both a European and China team and the China team are English speaking. The European time may not be Chinese speaking. So, we have western tools and all the tools that are mentioned, including Google Docs, Drop Box. They are high Chinese alternatives, equally as good, if not better and we don’t spend too much time on making choices because we believe how we use them is more important than choosing the tool itself. So, now we have been using Pipe Drive for a couple of years. We know there are better and cheaper ones, but we don’t change because we are used to it and it is good enough.

Matthieu David: Interesting. I always have a hard time choosing software because I would go with it for years, and if they go bankrupt, I don’t know why they don’t raise money to go on. I have to start again. I always look at the exit strategy to be able to extract all the data easily. I’d like to have your opinion on an unexpected success or an unexpected failure you witnessed in China? The reason why I am asking this question is because Peter Drucker, the thinker and consultant of business strategy, he wrote many books on business strategy. He says we can assess innovation when we look at unexpected success happening or an unexpected failure happening and this unexpected success or failure gives a sense of direction of what is changing in society or in business. What would you say over the past 3 or 5 years as an unexpected success you witnessed or failure in China which can give us an idea of the changes that are happening here in the country?

Liang Sun: Yeah, I know the book you mentioned. I know the person. I have heard of him and he is from the innovation perspective, from the entrepreneurship perspective. I consider myself more a businessman than an entrepreneur. So, the way I see it, the unexpected failures and success is more than the right time and the right place or the wrong time at the wrong place. So, I believe luck plays a large role in a business success or failure. If you ask me the recent success, I will say the medical companies or the medical supply companies are masks manufacturers. They don’t need to do anything. They need to be at the right time and at the right place, they will be successful for a year or two, at least. The failure is the same. I mean, so many good companies are not going to go through with this because it is not a good time for them, but the good ones will go back up after the crisis is over because we believe the best time to start a business is after the crisis.

Matthieu David: That is interesting. Basically, you don’t believe what Peter Drucker is saying because what you are saying is that an unexpected failure or an unexpected success is based on timing, is based on luck and not necessarily showing a change in society or business. That is an interesting way of seeing things because that’s in some way, how much timing is important in success and it is random. Facebook succeeded, but MySpace failed in a few years of difference and we can see many, many examples like them. Thanks Liang, for your time. It was very, very instructive. I really enjoyed talking to you. I really enjoyed when in the podcast I see that there is a process in mind with the person I am talking to. They have thought about what they did. They chose tools, they know about what they do and they have a process and clearly, you are this person. So, thank you very much for spending time with us on to China Paradigm, the China marketing podcast where we interview entrepreneurs in China, and I hope you enjoyed it.

Liang Sun: Thank you very much Matthieu.

Matthieu David: Thank you everyone for listening. Bye-bye.

Liang Sun: Cheers.

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This article China Paradigm transcript #100: Behind the scenes of a B2B sales network in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Welcome to China Paradigm, the show powered by Daxue Consulting where we interview season entrepreneurs and experienced managers in China about their business and experience in the country. 

Matthieu David: Hello everyone. I’m Matthieu David, the founder of Daxue Consulting and its podcast, China Paradigm, and today, I’m with someone who I think will be very interesting to interview. To give you a sense of who she is, Cotton Ding is from Hunan and started her business at the age of 26 and she has been running a restaurant in Shanghai for 17 years.

I don’t think you have many restaurants in Shanghai which have survived 17 years. You studied at the time which now resonates even more than before. You started in 2003 during the SARS (learn more about the SARS impact on China). At least it was during this year that we had this outbreak of SARS and currently, in 2020, we are late March 2020, we are in the middle of an epidemic in Europe and the US and it seems that we have handled it in China.

You have two venues now. You had three in the past and that’s something that can be very interesting to understand as well; how you did manage all of them. A few numbers about the industry. First, this is the Food & Beverage business in China that has been hit hard by the Coronavirus recently. It’s about 90 million people in all China who lost their jobs temporarily and it’s about – in terms of revenues- 70-80% down for the first quarter (learn more about the impact of the virus on the restaurant industry in China).

So, it has been damaging a lot of the industry, an industry which is about 1.8 trillion yuan for January, last year in 2019 in China. It is a sizeable industry that represents about 6% of the economy. So, coronavirus’ impact on restaurants and bars in China has been affecting a lot of people. It has been hard to navigate. Some companies, large companies, were saying that they had only two months of cash, and if the epidemic was here to stay, they would be out of business. So, running a restaurant in Shanghai during these times will certainly be a challenge, but you have been here for 17 years now, managing a few restaurants and we have a lot of questions for you, Cotton. Thank you for being with us. 

Cotton Ding: Hi everyone, hello Matthieu. Nice to be here.

Matthieu David: What would you say about my introduction? Anything you would like to add or anything you would like to correct?

Cotton Ding: It’s quite a good introduction. I opened Cotton’s in 2003; 17 years ago, and for the past 17 years we have been here. We now have two locations and it was quite a good journey. The interesting thing is that we opened in 2003 during SARS (learn more about SARS impact on Chinese economy) and now we have the Coronavirus and I mean, quarantine. 

Matthieu David: Right now, you are in quarantine because your husband came back from overseas and you have to stay in quarantine with him. China is being very strict about it. I just finished my quarantine.

I’d like to go back to the start. You have been working in a factory in Shanghai 20 years ago, coming from Hunan. Hunan is a province in China that is famous for a few things. Its food is very spicy and it is also was where the mother tongue was born. It’s a big province. I think there are about 60 million people and you came from Hunan to Shanghai to initially work in a factory. Then, you worked as a bartender in Shanghai and you had the idea of running a restaurant in Shanghai when someone asked you, “Oh, you are the owner of the restaurant or the bar? You should do this and that.” Then came to you the idea that you could be the manager. Could you tell us more about the start? 

Cotton Ding: Yeah, that’s quite an interesting one. So, I was in Shanghai in ’97. I was a factory worker. So, I was making about 350 RMB per month. So, I had been working at the factory for about a year and then I went back to Hotan and then in 2000 – 2001 I came back to Shanghai, again and then the story, actually, you already described very well how I started. How I started from

working as a bartender in Shanghai to running a restaurant in Shanghai. So, the small story is that I had just graduated and moved to Shanghai. I know the final draw was Graphic Design and I went back to work as a bartender in Shanghai in a restaurant again. Just after seven months.

Matthieu Davi : Sorry to interrupt. There must’ve been a lot of frustration. You studied interior design and you then found a job as a bartender in Shanghai. Wasn’t that frustrating?

Cotton Ding: Actually, it was very frustrating. I came to Shanghai and I was broken all the way. All my money went to university. My dream was broken because I wanted to be an interior designer, but I couldn’t. So, I took a job to

work as a bartender in Shanghai when I was saving money to go to university and my heart was broken with my boyfriend. So, I can say I was broken all the way. 

Matthieu David: And you found the energy to be about there for 7 months. 7 months working as a bartender in Shanghai and what happened there?

Cotton Ding: So, I think the key point for me or the key turning point in my life was that I decided that I was tired of being broken. So, I decided to find the job I wanted. Then, I would take the job I am doing to be my dream job. So, that’s the decision that changed everything. I loved to work as a bartender in Shanghai and I was good. So, once you change your mind, your life changes. 

Matthieu David: What do you like about it? 

Cotton Ding: Everything. I love the interaction with the customers. I love being behind a bar. So, I always help people. So, behind the bar, it is a stage. Who you are and how you… we are in the business currently with people to connect with them, talk with them and make them feel good.

Matthieu David: I see. It makes sense now that I understand the transition better. You like sociability. You like to interact with people and then it makes sense that at some point you wanted to run a restaurant in Shanghai or have your own venues because you like to listen to your clients and customers and interact with them. I’d like to now give a sense to the new current business situation now because that is usually actually the question I started with.

I went to one of your venues two years ago and I saw the picture of the other ones. It’s beautiful. Inside is beautiful. We see that you like the design, the colors, the lights. There are gardens as well. So, restaurants with gardens. You have a capacity you said, of 200 people for each place. You can go up to 800 if it is booked for an event. Would you mind sharing a bit more about now; 2020? What is the size of your business? Any numbers in terms of team revenues and as we said, the number of seats. You already disclosed it. It is 200 people at each venue.

Cotton Ding: Yes, for both of the locations, they are beautiful and historic and so the capacity is about 200 if we sit down and id there is a party going on; so, we could host around 800 or even 1000 Khotan. So, if you imagine the scope of the businesses we cater about; between both venues about 400 guests per day and on a weekend, we are catering about 800 guests a day and the average bill is about 200 RMB per person. So, you do the math. 

Matthieu David: Okay good. For people who are good at math, they would calculate, but basically, you are about 40 000 if I make a calculation, per day. You would certainly be about 80 000 more every day on the weekend. To make people understand where you are; the location is in Xinhua road. It’s a very good location. I think it is expensive to rent it. You started 17 years ago. So, I believe cost-wise and we understand that now your top revenue is 200 people around 200 RMB per person, on average. What about the cost? I feel a lot of businesses don’t survive ten years or even five years or even a year because of the rent increase. Could you share more about the cost of the rent and how you have been able to manage it over the last 17 years in a very good place?

Cotton Ding: So, the rent increase between both places almost doubled for the last nine years. So, it’s quite a big increase, compared with how much we or our prices increase. We try to house the business. We look at the rent and we try to match the rent to 20% of the revenue. 

Matthieu David: I see. That is a good metric.

Cotton Ding: Yes, if you manage your rent, 20% of the revenue, you are in a very good financial business shape. 

Matthieu David: That’s your goal, right? Your goal is to stay at 20%.

Cotton Ding: Yeah that’s the goal. So, we have to with the increase in the rent. We need to increase our Food & Beverage businesses in China. Push more business. From the beginning, we don’t open for lunch. We don’t open for afternoon tea. So, we open only for 6 pm, right? So, we started to open for lunch from 11:00-14:00 and then afternoon tea. So, you expand your business hours.

Matthieu David: What we are saying for the Food & Beverage businesses in China is that there is nothing more expensive than an empty seat, right? So, that is what you did. You tried to have someone in a seat all day long; for lunch, for afternoon tea, and so on.

Cotton Ding: Yeah and the ones that we did very well were for brunches. So, I think the one in the year that we had just opened, we had very few customers for brunch and now our brunch is active every day and every weekend. So, this year due to the coronavirus’ impact on restaurants and bars in China, what we try to do is open for brunch every day. So, that again, the business hours and we tried to do it. If the formula is working, then you push in more.

Matthieu David: I’m not getting it; the link with the coronavirus’ impact on restaurants and bars in China. You open for brunch every day now, including the weekdays because people don’t have to go to the office, right? 

Cotton Ding: Yeah, even during the weekdays we are open for brunch now. Before we were only open for brunch on Saturday and Sunday and Saturday and Sunday we are always full. We already have 200 guests, just for the brunch. 

Matthieu David: Very interesting. That’s why I am liking your story. You can innovate step by step with key changes like this. Like the coronavirus’ impact on restaurants and bars in China is happening. People have more free time because they don’t go to the office during the weekday, right? They are not authorized to commute too much, to go too far or whatever. So, let’s do brunch every day and that is very, very interesting learning.

Cotton Ding: Yeah and what we are doing now is that we are trying to do it in a new way. So, delivery was a disaster before. We never really paid any attention to delivery and then this year we tried to go to delivery. The number is still very small, but it is increasing every day. So, we see the effort.

Matthieu David: I’d like to go into delivery and online later on more deeply, but first, I’d like to finish on the revenue and cost. So, you said about 20% for the rent and what about the team? You said that the rent has doubled over ten years. To be honest, I am not that surprised and I feel even you matched quite well the increase because I think my apartment over ten years, it may have more than doubled or it has doubled, I would say as rent, but I would have expected that a place like you would have more than doubled.

So, that’s not something I am very surprised at. You said that you were making 450 GMB in ’97 and so I believe that the salaries may have increased even more for Food & Beverage businesses in China. Would you mind sharing more about the cost salaries ad what do you have to do? What do you have to pay when you buy people in the restaurant business? To give more insight and background stories, I remember talking to people in Beijing. I used to work in Beijing. They told me that they have to pay for the rent for the workers, they have to pay for waiters and waitresses, they have to pay for the chauffeur and to find the dormitories and to provide them and of course, there is a salary. Would you mind sharing a bit more about what your costs?

Cotton Ding: Compared to the number of how much the salary we paid to now, it has increased by 400%. 

Matthieu David: Sorry, 400 times? So, plus 300%? Four times, right?

Cotton Ding: Yeah, four times. When I first started in food and beverage in 1998, my salary was about 500 and in 2003, if you hire someone you pay about 1500 RMB and now, you cannot find anyone below 5000, I think. 

Matthieu David: When you say 5000, you say with taxes and so on or it is net for them; net 5000?

Cotton Ding: It is net. 

Matthieu David: Do you provide accommodation?

Cotton Ding: We provide a dormitory. We provide a food allowance and so the salary structure of what we have is very flexible. We have a basic salary, but we also have a bonus and other benefits.

Matthieu David: I see. Are there other costs we are missing here that are viable costs for the food you buy, the drinks you buy, and so on? Are there other costs we are missing except for the fixed cost?

Cotton Ding: We always talk about it… the fixed cost is always different from the salary, right? So, that’s a fixed cost and the food and drink cost is between 21%-31%.

Matthieu David: Wow you are very precise. Why 21-31%?

Cotton Ding: Different restaurants have different price structures and it depends on how well you look after the costs.

Matthieu David: Okay, interesting.

Cotton Ding: So, really very well managed restaurants. They could go for the drinks, down 21%. That’s what we talk about. Very good managers of the restaurant and if you go to 31%, you’re still okay, but over 31%, it’s difficult for business. You don’t have any margin.

Matthieu David: I see. I think one of the difficulties of managing a restaurant is to make sure you don’t waste food (learn more about waste food in China). You don’t waste your drinks. When you open a bottle of wine, you make sure to finish it because you cannot re-use it the day after. Would you mind sharing how you manage your inventory and purchasing every day when you are not sure of how many people are going to come and how many will order? 

Cotton Ding: Okay, we talk about managing a lot. I remember a few years ago people asking me, “How do you manage so many people?” We have around 50 food staff and actually, around 30 casuals and so my answer is always, “No, I don’t manage it at all. I really don’t like the word ‘manager’. I would more say the style of how I empower people.” So, in my business, we talk about the cost and I allow them to decide. The Chef knows. After one week he knows how many fish per day we sell and what is the most popular and what is the ingredients we use. They understand it better than me. So too, with the bartender because he is the one who manages the daily operation.

Matthieu David: I see.

Cotton Ding: We have a procedure for running a restaurant in Shanghai. We have checklists. We have minimal storage for each item, but people are the key ingredients in this process.

Matthieu David: How do you make it happen? How do you empower them because the difficulty or I mean the idea is nice and I think a lot of entrepreneurs want to do that but implementing it is hard because it is hard to make everyone aware and responsible for the fate of the company? Is it that you do a profit-sharing model? Is it because of you… is it the way you interact with them? You let them speak. How do you do it?

Cotton Ding: There are a few ways. I mentioned about salaries earlier and so, not everybody has a fixed salary, of course. You have a basic salary, but then you also have a bonus and an incentive. So, when business is good, your income is better and so, everybody is striving to have better good business because if business is good, then everybody’s income is better and the same with chefs. So, if the cost is lower, they have also a better bonus. 

Matthieu David: I see. Would you mind sharing about how sizeable the bonus can be? Are we talking about +10%, +20%, +5% for them on a monthly basis?

Cotton Ding: So, the bonus should be, structural you have a basic salary and then there is a 30% difference in a good month and a bad month. 

Matthieu David: It is very sizeable. Which month is good, for instance? Is it December? Is it February?

Cotton Ding: The best month are September, May, and October. So, when the weather is good, we have good business because we really depend on the garden. So, when the weather is bad, then the business is not so good.  

Matthieu David: You said you motivate your team by a bonus. So, for profit-sharing, you look at the revenue, manage the cost and in some way, you give them a percentage. It is interesting because it is exactly what we do, actually, in our company. What else do you do to create this team spirit where people are willing to share and contribute and so on?

Cotton Ding: We have a company culture training and so every year, if we have a new team member, I make sure that with me they go through the company culture training. So, for me, I don’t’ believe people will work for me forever, and also, I don’t believe they will work for me. They work for themselves and a better future and I am a provider of a good platform for them. So, they use it and once they are ready, they could start running a restaurant in Shanghai. They can take off. So, that’s our atmosphere at Cotton’s.

Matthieu David: I see, interesting. I am not sure opening a restaurant now is in some way as reachable that when you did in 2003?

Cotton Ding: What I see is that when people work for somebody else, it is a different feeling than it is to work for yourself. For everyone in Cotton’s, they feel they are working for themselves. It is a very different working atmosphere.

Matthieu David: There is a saying from people from Wenzhou saying that they would prefer to sleep on the floor and have their own business than working in a company for someone. It seems that it’s a little bit your mindset rally, to master your own destiny and your own life and your own business if I’m correct?  

Cotton Ding: Yeah and also it is a friendly working environment. You interact with people and that is what we try also to do. 

Matthieu David: I’d like to talk a little bit about what has happened in January, February and march in China and what is happening now in the rest of the world and the coronavirus’ impact on restaurants and bars in China. So, I’d like to talk about it with two perspectives. The first one is a Chinese perspective to understand what happened and the second one is an inspiring perspective to inspire people in the West and all over the world, actually; business owners and restaurant owners on how to manage and if they could manage it the same way in their own country. I’d like to share a few numbers.

So, as we said, the food and beverage industry is about 6% of the GDP in China so it is sizeable (impact of the coronavirus on the F&B industry in China). It is about 9 million people who have been laid off during that time. It has been very strongly impacted. We have seen the same in the West. The weight for different segments, for instance, for fast food (learn more the about fast-food industry in China). 62% of the restaurants were shut down at some point during the epidemic. Coffee shops were like 83%, bars were like 66% and basically, we are talking about two thirds to 80% of shut down for a few weeks and some for a few months. I’m talking about Wuhan.

China is specific because it’s very digitalized. Delivery is working. I mean, I don’t know how you would say it, but it is very common to get delivered and you have digital payment very widespread. So, in some way, it will be different than Europe and the West. Which is not as developed on those elements. Would you mind sharing about how you manage those hard times and the coronavirus’ impact on restaurants and bars in China? What decisions did you make when you knew it would be hard and you knew you would be shut down?

Cotton Ding: We sat down actually, January 2004 and there was a new one out and I knew we would not be open for the whole of February. So, we’d be closed for 5 weeks and we opened on 1 March and so now, we have been open for one month now. So, the moment I heard about this outbreak, I panicked. I really was… I couldn’t sleep and I was really worried about my business because I know that in 2003 during the SARS, 35% the Food & Beverage businesses in China didn’t survive. They closed their doors forever. I know something very big is coming and we should be in survival mode. 

Matthieu David: Seabay, a very big restaurant chain very openly communicated in the press saying that they have three months of cash if they are still closed and I was very surprised that I saw a lot of people buying Seabay online. I think it was a very smart move, actually, from the manager to say, “We only have three months to survive” and I feel the deeper boat online and got delivered through Seabay. Would you mind sharing a bit more about the actions you made because the restaurant was shut down, but does it mean that delivery was shut down as well?

Cotton Ding: The Food & Beverage businesses in China were shut down and our delivery was also shut down. So, basically, we closed for 5 weeks. Seabay was alright and most restaurants only had three months’ cash to run. Since we are a business for 17 years and also, our business is very seasonal. We have summertime very good business and wintertime, very slow business.

So, in our business, we have money saved for a rainy day. We have a little bit extra cash saved because we know that business is not always good and we save cash for two reasons. One is we save for a rainy day and the second one is that we save if the opportunity comes, maybe we move to a new location and so when the business is good in the summer, we always try to save. We don’t spend it all. We always try to save and I think that is something which we have been doing for ten to fifteen years and this is something we saw last time and this time, we have a better chance to survive, long term.

Matthieu David: I heard an interpretation that February is a low season and I am speaking for a lot of Food & Beverage businesses in China because people don’t work. I have a sense of that has a bit softened the coronavirus’ impact on restaurants and bars in China; the economic impact. Is it correct?

Cotton Ding: Yes. Indeed, February is always slower. So, when we predict cashflow we already in February we won’t generate a lot of income. So, we already saved for February. 

Matthieu David: It is as if the crisis in Europe or the US would happen in August where actually a lot of companies are closing and business is very slow. I feel in some way, that has softened the coronavirus’ impact on restaurants and bars in China. What about the after-crisis? So, let me understand. You shut down for 4 weeks. No business at all. Nobody could join your restaurant and you couldn’t deliver either. You had to pay your rent, you certainly had to pay most of the salaries.

What about 1^st of March and the month of March? What did you see in the habits of people? How did it change? One learning we have is you said earlier that you implemented brunch all over the week so that because people don’t go to the office anymore because they work in a more remote way, they would come actually, in the morning to your restaurant or they would look for a place and in a coffee shop, I think it took time for Starbucks to reopen fully. So, coffee shops may not have been opened as well. What else has changed in terms of consumer habits, in terms of the way of running a restaurant in Shanghai? You mentioned as well delivery. You did more delivery. Would you mind sharing it?

Cotton Ding: We always used to be an evening business. So, revenue was always like 80% or even 90% and now, we already notice in the day time; brunch time has increased. Basically, since March our brunch business is better than last year in the day time and so we increased our brunch business and people feel more… after time people don’t feel… people don’t want to go out. In the day time when the sun is out, the people fear going out for brunch and going out to have a coffee. So, we have to really push our brunch. That’s the one thing we did and for delivery, but we still are working very hard. Delivery is not there. Before, it was 0.1% and now maybe we have 0.5% of our business, but it still couldn’t pay the bill.

Matthieu David: Why do you say couldn’t pay the bill, because delivery (learn more on food delievery in China) in some way, you just shared a percentage of the revenues with a delivery platform. Is it because they take 10-15% that is damaging so much your margin that you cannot be profitable?

Cotton Ding: Because of our business model, I think. Our business model is still… it is not only food, but it is the social perspective. People can always have a burger and a sandwich at home, but the social aspect cannot be taken away.

Matthieu David: I see, so the drinks basically, right? When you socialize, you consume drinks and alcohol and this is where the margin is higher than food. When you deliver only food, you may have a lower margin.

Cotton Ding: Yeah. 

Matthieu David: Okay, I’ve got it. What about working with a platform? How do they work? What do you have to consider when you work with those platforms and who much margin does it take you?

Cotton Ding: So, with Ele.me, last year they take 18% and this year they took 20%.

Matthieu David: Okay, they increased.

Cotton Ding: Yeah, the same with shoppers. I think shoppers also do 20%.

Matthieu David: It’s huge. 20% of revenues, right?

Cotton Ding: Yes. It is very big and the service took 20% and Shoppers has them encouraged. So, if you are doing more delivery in percentage, then they will come, but we are still in this 20% range. 

Matthieu David: Does it change because of the weather? I heard from someone who managed coffee shops that… the coffee price point may be lower than you so we are talking about 10, 15, 20 RMB. She has to pay more when it is raining. Is this the case? 

Cotton Ding: No, it is the same, basically. 

Matthieu David: Yeah, we understand that you change your opening hours and what you offer to be more balanced throughout the day; one thing. Another thing, running from the Coronavirus and change in consumers. The second element is more delivery which is a bit obvious in China because it is so well-organized and so easy to deliver. Does it mean that Shoppers are bringing you new clients or is it your own clients go to the platform to buy from you?

Cotton Ding: Maybe a little bit of both. I don’t really know the number yet. The database is still in the back office, but I think it is all clients.

Matthieu David: Okay objectives should be also to bring new clients and that is why they may justify the 20% which is pretty high.

Cotton Ding: I agree. It is helpful in the future because we have not been working with them for very long. We still only tried to push for last month. So, it’s still too short to say.

Matthieu David: You mentioned in one interview in the past, that you have been able to go through a lot and without being hit by license violations, development, etc. Would you mind sharing about the big mistake that restaurants are making, that shut them down, not only businesses? So, we understand if you don’t make a profit you have to shut down. That is the case for many businesses and now what about a license violation that you say, the open development. Are there three common threats to Food & Beverage businesses in China?

Cotton Ding: I am more conservative when doing business because there are so many elements for a business to fail. For me, before I sign a contract, I need to make sure we could have the proper license. So, this is something that I will not risk. 

Matthieu David: Is it hard to get it? Why do people manage their restaurants wihtout it? Is it hard to get?

Cotton Ding: Yes, it is. It is hard to get. 

Matthieu David: Why is it hard, because it takes control, it takes time and it is expensive?

Cotton Ding: It is difficult because you need food and drink license, then they’re also very strict on the location size, but I think it definitely was worth it to go through all the troubles. Of course, it was a lot of trouble. It took one month, two months, three months to get a proper license for my Food & Beverage businesses in China, but always get a license because the law stops business and the risk is too high not to have that.  

Matthieu David: Yeah there is a misconception between the West and I mean, the West toward China and business in China. A lot of Western people still think that China is not very regulated, but actually, you have a lot of regulations and you have to follow them in China. You have taxes and salaries. You have social insurance to pay, which is not small even compared to Europe. It is actually comparable to Europe and that is a misconception. Do you feel the same?

Cotton Ding: I think maybe before 2010 or back in 2003 it was a cowboy country. There were a lot of grey area. People could get away with running a restaurant in Shanghai without a license, but this is a risk matter for each individual and after 2010 after the world expo, if you don’t have a business license you are shut down. 

Matthieu David: One thing I’d like to dig in more is especially because you have a background of interior design. You insist on some articles on having your own identity. So, I understood that you have your own identity with your team? You have your own values. You have your own culture and you have developed it. What about the identity towards the customers; the people who join for lunch, for lunch and now, brunch. Would you mind sharing about the identity over the last 17 years and why you have built this identity? Is it because of yourself? Is it because of actually, the contact of the customers? Is it because it is working and you have found an opportunity?

Cotton Ding: You have been to Cotton’s and so both Cotton’s are located in historic homes, basically. So, you don’t feel like you are going to a restaurant. You feel like you are going to your home; maybe your grandma’s home. So, that is the idea I try to create is we go to a friend’s home. We go to a friends’ living room. So, this ambiance is what I try to create. 

Matthieu David: I see and you do it yourself for the interior design and so on or do you hire people to do that?

Cotton Ding: I have a designer that I work with from England. We have been working together for all my projects. So, Peter; a good friend of mine. He understands what I want very well and we work together to create a living environment, a home away from home. That is what I always tell Peter. 

Matthieu David: What changes have you followed in the identity of the brand since 2003? I believe it has changed. In one article you said that in 2003, let’s say 90% of your clients were foreigners and I mean now, the date of the article is a few years ago. You had 40% of local people from Shanghai. I believe that is affecting also the way you communicate your identity; your brand identity. Would you mind sharing about your clients, how they have evolved, and how it has evolved the identity? 

Cotton Ding: Well, when we just opened it was like almost 100% for foreign communities. Now, we have about 55% foreigners and then we have 45% of the Chinese community and they are very important. So, with the new clientele and a new community. So, we have to design the menu to also appeal to them, even the way of service. 

Matthieu David: Very interesting. Can we dig deeper into it? What are the elements that had to change?

Cotton Ding: Definitely we had a lot of different juices. We had various different teas. We need also in the menu the Asian favorite. So, a few Asian dishes to be added in there for the clientele.

Matthieu David: Spicier, compared to… Chinese would feel like French food very untasty because it is not spicy enough, for instance. What do you feel you had to adapt and not only because it is Asian only, but because the effect of Western food and the enjoyment of Western food is different?

Cotton Ding: So, for most clients, they come to Cotton’s and they come here not to eat Chinese food, but they come here actually for less than food. They like original Western food. So, I think they are clear about their ingredients and so where does the tea come from and that is something. They come for Western food and to try different ingredients, I think.

Matthieu David: I am curious about yourself and the way you are running a restaurants in Shanghai. You said that it is mostly for dinner in the past. Does it mean that you were staying in the restaurant and then sacrificing all your evenings to the restaurant? How do you manage your life with a business which is the opposite of a personal life because you have to be there when people have free time and so you don’t have free time when the rest of the world has free time? How do you manage that?

Cotton Ding: I think that’s the nature of the the Food & Beverage businesses in China. Everyone in food and beverage; you know, we never have Christmas and we love our Chinese New Year. We are working. We rarely have holidays and when everyone is on a happy holiday, we are working. I love it. I’m not a morning person. 

Matthieu David: It is interesting. I think that is something we don’t see, but you choose business as well when you start a business which may fit also who you are. You are a morning person or if you are an evening person. If you are a person who likes to socialize or if you are someone who likes more technical things and not too socialized. Is that also a choice you have to make and be aware of when you start a business, right?

Cotton Ding: I agree. I think so. I think you have to understand who you are and what is your nature and the best quality or passion you can offer. If you do something that is against it, it is difficult, right?

Matthieu David: Yeah, it’s not only about the product and the profit, right? It is also about the fitting of your own way of life because if it fits, you will thrive and if it doesn’t fit you will suffer from it and it’s already hard to start a business.

Cotton Ding: I believe a business is not a job. It is not like, okay, you go to work 09:00-17:00. It is a lifestyle, for me, I don’t really consider myself going to work or an off day. You are working 3-4 hours and so it is a lifestyle you create for yourself. So, it is better to be suited.

Matthieu David: I have a few questions to end the interview. I believe we sent them to you earlier. What books or it could be books, it could be movies, it could be poems; whatever has inspired you in your entrepreneurial journey? It could be meeting with people, but what has inspired you the most?

Cotton Ding: Yeah, it is interesting because I really love reading and I read a lot. So, the last time we spoke there were many categories and so for me, what has inspired me is when people enjoy what they do. That is also empowering.

Matthieu David: If you had one book to recommend to emphasize this element, to do what you love and by the way, the name of the third venue you have; Litchi, was coming from Yun Gu Fei, which was one of the concubines of the emperor a long time ago and you got the label, Litchi, from the south of China. It was very expensive at the time. So, I see that from what you do, you try to find a route to give the sense to find something which is a bit more with substance. So, would you mind sharing with us one book, if you have, which is representing or embodying what you just said or two books, if it easier?

Cotton Ding: Wow, I have tried to find something. Okay, let me just… give me a second. I just pulled out a book from my bookshelf. The strategy of War. Robert Greene. For me, I think this is a very good business book. I believe in a way, life is a war, and business is a war, too. To really be able to win the battle, you really need to understand your own strengths and also your opponents. 

Matthieu David: What do you fight for because when there is a war, we fight for something? Is it for making your mark in the world? What do you fight for?

Cotton Ding: I believe what we fight for, of course, is to overcome the Coronavirus. To survive, to be here, and to make a difference. To keep intact for whoever works for you; like your staff and then also give a positive impact to your customers to be remembered as this is something that we fought for; to be remembered, not forgiven.

Matthieu David: To be remembered. Interesting. What do you read to be up to date about business in China? For instance, we are in a world that is changing fast. Myself, I am reading tech Crunch, for instance, to understand about technology. I am reading the New York Times to understand more about the world. I am reading the Morning Post to know more about China. What would you read to know more about China and your industry? Would it be your WeChat groups? Would it be LinkedIn? A lot of people tell me that, but it could be…

Cotton Ding: If I tell you the answer you are going to laugh at me. I read WeChat. 

Matthieu David: Yeah, but actually that’s something I found out. A lot of people say WeChat and LinkedIn for some reason. The reason is that you have your own group which focuses on a topic. I believe you have groups about food and beverage and restaurants and then you can interact with your people who provide you information to say is it true? How did you do it? You cannot do that with a journalist. You cannot do that with a paper and finally, you get the news quickly because when something happens, you know it and it’s now. Journalists may take a few weeks to react.

Cotton Ding: Yeah that’s very true because we have a lot of different groups; a restaurant group, a customer group, supplier group, management group, and the communication is very fast and direct and you have really a close connection with your customers.

Matthieu David: True. One thing I see as a danger is that I am seeing some people spreading fake news and false information and so, I am balancing it a little bit of Google search, sometimes to make sure that it is really something issued by the government because sometimes I feel there is a little bit, especially during the time of the Coronavirus, when we have to act fast and there is a bit of fear everywhere. They get fake information.

Cotton Ding: Yeah, I saw it during the Coronavirus. Everybody is trying to send information and that creates panic and it creates unnecessary panic and then people all react. I was finding fault with that because of panic; there is no good outcome that comes from panic. We could only do what we could manage and especially in this difficult time. We have to be positive. 

Matthieu David: Exactly. My conclusion is that critical thinking that is the ability to be critical in screening information and to use critical thinking can be key; more and more key and more and more important in the coming years, to make sure that when there is information that looks a bit weird or surprising to be able to know that, “This one I need to be able to check.” About China, what books would you suggest to foreigners to read about China? What would you recommend? It could be a book. It could be a movie as well, but what would you suggest foreigners read, to watch, to do, to know more about China?

Cotton Ding: The book is called Dark Heart and a Thick Face. It is a business book on how to understand how to do business and all the Chinese philosophy and how to do business in China.

Matthieu David: By whom?

Cotton Ding: I can’t remember the author, but the name is called Thick Face and a Black Heart.

Matthieu David: Thick, like a bit fatty, right?

Cotton Ding: Yeah.

Matthieu David: What productivity tool do you like most to use? We understand that we use WeChat, but WeChat seems to be an unproductive tool because it takes too much time. Sometimes you wonder what to doon WeChat. Do you have some productivity tools? I am especially interested in this question because I have a sense that you are very good with your numbers. You say 45% is our local customers 55% are foreigners. Someone who does not look at numbers will always say it is 50/50 or half-half. You come up with very precise numbers. So, what do you use as a productivity tool or digital tool to understand your business and to be productive?

Cotton Ding: I don’t use many tools. Because basically, I spend most of my time in the restaurant and so my back office is quite bad, but now thanks to the Coronavirus, I have time during quarantine to understand the numbers. 

Matthieu David: That’s a very good point. This time of shut down, you can worry a lot and spend your time worrying, but you can also look at your numbers and think about what is next or what changes you can make. By the way, after the Coronavirus crisis, have you seen more business or less business?

Cotton Ding: I will say that this will be a very good year. I am quite positive about 2020. I know we had a very tough start, but I am still quite positive for this year.

Matthieu David: About March? What about March? Was it better this March than last March?

Cotton Ding: No. My business is 50%.  

Matthieu David: I see because some people argue that people have been home for one month with only sad news and so they would like to go out, to do things, to meet with people, but it is still not the case, right?

Cotton Ding: Not yet. It is much more positive. I saw that maybe April, people were already going out and celebrating and now because it is not only happening in China. It is also happening globally. So, if we could go back to normal, that is already positive.

Matthieu David: If you had extra time to do something else, what idea would you like to work on, or what business, or what may be action you would like to dedicate more of your time to?

Cotton Ding: For me, it will be always Cotton’s. That is something I know. So, just focus on things you know and get better. 

Matthieu David: So, really focused. That’s one other rule of success, right is to focus.

Cotton Ding: Focus. So, I think this year maybe I could be better. I may even because of this Coronavirus, we may even have a different opportunity to open a new one. We don’t know, but we keep our eyes open.

Matthieu David: Do you think you have an opportunity because rent is going down? Do you see that rent is going down or is it that people consume differently so you believe that they may behave differently?

Cotton Ding: I think the rent is going down. 

Matthieu David: Okay, it is very clear?

Cotton Ding: 10 or 20% should be expected. There’s a lot of empty shops out of there now.

Matthieu David: I have two last questions. I really love this question and I really would like to have your view on it. Over the years; 17 years of managing your business, what has been more surprising for you to see happening in China? I was very surprised by how people got used to paying digitally (learn more about the China’s digital transformation). When I arrived in China 10 years ago, for instance, people were paying cash when they got deliveries. What do you feel has been very surprising to you; a success over the years in China?

Cotton Ding: One thing is about popularity. I remember in 2003, my opening I had to send out 1000 mails to let people know that I opened and now, we just use WeChat to say, “Okay, we have a party. We have a promotion.” So, I think the way people communicate is amazing. It is amazing how efficient, how immediate and how can you reach data from abroad. That is something that like really blew my mind, I think. 

Matthieu David: Perfect. What have you seen as a failure in China? It could be a business or something in society that you have witnessed and you wouldn’t have expected it to fail?

Cotton Ding: I remember when I was very young, I remember Friday and I was like, “Wow, that is very good business” and they were so busy, but they didn’t make it in Shanghai.

Matthieu David: Which one? Which business?

Cotton Ding: It’s called Friday.

Matthieu David: What is it about?

Cotton Ding: It’s a restaurant.

Matthieu David: Okay. Oh, is it Thank god it’s Friday?

Cotton Ding: No, not this one.

Matthieu David: was from overseas ?

Cotton Ding: Yeah, so you are surprised to see a brand that really is successful overseas, but you are thinking as well that you are really happening in China, but it is somehow, past tense.

Matthieu David: My conclusion on brands that enter under China is that they need to really on the core community which knows them from overseas, but they also have to reinvent their brand. Some brands which are famous in the West are not known here and they have to redo again. They can only rely on people who have studied and worked overseas as Chinese or foreign people. So, it’s a whole new job for them.

Cotton Ding: Yeah and also you see the goods like the ones which maybe I don’t want to give all the names, but the ones who are really popular ten years ago and now they are quieter in the background. I think this is because they stop seeing the market anymore. They fail to change with the market. 

Matthieu David: Thank you very much for your time. It was very interesting. I learned a lot. I think people listening to us have learned a lot as well. I hope the crisis is going to be resolved soon. I think China is in a good way and I share your optimism at least for China. I hope you enjoyed it and I thank everyone for listening. Take care and stay safe. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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This article China Paradigm transcript #99: Business management in a crisis workshop: Running a restaurant in Shanghai is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Hello everyone, welcome to China paradigm, the show powered by Daxue Consulting where we interview seasoned entrepreneurs and experienced managers in China about their business and experience in the country.

Matthieu David: Hello everyone I’m Matthieu David the founder of Daxue Consulting and its podcast China Paradigm and today I am with Gordon Dumoulin. You are the founder of three companies and one of them being food, one being education with your wife. You have been in China for more than 10 years now, more specifically in Beijing. The first company we are going to talk about is in the food business, it’s called Dumoco – if I pronounce correctly – and it’s focusing on ingredients, very rare ingredients with specific effects on health, memory, basically health – how it can affect your health and I have a lot of questions about it. This is not a small market in China when we talk about health and ingredients to eat, we always think ingredients for traditional Chinese medicine and we talk about a Chinese herbology market which is about 150 billion to 200 billion USD of which 15%-20% is exported. It is growing. In some way, there is a paradox. The sales volume is growing but the number of TCM doctors and TCM health buddies are actually decreasing when we look at the numbers. It has been decreasing until 2010 and now, since then, it’s increasing again but still not at the level it was in the 1990s. So, it’s a very interesting segment because we have interviewed a couple of people before who were in health supplements and I believe you are very close to this market (learn more about the health supplement market in China).

The second business you are contributing to – because I understand that it was initiated by your wife – is education, Easton Bridge Education. So, it is based in Beijing, providing education centers in China such as English teaching and also art, science, and so on in Beijing to – I would say those upper middle class, middle class Chinese who are living in Beijing. I will have a lot of questions about this market too later on. Thank you, Gordon, for being with us. Would you mind telling me, if you want to add anything about the introduction of your two businesses and tell us more about what you do?

Gordon Dumoulin: Yes. Thanks for inviting me. It’s a nice opportunity to talk more about China, about doing business in China, and also about understanding China more. As you introduced very well, first I’m from Holland, the beautiful city of Maastricht in the South of the Netherlands and I’m living since 2009 in Beijing. Indeed, I’ve been doing the business with Chinese natural ingredients market called Dumoco. I set up the business myself in 2009 – operational 2010 and actually that came from a more Chinese natural ingredients market course or race. I have always been in the food business when I was living in Europe and when I moved to China some people and some business relations were asking me about some specific ingredients for traditional Chinese medicine and when you start a new business you need to take all the business what you can get to start up. So, I dived into some specific Chinese natural ingredients market and then I expanded to a wider range of natural ingredients. Basically, it’s indeed like you mentioned, related to ingredients for traditional Chinese medicine, functional herbs in which they come in many ways. We can use them for herbal teas, we can extract them, we can make powders and many of those are indeed coming into supplements. So, what we do here at Dumoco, we have different ways. First of all, we have our own export of different natural ingredients to Europe, to the States, Australia and to some other countries. Secondly, we do consultancy for the Chinese herbology market, Chinese companies, Chinese herb farms, cultivations, and also processing companies to consult them in quality control, which is usually expected in Europe and the type of quality control which is expected. So, we also do consultancy works in different provinces in China. The most important in this way is – as you mentioned, it’s a very interesting segment. You specified a little the TCM and also the TCM doctors, but we should look at more widely that – especially Chinese natural ingredients. Functional, medicinal, herbal ingredients are not only used in TCM. Actually, when we go to the States, in Europe, we go to many pharmacies, even to supermarkets and to other shops where you see many kinds of supplements, for sleeping, for being active, for focusing and for many other things. Actually, these are all already related to ingredients for traditional Chinese medicine, but not only to TCM, in Europe, but we have also had – now it’s much less –, many herbal remedies and still, today learning from our grandparents and even from our parents, that take these herbs or take ginger with lemon whenever you have a cold. So, there are many relations in this aspect, and the marketing, the model of marketing in recent decades, is that, of course, many modern fashionable companies who are doing supplements, but at the end of the day it’s all about the Chinese herbology market, it’s all about tradition and the history in this (learn about the push for Chinese medicine during the Covid-19 crisis).

Matthieu David: So, something I understand now, your market is overseas right, and you represent some producers from China, you help them to get the certification, do it the right way and you export their production overseas.

Gordon Dumoulin: Yes, yes. So, there are two ways, we do consultancy for Chinese companies. We help them in – among others quality control also in some export how to do business overseas and secondly, we have our export department where we have distributors in Europe, in the States, other countries who sell our products, which we manufacture in corporation with our partners in China.

Matthieu David: I understand that some of your people you know, wanted your help to buy those products in China because you were in China. What is surprising me is you have been able to also actually get the producers as clients for consulting to understand how to manage those productions and to export. Would you mind telling us more about how this articulated? Was it from the beginning that you were advising them and supporting them in production or was it in a later stage? How did you get this knowledge and how did you do it and how a foreigner can help them to do – to produce something they are used to producing.

Gordon Dumoulin: Actually, you are a link on both sides. You benefit from both sides. First of all, when you talk about the Chinese side, how you do business in general – we all know that. Its relation, you build up relations. So, at the beginning of 2010, I took night trains – 70% of my time going from one Chinese herb farm to another (learn more about China’s agricultural strategy). Going to productions who extract botanicals or pulverize to powders and you focus these people and it’s a way of doing business in China that – we hear there are many ways – also in the media, but it’s true it’s always about the win-win corporation. You also have to think about either your supplier or your customer, how they can benefit, and how you can benefit. Because if one doesn’t benefit, the relation will not last. So then it’s a natural growth that – of course with some people, you have a better relationship than with others, but you want to help them to improve because also for my benefit, because I’m buying products from them, so I want them to improve, so I can sell better products to my clients in Europe.

On the European side of the American side – European side they feel comfortable because Gordon is in China and I can speak a little bit the same language. And for many people in Europe or outside China, China is very far away and very unfamiliar so they don’t get a comfortable feeling, so this is what I can bring to them, and transparency is a very big word in this – because we are transparent. Our customers in Europe, they know the Chinese herb farms, they know the productions. They know everything. While many other people in the States or Europe, they try to hide because China is their treasure, so they say okay we deliver products, but we don’t tell you where or how – just the product is good.

But we did it the other way around. We are transparent and we build on trust. We built trust from all sides. So, it’s more like a community where we are in one way or the other the glue and the control and also trying to improve the whole community that everybody gets better in this way – and everybody makes money of course.

Matthieu David: I see. Talking about the product. When you talk about Chinese Chinese natural ingredients market, would you mind being more specific about what it is and especially what’s the difference between having supplements, what is the difference between ingredients for traditional Chinese medicine

 – CTM – one thing I didn’t say about Chinese medicine, Chinese traditional medicine – the World Health Organisation, WHO said, they accepted Chinese traditional medicine as a medicine and in June 2019 – the very recent was last year so I believe that may change a little bit your business and the perception of your natural ingredients by the West. By overseas markets. Would you mind sharing some more about Chinese natural ingredients market and how different they are?

Gordon Dumoulin: Yes. I’m not sure if this influenced the West, but I can explain a little bit more about TCM in general, I will not go into details. TCM, in general, it’s a different philosophy at looking at health. It’s also a more preventive way of looking at health. I’ll give you some examples. For example, they – a lot of people here in Beijing – eat radish after eating and you know when I just came here I said I’m full – I don’t want to eat radish or I’m not in the mood for radish. I better have dessert or some French teas but I looked it up, a radish has specific substances which make the probiotics start working. So, digesting your food. This is the same for nuts and seeds. You see Chinese people all over China and they eat a lot of seeds especially after dinner. And this is for the same reason. Chinese dates, the tribe dates they are often eaten before dinner because it lessens your appetite, so you don’t eat too much. So, in many ways subconsciously even many Chinese people will not have the straight answer why they do that, because it’s a tradition but generally eating or food in China is much more closely related to health and this is also coming back in TCM. In TCM there are many preventive measures, now, of course, you have many medicines which hardly exist in Europe and then you really talk about medicines concentrated syrups and other things, but the link is coming to supplements because supplements in Europe they have also a prevention. You don’t get sick, you have to eat vitamins, tablets every day or you have to drink lavender tea at night because you sleep well. So, there are many ways that you prevent something to happen. This is also in TCM – the value and WHO indeed appraised the TCM as being a medicine but is a different way and I don’t think it’s fully comparable. When you go to Chinese hospitals for example, usually for acute diseases which need to kill something and so to say in your body, you take a killer and it’s usually a Western medicine and you are cured. While –when you are for example having symptoms of something, you feel uncomfortable or you are having headaches or different kinds of symptoms, people often tend to look more to Chinese medicine to see how they can reduce the symptom. Not only to the medicine but to treatments and to behavior. So, the doctors will also tell you how to behave – the same as in Western societies, run more, walk more, do more exercise, sleep early, etc.

Matthieu David: I had a question about Chinese herb farms. Finding factories in China in some way it’s linked to overseas. It’s linked to foreigners and even that – finding the right factories, understanding the factories, how to work with them – it’s not easy. A lot of people struggle with that and you have been able to connect with entities which are Chinese herb farms which are much more remote, usually, I believe don’t speak English and I don’t believe they are used that much to export. Is my analysis correct and if it is – how did you handle it?

Gordon Dumoulin: Yeah first of all it is correct. The first question is actually why people are having problems finding the right partners, the right companies, right suppliers is – first of all, you have to be there. Like I said in the beginning, at the first year I spent 70% of my time in night trains really going to the countryside, visiting many companies, visiting also many Chinese herb farms and look – many were not qualified so –

Matthieu David: How did you find those Chinese herb farms. You can get a train to go to the countryside and then what do you do? How do you prepare?

Gordon Dumoulin: Oh, first we do some research.

Matthieu David: So, research how do you do it because it seems so unclear, so remote, so local – would you mind sharing a bit more?

Gordon Dumoulin: Yeah, I mean we are not going to the local, local Chinese herb farms – we are not going to a local farm whose producing vegetables for their village, but we are going to specialized Chinese herb farms because we are looking for the Chinese natural ingredients market. I’ll give you an example – for example, ginseng root which is familiar to many Western people, the area of the ginseng root in China is in Jilin province. Actually, at the border of North Korea so the famous mountain Changbai mountain is actually the homeland of the ginseng, so you study first. To come back a little early before I went to China, I didn’t know anything about the Chinese herbology market. So, I studied day and night, learning more about ingredients for traditional Chinese medicine, also studied – actually very simple, spending time on the internet talking to people, trying to find out – okay where is this, where is that? So, it’s also about relations, you talk to somebody and they know. Okay, we have a good company that has a plantation for ginseng. So, you take the train or the plane and you fly to Jilin, and you have a look around and you are amazed every day because you learn and then you find out this whole city is all about ginseng. And it is not the only plantation, there are 120 other plantations. So, you go to study more and you go to study more.

Of course, I have also Chinese people with me, who spoke Chinese at that time, because I didn’t speak and I still don’t speak very well, but they can communicate with the local people and we can find out more relations, more companies how to find out, but it takes time and you have to be here.

Matthieu David: So, your clients in the West, would you mind describing a bit more – are the restaurants? Are they more individuals? Are they doctors who are using it for traditional medicine?

Gordon Dumoulin: No, the majority are supplement manufacturers. So, the majority are – there are even big companies who produce actually natural supplements. Then, some of them are also cosmetic companies who are producing natural skincare (learn more about natural skincare market in China). So, we cannot supply to individuals because the quantities are too small because when somebody needs one kilogram and we have to fly that over, it will be very expensive for people. That’s why we also work with distributors. We have distributors in different countries like in the Benelux, in Germany, in France, Spain and we work with them – but they usually also of course target the larger companies and like I said, most is going into supplements, syrups, tablets, capsules, products like this and I think about 10 -20% maybe into skincare (learn more about the skincare industry in China).

Matthieu David: It’s more and more interesting what I’m discovering because I have – we are used to talking to people who are doing import and export businesses, but not at all in  Chinese natural ingredients market, not at all in food from China, but more from factories and we see plenty of people in this industry. So, I believe your business is very unique and your position is very unique. I’d like to understand more about – because you said transparency is very important – your clients know where the farm is. How do you handle the transparency on pricing if they know so much about the sourcing and so on – how do you work on the pricing?

Gordon Dumoulin: We move on the pricing together with our suppliers here in China. So, they know what we are asking in Europe and we also discuss this together. We don’t have any exclusivity, so our model is – actually, we have our own brands and that’s the local brand, so the end-users at the end of the day do not know where it’s coming from. Our distributors they know. If we have a very big customer who wants to visit a plant or wants to visit a plantation – he’s most welcome. They can come but we have to deal and we have the agreement with the suppliers that they know our customers and they will not touch our customers and even – so actually we put the security and that sounds strange for many Western people – we put the trust with the Chinese suppliers as – to be honest, I haven’t been cheated in 10 years. So, if any customer from Europe – and they know for example from which factory it’s coming, or even from which plantation – they need for example ginseng for an herbal tea if they would contact the Chinese herb farms directly the first phone call is coming to us. This guy is calling and how should we handle this? So, it’s in a way a matter of trust we can put and to be honest – we don’t have any legal agreements with this, because you don’t want to go into legal anywhere, so it’s a matter of trust and it’s again about relations what I said before. You build up relations with the people, you show them trust, you show them support, mutual support from both sides and a feeling that we are here to stay and we are going to make a good relationship together and also a pleasant relation together, for the purpose that we can sell and we can have some market.

Matthieu David: I understand. I feel that you are acting like an agent for them, an agent who will actually manage their exports and their overseas relationship. Does it make sense to say so?

Gordon Dumoulin: In one way yes, in one way, yes, but even some of them are large companies. They even have their own export department, so it’s not the only one – we are not working only with small companies, we are working with some leading companies in China for plantation, for processing and even there we have our relations and we do our own business with our own branding. We have good relations and we also support them as I said in the consultancy, in improving their processes and our processes together.

Matthieu David: You are involved in another business I mentioned initially, which is education. Business called – Easton Bridge Education. To give an idea to people listening to us how big this industry is – it is said that private schools account for 35% – let’s say 1/3rd of the total number of schools in China in 2018. So, it’s massive. I believe that the number of private schools in proportion is much higher in China than in Europe for instance. 53 million students are studying in private schools in 2018. That’s also a very fragmented market and when we look at the English language learning market for 2018 globally, China represents a third of it. Like 29-30% of the total. Final thing is that education for kids is one of the segments of the market where parents want to spend. They are eager to spend. When we look at some statistics in Shanghai, so private bilingual schools on the time of education of the kid, parents who were affluent could spend 100 – 200 thousand USD – of course, that’s over many years, but that’s a sizeable amount of money that Europeans, for instance, are not spending. Most Europeans don’t spend, even the affluent ones in Europe. Would you mind telling us more about what you do in the education business in Beijing and a bit more about your clients as well? I’d like to know if what I just described corresponds to what you see.

Gordon Dumoulin: Yes, actually the education has been also born from a – in a natural way. Like you mentioned my wife – we started up Dumoco together 10 years ago. She is from Beijing and at that time she was not my wife yet and we set up the business and we were business partners. She helped me and as we all know the business at the start is a difficult one, so we were fighting for Dumoco for the extract, for the Chinese natural ingredients market, and for the export network and at one point we were – living in the outskirts of Beijing and we had an office at the time, a small office and so my wife at that time said – there are two kids here on the floor and they want to learn English from a foreigner and me was a European mindset, focused and I didn’t study for this and I don’t want to do this, I need to spend time on Dumoco, and then I came to one of my first confrontations of Chinese ways of thinking because she showed me the balance sheets and she said – you still want to pay me or not? So, that was a good one and so she – so I said actually its good. Let them come and we can teach them at the weekend. So that was actually her education. She’s an English teacher, she has an English teaching degree and her passion, her dream is her own school – her own English school (learn more about China’s language school industry).

So, we started this for two kids and we expanded, we rented an apartment here in the Tongzhou district in Beijing and fast forward we 8-9 years later we had a full program in our apartment, so we rented another apartment, ran a full program. Especially in the weekend, and also after school – with me teaching in the weekend to support her and she taught during the week and we had two other teachers and since last summer we moved – we found a corporation and an investor also with a license because we were not actually official, so we found an investor with an education license, we moved to where I’m sitting now, we moved to a new school – 400 – 500 square meters, with also more teachers and now we have about 150 – 200 students running and besides that we are doing international summer camps. So, in the past year, we have organized summer camps to Boston, to London, to Holland. Last winter, just in time before everything was closing – to Singapore. So, this is – yeah this is in a nutshell where we came today.

Matthieu David: I see – what you do is an education center based in Beijing and also education – how do you say that? Education travel?

Gordon Dumoulin: Yeah, we call it winter camps, summer camps, English summer camps, so we find corporations with schools abroad, in the US, Europe, Singapore last winter and then we send them on training there together with some – of course with some other educational culture tourism natural aspects as well.

Matthieu David: How would you describe your clients? Are they very wealthy? Are they affluent? Are they themselves parents have degrees or the opposite, they want the best for their kids because they don’t have degrees? How would you describe them? How would you qualify them?

Gordon Dumoulin: We have many different kinds of clients, of course, you need to spend – I mean they spend quite a lot of money on English courses. Usually average you spend for a 60-hour course as frat you spend about – and then you are not expensive, this is for normal smaller schools you spend between 1 -1.5 thousand USD per kid and then you are talking about group classes. When you have one to one classes you spend even more, but many of them – we are building actually also a very large social environment because most of the parents are here so we get to know them and when it’s clicking we are eating together and drinking some wine –we see that many – of course first of all people need to be able to afford, because some of them taking three classes and then they also have a piano class in the music school and they have an art class in the art school – so they are quite filling, but many of them are entrepreneurs, they have their own business in many different ways, in many different sectors. Some of them work – I would call it the upper-middle class because – no actually the whole middle class. We have some lower – we also have a girl she’s living in a village; she’s coming by bus really 45 minutes by bus, just to spend 45 minutes here and they’re really struggling for this, the parents – both are really struggling for this but the average is middle class. The upper class will have their own really higher private education because then it’s what the price counts – so I would call it you know, average middle class and to be honest, the middle class in China is doing very well and is very much comparable to European middle class – I think you know as well and even in some ways better off in terms of spending power. On what can be spent. So, yes, the clients are all families, most of them all go to public schools and the children go to public school and to our education center based in Beijing. I have a son of 7 years old, he’s going to public school here and many of our kids are his classmates, at least in the same school and to be honest, just as an example how still rare it is also – I’m living really in the outskirts of Beijing, my son is in a public school and this is – it’s a huge public school, I think about 1500 students and I’m still the only foreign parent in the whole school. So, it’s also like an imagination for the listeners that you’re still a minority as so to say but a blissful minority. It’s not something negative at all. But you get close to the people, you get close to the residents in the compound, also with the school – the school has its social factor in this.

Matthieu David: What are the parents looking for? Are they looking for opening the mind of their children? Are they looking for core competencies like English – being fluent in English, or are they looking also now and because the education market may be more mature than before – are they looking maybe also to learn how to play a piece of theatre? How to learn instruments? How to do liberal arts, drawing, and so on? What’s your perception of it and the evolution of it over the last 10 years? My perception and I’d like to know if you agree with that is that – 10 years ago it was much more about core skills, learning English – learning maths, learning whatever core subjects and now it opening up to the drawing, dancing, music instruments, playing theatre. Is my understanding correct? Do you see that with your clients?

Gordon Dumoulin: Yeah, I see that and you are correct. It’s more – you have specific courses, when you talk about English, you have specific courses but our general courses have the aim that the students and the kids are able to express themselves and they feel comfortable to express. We do – in our education center based in Beijing, we do many ways, we play Shakespeare, we have many jokes, we do games and all in English and it’s all about that they can feel more comfortable in expressing themselves. I don’t correct them every time when they make a mistake. Let them talk, let them express, let them speak – and this trend what you just mentioned is correct, people are looking for – you know, kids who are more able to express themselves, to be more diversified in many ways, also internationally that they learn more. We also talk a lot about cultures in other countries so they learn more about this. I’m amazed about what the kids know here about other cultures in comparison to what I learned in Europe about China which was a big mystery at that time. But I’m amazed at what they already know and I want to give it a more attaché that they also see and feel. So, yes and then we have specific courses also of course – I mean for example when a kid needs to have an exam for a certain school, for example, Cambridge or Toefl or things like that, we have specific courses to prepare them for this, so there’s also, of course, a specific target course and then we have the general language course.

Matthieu David: I see, so still you feel that there’s a functional need for education to pass the exam, but it’s opening up to more liberal arts and more non-core skills. One other thing you are mentioning on your LinkedIn profile – it’s a bit another topic, but you say change is inevitable. You have written that – why do you say so, because I wanted to ask you because Peter Drucker who is a consultant we look into a lot at our company Daxue consulting, invented the name of strategy and business, is saying – what’s in common with all entrepreneurs? It’s not their education, it’s not where they come from, it’s not their social background, what they have in common is that they think change is positive. They see change as full of opportunities when none entrepreneurs would see change as a threat. As something which is threatening their position. So why are you writing change is inevitable?

Gordon Dumoulin: Because first of all this – how you look at it, it doesn’t matter. Whether you take it positive or as a threat, but I do believe that change is inevitable. We have a very – unfortunately not a lot of positive situations today, all over the world because of the coronavirus but change is inevitable and that’s what I learnt also here in China. Indeed, in Europe, many people see change as a threat, but in China, you have to change, you have to adapt. There is a certain – I don’t call it negativity, there’s a certain nervousness that you need to improve, you need to change, or this doesn’t work so we need to go another way. There’s always something happening and this is also coming to my third passion what I’m doing, I’m also doing a blog of 5iZ – actually started, I’m no longer on LinkedIn. For me, it’s cross-cultural awareness about different cultures and different societies what the change is there, and what are the differences there. And so, what I learned in China – change is inevitable, but I also see that in other societies that this applies also to other societies and if you see it as a threat it holds people back and societies as well.

Matthieu David: I wanted to talk about 5iZ as you mention it, and especially about the name, I found it very interesting and shows how deeper you know China. You named 5iZ because China is not talking about North, South, West, East only – but also North, South, West, East, and Centre like Tiananmen being at the center of China and the center of the world. Would you mind telling us more about what does it mean for you?

Gordon Dumoulin: Actually it has been – you know, before I went to China I was most of the time in expert management jobs, so I traveled for about 15 years all over the world, meeting many cultures and doing business there, coming to the homes and so you know – culture was always a passion for me and seeing different cultures, and I had been in China before I had moved here, also many times but just being here for a week is something else and plunging in a black hole and start to live here. And China gave me – China as a country, as a society gave me so much learning that you can look at things in so many different ways. We have been brought up which is normal, as Chinese have been brought up here and Europeans have been brought up in Europe, you always have some kind of mindset in the culture and the society where you grow up, and this is natural and this is normal. And having the opportunity to live here, spend time here in a practically almost Chinese environment it was really – I’m very grateful having that experience and banging many walls because you have your own mind-set and like everybody is stubborn and everybody wants to have their right. So, you have many different learning experiences about how people think and how other people can think and approach new things. So, it’s very important that people start to realize all over the world that there are many differences in culture and cultural intelligence in how to do things. Also in business and when we go then into the business side you have many fantastic models on how to do business, but at the end of the day, it’s about feeling the people and about feeling the country and also knowledge about what worries those people – what is their daily life. What’s it all about and how they approach problems, and opportunities as well. How they teach their kids, how they live at home. I’ve been grateful in this and I wanted to share that and coming back to the name, 5iZ – yes center is a very basic thing which I feel also a little now. You know I mean – all the changes happening for example today – also with the virus, but Chinese society 10 years ago and today is completely different almost. You go through many changes and you learn to be more resilient. You learn to be calmer and tackle problems, threats, or opportunities in a calmer, resilient way and if it doesn’t work – fine, you go to the next opportunity.

Matthieu David: It’s close to 1 hour, I have a few questions to end the discussion. The first one and I often ask these questions – what books inspired you the most when understanding about China?

Gordon Dumoulin: For me, one book generally, not only about China – and I read it last year, I’m still reading it again – it’s The Silk Roads, from Peter Frankopan. It’s a fantastic book about the history and about the world history but through a very different perspective and the message what you learn there is that the history what we learned as a kid, in our society is very different from the kid in another society. Such as China or anywhere in the world. And so, this is a book I really recommend – also in understanding China. First of all, you cannot understand China completely – no one understands China, you don’t understand France – I don’t understand France completely – you all have these few items which characterize a country but this is nothing to make this diverse society clear because it’s very diverse. So, just for the perspective – read this book and know that you know nothing about the country. So be objective when coming here.

Then some other books – first of all, there are many books about how to do business, how to be successful, get your things, e-commerce – digital retail, new retail – all this. Read those books, some of them are great but it’s not about understanding China, it’s about understanding the market because China is a society and its people. This is what I’m always telling many people – because people want to know about China – I say why do you want to know about China? Because I want to do business – I say either you find a good local partner, then you don’t need to understand China. If you want to understand China you need to know the culture, you need to spend some time, you need to read about it. Few books that I have on this one is – first of all, a very old one and but still, it grasps a good feeling, its Red Star Over China – from Edgar Snow. Red Star over China- he was an American, he was actually the first foreigner who met Mao Zedong and this story gives you an insight also how people think and we are not talking about the historical events, but how people think and many thoughts are still applied today – how people think in terms of the collectivity of pragmatism in many – the many characteristics which are not defined, but which indicate as the characters of Chinese society is coming back. Secondly, I think – I don’t know if people have seen the Wandering Earth – the movie, the Chinese science fiction movie, a great one last year – I’m not sure if it’s not Netflix already – because I don’t have Netflix here, but read his book, it’s from Liu Cixin, he is one of the biggest science fiction writers in China – so in general, read either fiction or non-fiction biographies if you want to learn about China more.

Matthieu David: If I say more, The Three-Body Problem is written by him as, well right?

Gordon Dumoulin: Yes, exactly.

Matthieu David: And it has been popularised by Obama who read it before it was published and The Dark Forest the other one which was – yeah – I think he’s buried in Peking University and he was the first one – maybe the only one, but he was the first one I’m sure to be the member of the Chinese communist party and he lived in China all over the different periods of China, including during the controlled evolution. What are the most surprising success for you in China and the most surprising failure in China you have witnessed? I’ll give you an example of mine – I’m very surprised how e-commerce developed, because when I arrived people were paying cash at the front door when they get delivered and they didn’t want to use their credit card and now it seems that they use their phone to pay with a QR code that could be scanned with another number, taking more money than what you really want to pay. So, it’s a change I wouldn’t have expected to go so fast and so far.

Gordon Dumoulin: Yes, coming to your example this is very true and we always think about Chinese 10 years – 15 years ago with piles of cash because they wouldn’t trust anything else and they wouldn’t trust other people – while this is totally gone in 10 years, in less than 10 years even. But yes – I mean the daily change, as an example the daily changes that are happening – but also the daily changes and the daily speed what’s happening to yourself. You are really coming in to – you are forced to keep moving, to keep moving either by new regulations, by new opportunities, other companies like you say the new retail is coming. We are forced today, we are forced today with the quarantine or the confinement – our school has been closed for 2 months because we are not allowed to open and we don’t want to open because we want to be safe. We are already working, we have now our video classes at the weekend, we have our online classes. My wife is teaching almost the whole day online classes. We have set up an online library – we all did this in a matter of weeks. As for the surprising success is indeed the fast change which is happening and that you can adapt to that. So actually, this success is not more like business success, but it can come out in the business – the success is that you must break yourself open. You must be more adaptable and you must be more wide looking in things which you might be stuck in the business – for example, you have been doing business for 10 – 15 years at home or Europe or even here in China and you say I cannot do anything else. This is what it is. No, this is not true, even within your own business you can innovate. You can differentiate. As for the speed of differentiation of innovation is stimulated – also even forced upon you because – not forced in a negative way but you go with the flow, and you also want to lead some of those flows. So, this is I feel really a success in myself that you are much more wide – open-minded in doing business.

Matthieu David: Last question – what do you read to stay up to date on China? What are your sources? I believe that’s a common question for foreigners – what kind of sources can they use? It’s hard to read the Chinese newspapers, even for people who have a very good Chinese level HSK 5 or 6 – it could be hard. So, what are the other sources you are using to stay up to date on what’s going on?

Gordon Dumoulin: First of all, I think – of course, you have some English language – like China Daily, Global Times – many people see these newspapers often as not very objective but actually there are many interesting articles and there are many insights which can teach you more about China. Also, about society, also about governance. Some more other sites – there’s also one site – it’s called Sixth Hong and they have some social articles, articles about society, about what’s moving the people and different kind of aspects, they touch these topics and you have similar sites of this like RADI China, Sub China – so you actually have different sites where you can find – so to say non-mainstream insights of China. Because the mainstream – people know but there’s actually – it’s not very interesting because it’s always coming back to the same, and it doesn’t give you an image of society and when you want to do business here or when you want to be interested or when you are interested in China, you need to know more about the people and what’s moving the people – because they are your customers or your suppliers and you also want to trust your suppliers. So, try to find some other news agencies which diversify the news. Of course, go to my blog, I post almost every day different things about Chinese society. LinkedIn is also a fantastic medium with many people telling their own experiences and their own insights and so – this is usually the sources what I’m using, and then, of course, you have the Chinese twitter – Weibo, you have WeChat where you find the trends, what’s happening in China.

Matthieu David: What’s the link for your website?

Gordon Dumoulin: 5iz-China.com.

Matthieu David: Thanks Gordon for your time, thank you very much it was very instructive, very interesting to see how you have been able to develop your business on natural ingredients, a very unique business I believe. I wouldn’t have the chance I think to interview someone who has been able to go into this industry which looks very, very local. Thank you everyone for listening and stay safe during these times of virus outbreak. I hope you all stay safe.

Bye, everyone.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article China Paradigm transcript #98: Doing business in the blossoming Chinese natural ingredients market is the first one to appear on Daxue Consulting - Market Research China.

• 2:13 Adventi Communication – a company introduction
• 7:27 How did the need for a service like Adventi come about?
• 13:52 Is having a Ph.D. in PR advantage for starting a PR agency?
• 18:26 The SARS outbreak vs the coronavirus outbreak – how have these epidemics impacted the PR business sector?
• 27:27 Why are Chinese companies not pushing for sustainability?
• 33:48 Is the market the deciding factor for sustainability? – the reason GREENEXT was launched
• 38:48 Are there any companies in China that are making a name for themselves in terms of sustainability?
• 41:37 What other industries will be impacted by the need for sustainability?
• 45:40 What social values do brands communicate in China compared to the West and what needs to change?
• 48:42 Do Chinese consumers buy natural products for their own health benefits or for society’s health benefits?
• 49:43 What books have inspired Hong Zheng in her entrepreneurial journey?
• 51:17 What does Hong Zheng read to stay up to date with China?
• 53:23 What means of communication should people employ in order to get a good understanding of China?
• 56:48 What unexpected business failure and success has Hong Zheng witnessed in China?
• 1:02:00 Outro

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm 114: Bridging Chinese suppliers, brands and consumers to make sustainability core product feature is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David interviews Michael Chiao, a Founding Partner at MEGI and Axel Standard. Finance and accounting management are important for companies as they weigh heavily in decision-making. That’s why MEGI, cloud-based accounting software has seen a great subscriber count since it’s creation. But is there a local market for such software? Are Chinese companies getting this type of management done internally or are they moving towards streamlining it? Find out the answers to these questions and more in this new China Paradigm interview.

• 2:55 MEGI – brief company history
• 4:33 The coronavirus outbreak – growing the company in uncertain times
• 7:10 MEGI – current client base
• 8:03 Small numbers or niche numbers – what is MEGI’s focus demographic?
• 9:35 Foreign companies vs Local companies in China – the culture difference in finance management
• 13:42 Do Chinese companies do analog SaaS services internally?
• 17:23 Are Chinese small and medium companies changing the way they manage their business internally?
• 23:25 Current company yearly revenue
• 26:24 What was the initial subscriber goal for MEGI?
• 29:38 What specific key features do clients value for MEGI?
• 33:04 How hard is the process of bank reconciliation through MEGI?
• 35:23 China’s baking system accessibility – how hard is it to integrate with MEGI software?
• 37:48 How is MEGI able to handle finance reconciliation in the present?
• 41:16 Why did MEGI decide to focus on the financial statements?
• 46:12 Big Data Collection – has MEGI achieved critical mass yet?
• 51:42 What type of loans can small and medium companies expect to get from other companies or banks in China?
• 56:38 What is the process of deciding and then implementing a new feature for MEGI?
• 1:00:30 Listening to your client – a key requirement in software feature development?
• 1:01:49 What is Axel Standard and what do they do?
• 1:06:26 How has computer science evolved since 1998?
• 1:08:51 How has China benefited over the years by opening up to the world?

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm #113: Understanding business practices and technology maturity in China through a SaaS case is the first one to appear on Daxue Consulting - Market Research China.