SMEs urged to go north
Small and medium-sized enterprises should adjust their mentality when breaking into the mainland consumer market, according to the Hong Kong Productivity Council.
Ricky Leung, the council's principal consultant on mainland and business management, said the European debt crisis was expected to dampen demand in the next few years, which meant a timely need to diversify into the competitive but robust consumer market across the border.
He cited the findings of a council survey of 215 SMEs in April and November last year that showed respondents were largely original equipment manufacturers and many were newcomers to the market.
The central government made spurring domestic consumption a priority in its latest five-year plan. It also wants to reduce reliance on exports and boost living standards. That presents a crossroads of sorts for tens of thousands of Hong Kong exporters in the Pearl River Delta. They face having to upgrade their value chain and technology or relocate to inner parts of the nation, or branch into the mainland market.
As part of the plan to boost spending power, Beijing has stipulated an average 13 per cent increase in minimum wages annually between 2010 and 2015.
'Buy an air ticket, go to a city in the east coastal region and get a feel for the market,' Leung advised smaller companies. 'Even better, get a high-speed train to reach out to second-tier cities.'
Leung said Hong Kong exporters should develop their own brands and designs and set up separate teams of staff dominated by mainland personnel.
The survey showed almost 90 per cent of those polled had plans to diversify into the mainland market within the next five years.
'Dealing with a container of goods for export is totally different from marketing them on the mainland,' Leung said. 'Exporters need to change their mentality of doing business and take action promptly.'
The survey found exporters' biggest concerns in breaking into the mainland market were how to build distribution channels, design products and establish brands.
Geographically, the survey showed Shanghai was the top destination of entry, followed by Hangzhou, Suzhou and Nanjing in eastern and northern China. The preferred cities can be reached by high-speed trains.
A large number of the respondents indicated that they would develop online sales platforms as an alternative to store openings,.
Leung said that retailer Chow Tai Fook Jewellery set up its domestic sales team in 2009 while marketing jewellery through online shops and social networking websites.
Consumer spending on the mainland, as a share of GDP, fell to this proportion, from 45 per cent, in the last decade