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Timf
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I see many designers come to China looking for manufacturers to partner with in order to create their own products.

Here is the number one thing that your potential partner in China will be looking for - Do you have distribution?

Manufacturers in China have seen many designers come over with interesting ideas but know that they will not make money unless there is a retailer already interested in the product. Your negotiations will go much better if you can discuss the retailers/distributors that you already have interested in your product. If you have a letter of intent from retailers/distributors this will really grease the wheels and get things moving quickly. With this you can also get reduction in tooling costs and other goodies many times.

So before you get on the plane, make sure you have your distribution story ready.

Postby rkuchinsky » October 7th, 2008, 10:58 pm

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amen. well said.

i can't tell you how often I have people come to me with "a great idea" with no thought to distribution or sales. from even only a design/client point of view i view these people with a certain level of skepticism... in china, or with any supplier, i would only expect the same...


bottom line... if you don't have distribution and future sales, there is no business (and $$ to make) to have... any smart fty should know the same and i'm not surprised suppliers in china feel the same way.


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Postby choto » October 8th, 2008, 8:19 am

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Great stuff Tim, thanks for taking the time to share. You mentioned using this as a tool to get reduction in tooling costs and other goodies, could you expand on what other forms of "ammunition" one should bring to successfully reduce costs?

Postby Timf » March 16th, 2009, 8:17 am

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Sorry, China will not be the low cost producer for very much longer so a Letter of Intent is about the only way.

Postby Allazul » March 16th, 2009, 9:29 pm


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Timf wrote:Sorry, China will not be the low cost producer for very much longer so a Letter of Intent is about the only way.


I agree with you Tim,
I'm a industrial designer and i'm in shanghai, i'm trying to develop my ideas and things besides they are no longer so cheap are difficult to do.
Working with chinese industry is not a easy thing.

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Travisimo
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Timf wrote:Here is the number one thing that your potential partner in China will be looking for - Do you have distribution?

...

So before you get on the plane, make sure you have your distribution story ready.


Yo Tim, Any suggestions for learning more about this side of the design business?

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Thanks Tim. I'm glad 77 keeps the older forum posts online. I am helping to start a company and we are researching mfg in China. Luckily we have a couple American/Chinese factory liaisons touring HK and Guangzhou with us next week. But, needless to say, letter of intent would help our position greatly.

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Glad to be of help :)


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Agree Tim's oppinion very much. As a asia supplier, everyone want to sale their own product or service, but they must have prepare adapt
distributions before the business starting.
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Hello Everyone,
Thnx for sharing sucah a vital info tim. I want to know how can one find about distributors and wholesalers of any country?

Thnx


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I would like to pose this question to Tim.

How does one acquire this letter of intent or credit, if one does not have a production quality sample to sell to a retailer. I travel and work in china as well. I agree the first thing factories ask when working on development is do you have orders placed, but I often reply that we can not have orders until we have a market ready product. So if you are starting out and you don't have enough capitol or backing from a retailer or the factory side it will be very difficult.

I also agree that it is not as easy as before to go into factories and bully them around with promises of sales.

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Agreed that this is difficult and often becomes a "catch 22" or impossible situation. If you are unable to get any retailer or distributor to agree to a letter of intent, maybe the product was not meant to be or they have not been convinced of the value of the product.

It means you have to find creative ways to move forward or maybe give it up.

Other ideas would be:
1) If the product would be interesting for the manufacturer to distribute in China, you could give them rights to this. If it is a Hong Kong based company they probably will have no interest in China distribution so don't waste your breath in that situation.

2) Maybe try Kickstarter and give each investor a product after production. That way you have money and existing customers to review and comment on the product.


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The other options taken, but if one is a lone designer/entrepreneur that is bent on taking the mass market retailer route, one has to have a product in final representation in order to have a buyer commit to a product, no matter how good your idea is.

Someone is going to say make a good model I bet. But that also cost money(or much time). As designers trying to break out from behind the scenes into their own businesses, we need to be more strategic/creative in how we approach retailers and factories. There are ways to partner up with factories and ways to get the attention of buyers from various retailers.

I just want to give a balanced view of this approach. I would like to see more design minded people at the helm of companies.

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For me the question in 2011 is this: Why should anyone expect that the factory is going to be your investor?

Someone has to pay to develop an idea, market it, and sell it. You have to convince someone to put up the money if you cannot or are unwilling to risk it. The factory is in my mind the last option.

The part of the brain that thinks that the lone designer can take a product to the mass market and makes millions is next to the lottery ticket purchase cortex. The time for asking the factory to front the lottery ticket money has passed.

If you want to break into business, think of it as a business. Get money, get good people, get connected to retailers. Make models, test the product, modify the product, take it to a manufacturer and make it. Do it as guerrilla as you can manage, but put the elements in place like a business.


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"Lottery ticket purchase cortex" = Nice one!

Not to undermine the point of the thread, but I wonder if one is better off securing funding and handling up-front business issues in the West, then coming to East Asia/China strictly for final manufacturing/assembly and just paying them as a vendor? I understand this is the "old fashioned" way; Nike, for example; but I think it is still a relevant approach. Why? A number of related factors:

• Chinese are notoriously risk-averse.
Especially if your product/idea is remotely innovative or different than what is the current dominant seller, you will have trouble finding support there to fund something or for a partner there to assume some of the financial risk with you. Benchmarking, "me-too" products, copying, ripping-off; whatever you want to call it; these approaches are common in Chinese culture because they are perceived as lowering risk.
• Chinese focus on the tangible.
Giving them money to make something is "tangible" to them. Having a finished working prototype or bringing them tooling is somewhat tangible. However, showing them an idea, a rendering, some research data, a strategy, or paperwork alone describing intent from distant distributors/retailers is not as tangible to them and likely will not get you very far very fast.
• Chinese are "collectivists".
They only trust and help the "in-group" and those that have long-term connections with the in-group. If you are coming from somewhere else and asking for something, good luck! Long-term relationships, Guanxi, blah blah blah.
• Chinese do not respect the concept of intellectual property. (Obvious!)
There is little protection for you and your product there. And involving Chinese early in the process and sharing everything with your partner/investor along the way only exposes you to more risk. If you've got something successful/profitable, you'll get ripped off either way; but better to get ripped off later than sooner!
• Chinese see "win-lose" in business, not "win-win".*
*While the other items above are pretty well-documented and will probably ring true to most with experience in this culture, this one may be more of a personal opinion? In most negotiations and partnerships in the West, I think both parties can approach them thinking generally positively. Thinking that the pie will be big enough to share, hoping that the pie will expand, and believing that one partner's success can be good for the other partner. "Grow together". While this may work sometimes within extreme "in-groups" (families, for example) in China, I think the norm is for parties to harbour a "win-lose" attitude; believe that one person's gain is the other's loss; the pie is limited and every piece you get is one less piece for me. Kiasu, blah blah blah. So the question is, do you really think you will "win" in a relationship with Chinese? (or vs Chinese!)
(I wonder what others with experience in the region think of this observation?)

I suppose it's not impossible to get a reliable Chinese company/partners to help start and finance your project, and I don't want to sound discouraging; but given the tendencies mentioned above, I can't help but think taking care of the up-front business issues at home in the West (where you are more familiar with the quirks and faults of the locals and their perhaps equally flawed system) is still the best option for most.


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