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 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.

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 #100: Behind the scenes of a B2B sales network in China 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.

Full transcript below:

Hello everyone, I’m Aurelien Rigart I’m the co-founder and Vice President of IT Consultis, I’m from France. I’ve been in China and started this adventure nine years ago. So, IT Consultis is a digital transformation company. It’s a team of 80 people in three countries, which are China, Singapore, and Vietnam. So, we’re helping Fortune 500 and fast scaling start-ups to work on their digital transformation. It can range from eCommerce, from building mini-programs, from building websites, App, integrating systems together, or overall work as a consultant on their digital transformation initiatives.

What are the main requests during and after the COVID-19 lockdown?

I mean what’s interesting is that a lot of people do believe that China is fully digitally transformed. They believe this because they see that there is a deep penetration – like the whole ecosystem, like the usage of WeChat, the Alipay, the JD and so on, but there is a big war right now on traffic ownership where basically brands are really struggling to at the same time survive and gathering the data of the users. So that’s why the concept of private traffic which has never been used in the past, suddenly came in 2019 where brands finally they did understand it – like the more money they were investing, basically they were having a negative revenue. So, they were losing money on any kind of growth that they were having. So, like you’re always looking for growth, I mean in this period of time you’re looking more to survive, but looking for growth – they didn’t understand that if basically they wanted to find other channels, they may need to go back to basically private traffic and private traffic was made easier with basically the WeChat and the mini program. Because – before we started the mini-program, you didn’t have that channel. Tomorrow you’re not going to bring everybody on the website – websites are still important but it’s hard to drive people on a website unless they are already a fan of your brand and they want to see oaky – this particular car, that particular car – so brands that are at a certain level should always have a website, but what really makes a difference is really the capability within a WeChat mini program ecosystem to have the API’s for brands to be represented and to have like the full ownership of their traffic and this has been the major, major change.

In early 2019, when we did an interview with you, you said that the keyword for 2019 would be ‘omnichannel.’ How does it look like for the first quarter of 2020?

Well I would say that – that’s interesting that you remind me of this – it is definitely Omni channel, it is definitely headless, I would say that the keyword for the end of 2019 was really private traffic, so there was like a little bit of a change between Omni channel, basically private traffic is kind of like englobing the entire ecosystem, the entire Omni channel ecosystem and what I believe is that yes – it’s going to push more and more in that direction. Brands are still going to go to TMall, brands are still going to grow on all those marketplaces and they should do it, they should as well make sure that they have good ownership and at least a specific percentage, maybe 10 – 30% of their users coming on their platforms, to make sure that they have like a deep connection, but at some point they get into a fight with the category manager of Alibaba, they just don’t drop their self to zero from one day to another – I think that’s something that we’ve seen over the past and so – Omni channel is still going to be here, private traffic is going to be important, O2O which was probably 3 or 4 years ago is still very relevant, so this is going to continue but the most important is really the digital transformation that we’ve seen that is being operated and what’s interesting is that B2B is really leading the charge right now and there’s a lot of B2B brands in some very specific industrial ecosystem that are largely investing, they’re working through distributors and the problem is that they’re entering a Chinese market where – okay there are the products that are dropped, containers here – and then of course they’re doing all the marketing, they’re doing all the branding, but then comes the black box where they’re going to have one distributor, second layer of distributor and then they have the Alibaba ecosystem and basically those two are kind of like black boxes. So, trying to make sense of what the users wants, how they can adapt their strategy, their pricing points and how there can be some loyalty program and some deeper connection with the users and with their fans and that’s something we’ve never seen in the past and that’s something where we see a lot of players are really investing into that particular area and they need to find ways to create those connections because they’re not made easy. So there’s not like a magic formula where you’re going to say – hey, all of a sudden I’m a distributor, I’m a brand here and I want to target somebody that is here that is going through five layers of ownership and I have the opportunity to reach this person. So, there is no magical solution here, there’s no magic potion to make it up. So, it’s a laborious and really step by step approach using CRM, marketing automation, content, frictionless user experience, it can be app – it can be mini programs, there is many, many ways to do it, overall I’m using and leveraging as well distributors as well is something that is important, but that’s really what we see as a huge opportunity when it comes to the digital in 2020.

In the West, we see that CRM companies like Salesforce or Zoho have been able to expand massively and be titans in their industry. What CRM players are big in China?

First of all, we need to remember that it seems that we’re going to have Salesforce coming to china supposing July 2021, so of course, if things are not moving forward politically or with the virus – we never know when things are really going to happen so I think it is safe to say that those big players are going to come to China at some point, but China has not to wait to create their own ecosystem and you get a lot of start-ups that have been backed up by both Alibaba and Tencent, one of them is Xiaoshouyi which is like a CRM that is backed up by Tencent that is working pretty well, then you’ve got a few ones that are backed up by Alibaba. So, each of them is supporting their ecosystems together and kind of like blocking the other one from their own ecosystem. So, I think it’s something that is interesting and I’m very curious to see because Salesforce has a partnership with Alibaba and so they have announced already that they’re going to launch in summer 2021. So I’m very curious about how this partnership is going to influence basically the opportunity for Tencent and the mini-program to connect with this because we’ve seen over the past that they’re tried to silo those ecosystems, so I think there’s going to be a very interesting conversation, but clearly, there’s a lot of b2b players in the market that are very strong, but as well I know a lot of brands that are using salesforce globally that are just waiting for one thing that when the sales force is coming here, then we’re going to use potentially salesforce commerce and sales force here in China to replicate what they have done globally and to make things easier in terms of maintenance, in terms of programming and so on.

So, I think 2021 is going to be an interesting year to see if companies will want to resist and continue leveraging using what they’ve been developing for years or if they will say okay – let’s follow what global is saying and we’ve seen of course in China a lot of resistance. You don’t actually have the full ownership of the strategy and the governance of the country for those brands, so I think it’s going to be very interesting.

Any questions? We will find an expert to answer them. Drop your questions in the comments, or send us an email at dx@daxueconsulting.com.

This article Daxue Talks transcript #75: China’s digital transformation and CRM players is the first one to appear on Daxue Consulting - Market Research China.

Our guest Aurelien Rigart, Vice president and partner at IT Consultis, shares his insights on brands’ online survival during and after COVID-19, how digital marketing is evolving, and how he is anticipating a CRM collaboration between western and Chinese companies.

Jump to the questions:

• 0:54: What are the main requests during and after the COVID-19 lockdown?
• 2:58: In early 2019, when we did an interview with you, you said that the keyword for 2019 would be ‘omnichannel.’ How does it look like for the first quarter of 2020?
• 6:27: In the West, we see that CRM companies like Salesforce or Zoho have been able to expand massively and be titans in their industry. What CRM players are big in China?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks 75: Digital transformation and the CRM landscape in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Hello everyone, I’m Aurelien Rigart I’m the co-founder and Vice President of IT Consultis, I’m from France. I’ve been in China and started this adventure nine years ago. So, IT Consultis is a digital transformation company. It’s a team of 80 people in three countries, which are China, Singapore, and Vietnam. So, we’re helping Fortune 500 and fast scaling start-ups to work on their digital transformation. It can range from eCommerce, from building mini-programs, from building websites, App, integrating systems together, or overall work as a consultant on their digital transformation initiatives.

We know that email Newsletters are not effective in China. Which channel can replace newsletters?

That’s a good question. I think there’s a different means – SMS – like marketing is somehow still here. I receive here and there SMS notifications from a lot of different vendors, like subscription accounts on WeChat is as well very powerful, official accounts as well, service accounts. Even though the opening rate – that’s kind of like been going down, down, down – I think people now they want to have more like visual, video content. Like Douyin has been a great example of it, that has been getting a lot of market share, you know like people they don’t have the time to spend reading it- so that’s one part of it. Another part is creating group chats on WeChat and we’ve seen a lot of initiative like in many community where people want to grab the attention of their users, so they’re going to put like 500 people in a group chat and then talk about something specific, it can be beauty, it can be cosmetics and they’re going to share very specific tips about it, so there is like many scale ups that have been using it and that’s another segment actually of the private traffic that we were talking about earlier, the ability to use WeChat groups as like a community to interact and to purchase and there’s a lot of KOL that’s going to have maybe like 500 group chats and they’re going to animate them in a very specific way and they’re going to generate a lot of sales through this, so basically that’s like another way to do your newsletter.

You mentioned SMS solutions several times, what kind of software do you use in China to distribute SMS easily and to command them to your platform?

Well I mean like there’s been like some operators and like they have a very good French one called Splio that has been SMS and email marketing, at some point, you have like web power – so they have like very specific technologies working on this and right now a 360 picture – when you work on marketing automation – usually the user journey is going to include at some point a WeChat post, a WeChat message, a WeChat push, but as well as SMS – so now also shows CRM – at some point, it was just email and SMS marketing and then WeChat came into the loop and now most of the solutions are providing WeChat but as well SMS marketing at the same time when you’re building the entire user journey.

Any questions? We will find an expert to answer them. Drop your questions in the comments, or send us an email at dx@daxueconsulting.com.

This article Daxue Talks transcript #74: Do email newsletters work in China? If not, what does? is the first one to appear on Daxue Consulting - Market Research China.

Jump to questions:

• 1:06: We know that email Newsletters are not effective in China. Which channel can replace newsletters?
• 2:56: You mentioned SMS solutions several times. What kind of software do you use in China to distribute SMS easily and to connect them to your platform?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks 74: Marketing in China: Alternatives to email newsletters is the first one to appear on Daxue Consulting - Market Research China.

Find here Daxue Talks episode 73. Aurelien Rigart, Vice President and partner at IT Consultis, answers our questions regarding the development of the 5G in China and discusses the differences between developing software in China and in the rest of the world.

Full transcript below:

Hello everyone, I’m Aurelien Rigart I’m the co-founder and Vice President of IT Consultis, I’m from France. I’ve been in China and started this adventure nine years ago. So, IT Consultis is a digital transformation company. It’s a team of 80 people in three countries, which are China, Singapore, and Vietnam. So, we’re helping Fortune 500 and fast scaling start-ups to work on their digital transformation. It can range from eCommerce, from building mini-programs, from building websites, App, integrating systems together, or overall work as a consultant on their digital transformation initiatives.

Have clients ever asked you to develop on the Huawei OS?

So far – never. So far never which is interesting. I’m pretty sure that it’s going to happen at some point but I think this is like for very, very specific types of applications and I think marketers and brands they’re really focusing more on mini programs and on websites or trying to understand what is going to be the next mini program that will make sense – Douyin? Is Weibo? Is it Baidu? Because Baidu as well as Xiaomi has worked on mini programs. So, depending on the category that you’re working – but for us mainly working B2B or working with brands, our types of customers they never ask us for this.

How is the development of 5G so far in China? What do you expect as an impact of 2020?

Well I would say 5G is a birth word and clearly something that is going to revolutionize step by step the user experience but what’s important – so on top of the live stream you’re going to have more consumption of heavy files, video, 3D augmented reality, so that’s going to be the first step but when you’re talking as a brand – you still need to create those contents. So that means like from one day or another – live stream is one of the disruptions, but brands are not going to start creating millions of videos where they’re already struggling to catch the attention of the user. So, from a brand perspective, I think it’s going to have a very limited evolution. The live stream I think is a great evolution. In the future, you’re going to have AR where you’re going to have virtual shops and you’re going to have the opportunity to visit them. We have seen this in the past and it has shown that it is not bringing the highest conversion and that it was kind of gimmicky and gadgets – so are brands going to go in that direction? I don’t think so too much – I think the live stream is going to be something great, and then you’re going to potentially use more like AR – but it’s not going to touch too much about the 5G here. I think 5G is just going to enable like to download mini-program much faster, or to download apps much faster, but I think the 5G is going to have a stronger effect when you’re talking about IoT, maybe bitcoins, or just opportunity to download heavy files or when you’re on specific platforms when you want to for example mimic – if you’re doing the app for the NBA or maybe FIFA then you want to create a heavy content application where it’s going to be easy to display 4K videos and to promote some very specific content and this is where it’s going to have an influence.

What are the differences in developing software in China and the rest of the world? Are the languages of programming different?

So, overall, not that many differences. Of course, there are always cultural differences in terms of project management, integration, speed of development and weight management – but in terms of languages what we are seeing is that – we’re seeing a little bit of emergence of specific languages created by Chinese developer – view.gs, for instance, is a very strong JavaScript frontend that is competing against ReactJS or AngularJS – React that is created by Facebook and Angular – which is a framework that is created by Google. So I didn’t follow the market trends, but basically React, Angular – was started first but then React became the number one and Angular number two and I think View has such a strong community in China that he has emerged as potentially the number three – so I have to double-check what are the latest figures, but this is a language that is highly appreciated by the local developers and that has a pretty strong quality and is kind of interesting the way it’s been built in order to really leverage the WeChat – the different ecosystems and even the WeChat languages have kind of been used in order to create itself. So, I think there are very interesting things happening where we see the Chinese market is not just copying but innovating a very specific advanced technology where we have seen WeChat through the mini-program, creating their own languages and we see Alipay through the mini-program creating their own front end languages. So, I think it’s very interesting. So in terms of backend – those very backend heavy languages are kind of like very similar – wherever you’re looking at, and front end has been a little bit the changing component and I think that it’s something that is very interesting and sometimes you see that those languages are performing even better than the React or Angular that have been developed by a very strong community. Yet at the same time – when you’re going to talk with these Chinese developers – they’re going to say – oh I really prefer that languages or that language and we’ve seen as well some framework that have been created as well in China that have been like having a huge adoption, order management systems as well have been created, CRM have been created – so in terms of the backend language itself – not too much, but the framework that has been assembled around those languages – there’s a lot of really interesting ones – I know some frameworks are competing against like the Oracle framework, some frameworks for example like order management systems are competing against other order management systems here – even in terms of eCommerce – Adobe, Magento is a little bit being challenged – although what we see is that brands they still want to focus on having a strong quality – on our side we’re doing a lot of Magento development, Magento integration for brands and like when international brands are looking at very specific development, they’re going to have the importance of technology choice is going to be important, and if you’re working for example like with German companies – they will want to focus a lot of SAP and so on, so I think the technology inheritance from global to local is something that is important to have a look at, but in order to reply to your question – I would say that there is an emergence right now of Chinese languages and Chinese technology that should not be disregarded, that should be really looking into it and I think if global players like Salesforce, when they’re going to come in China in 1 year down the line – they want to establish a supremacy like they’re doing in the rest of the world. It’s not going to be that easy; they really need to take the extra step in order to make it happen.

Any questions? We will find an expert to answer them. Drop your questions in the comments, or send us an email at dx@daxueconsulting.com.

This article Daxue Talks transcript #73: Development of 5G and software in China is the first one to appear on Daxue Consulting - Market Research China.

How is tech development in China different from the rest of the world? How is 5G revolutionizing the user experience in China? In this episode, Aurelien Rigart, an expert in helping brands with digital transformation initiatives, tells us all about the software development landscape in China.

Jump to questions:

• 0:54: Have clients ever asked you to develop on the Huawei OS?
• 1:46: How is the development of 5G so far in China? What do you expect as an impact of 2020?
• 3:53: What are the differences in developing software in China and the rest of the world? Are the languages of programming different?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks 73: China as a tech powerhouse: 5G, software development, and programming languages is the first one to appear on Daxue Consulting - Market Research China.