The day 40,000 people visited McDonalds in Beijing

I saw the other day that McDonalds has opened its 2000th restaurant in China. To think that there are now 2000 Golden Arches in China because when I first lived in China there was one, in Shenzhen. The first McDonalds outside of Shenzhen opened in China in Beijing in 1992 and I was fortunate enough to have been there.

I remember a few things about that first visit to McDonalds in April,1992, namely how crowded it was (according to McDonalds there were 40,000 customers on that first day),  the line of people taking snapshots of the Ronald McDonald statue outside the restaurant and how I had to summon my courage to eat a Big Mac with cheese because the person behind the register could not comprehend a special request to make a Big Mac without cheese. After explaining to him that I did not like cheese I looked behind me at the great wall of people waiting to order and decided that I had better dispense with the special request lest it bottleneck production and create a major incident in what was billed as the largest McDonalds in the world. .

Thinking back to my first time at McDonalds in China I can remember how in those early years of Deng Xiao Ping’s reforms about the only two American foods you could find in stores, not counting the ubiquitous Coca Cola which had been in China since the 1930s, were Tang and Nescafe instant coffee. The popularity of Tang in China was hard to fathom since it had not been popular in the US in 20 years. I can only speculate that someone in the Nixon entourage had brought over a jar back in 1972, ( maybe someone in the State Dept thought it sounded Chinese as in Tang Dynasty ?) and the Chinese were hooked from then on. Who knows.

In those days then there was a buzz in the foreign community anytime an American brand was spotted in Shanghai, whether that was a short-lived Sees candy store on Jin Jiang Lu or a box of Ortega Taco Shells that somehow had found its way into the Soviet era grocery store on the corner of Wulumuqi and Hua Shan Lu. There was a randomness to it all that was exciting.

Beginning about 1992 or 1993 western style supermarkets started to sprout up all over Shanghai. They were big but did not offer much variety meaning you might find an entire aisle dedicated to one brand of hot sauce. The locals were slow to accept the supermarkets because they were more expensive than the local markets, did not except grain coupons and there was a tendency to distrust anything new. Imagine a local Chinese shopper in those days trying to figure out what a jar of Skippy was. I remember vividly how big but how eerily silent and empty the supermarkets were in those early days. You wondered if they would catch on.

If you really had to have that box of Pop Tarts or some Gray Poupon then there was the Wellcome Store, the Shanghai ex-pat equivalent of the Army PX, located in Shanghai’s most well-known ex-pat compound, the Portman ( now the Ritz Carleton Shanghai). But everything was expensive in this store so we did not go there but on the most special occasions or maybe after we had had a bad “China Day” and just needed a cup of Swiss Miss hot chocolate to keep our China life in perspective.

Nowadays when you go to Shanghai you can find anything everywhere. Whenever I go to Shanghai and pass by a bakery I like to recall those Sundays when I would get up early and embark on a two hour journey via bike, ferry and bus to the middle the old French Concession. There was a bakery there and they had a rare commodity that I was after. It was called bread.

Happy Thanksgiving

Some things to keep in mind for first-time China goers.

I was on a skype call with a prospective client the other day. She has a new product/business and would like to start sourcing in China. She has approached some manufacturers here in the US but with no success. Not only are costs to make her product, an apparel item, prohibitive in the US but she said the response she received from companies was tepid at best. Some of them didn’t even respond to her which is odd given her professional background and serious level of inquiry.

She had some questions for me which I answered. Her questions and my answers might be useful to others who are thinking about sourcing in China so here they are:

Question:

Does one need to speak Chinese to do business in China?

My answer:

No, it is not necessary and there are plenty of people who do business in China and who do not speak Chinese. But here is a fun, and I think reasonable way to look at it: not knowing Chinese will never help you and may hurt you. On the other hand, knowing Chinese will never hurt you and may very well help you. The big picture is that the Chinese want you to respect them and one of the best ways to show them respect is to make an effort to learn their language. This does not mean you have to go down to your local college first thing Monday morning and sign up for an intensive Mandarin course but you should at least  learn some greetings and maybe even a few proverbs, your knowledge of which will make a good impression on the people you meet in China. Just remember, big companies can afford to hire locals with good English skills to help them in China. Small companies must do everything on their own.

Question:

How do I find and settle on a supplier?

My answer:

Locating good suppliers is just a process of establishing contact, sending out samples and requesting counter samples and working with vendors to get to your target costs and achieve product quality you are happy with. One thing to pay close attention to when you are feeling out suppliers is how well do they communicate with you.  Do they reply to your emails promptly or do they make you wait ?  Are their answers to your questions perfunctory or thoughtful ? Do you have a feeling that they want your business ?  Just remember this: if the communication is sporadic to begin with, it will not be any better once you order. And in fact it may get worse as you ask more questions requiring more thoughtful and detailed answers.

If you are working with printed patterns then you will need to provide vendors with all artwork and pantones. I have often said that one really needs to finalize design before approaching vendors. Some of these vendors are very busy and if you approach them with a design and then change that design along the way they get frustrated. And it sends them the message that you are not organized/professional. So the first step is to finalize your design and have all the artwork on file.

Question:

How much will it cost to get samples?

My answer:

Cost of samples will vary depending on your design. If you want to use printed fabric with your own design, of course there will be a charge to cut a screen (usually $100-$200.00). If you have definite material or fabric requests then you need to send your vendors swatches and let them source for you. Often when you have specific material requests vendors may not have adequate stock of that material on hand and may have to use a substitute fabric. This is OK. A note on zippers: You should specify YKK because Chinese zippers are pretty bad. And even with YKK you have to be careful because there are plenty of fake YKK zippers in China.

Question:

What should I do to protect my designs/product in China ?

My answer:

For protecting all IP it is a good idea to register your trademark in China as well as in the US/Canada. The cost to register a trademark in China is 600-1000 USD if you use a Chinese lawyer and probably 3 or 4 times that much if you use a lawyer in CAN or the US. The key about IP is this: Don’t be paranoid about having someone take your name in China. Big companies are most often the targets. But don’t be nonchalant about your IP either. Stuff happens in China and you just want to do all your DD and take the same precautions you would take in your own country when starting a business, and this includes registering all IP.

Question:

If I work with you how can you guarantee that I will get what I order ?

My answer:

No matter who you work with when you do an order in China and no matter how good you think your supplier is you can never be 100% sure that what you order is what you are going to get. All you can do is try to reduce your risk. And this means vetting your suppliers before you give them orders, showing up occasionally to make sure they are keeping your company’s standards in mind, and checking your orders in China before they ship and you have to pay for them in full.

Can you chew gum and talk to the President of China at the same time ?

I turned on the TV last night and I was somewhat shocked to see Obama chewing gum while walking to a state event with Chinese President Xin Jinping. As expected media in China were incensed with this breach of etiquette. Some people here in the US may wonder why all the fuss about a piece of presidential chewing gum ? The fact is that in some countries in Asia one does not chew gum in public. In Japan, for example, baseball players will not chew gum during a ballgame because it is considered rude to do so . In fact eating anything in public in Japan is is widely frowned upon. China is a little more relaxed in this respect and people eat where and when they want. But at a higher level one encounters the same strict cultural formalities in China as they do in Japan which means you just don’t chew gum when you are meeting with a high ranking official or the president of a company. When I am in China I have no compunction chewing gum when I am talking with an vendor on the factory floor. But if the owner of the company is anywhere near I quickly jettison the gum and I am on my best behavior. That is what is expected of both Chinese and non-Chinese alike.

My first thought is that either Obama has some insanely ignorant China advisors in the State Dept or he is incredibly arrogant. I really don’t know which and I am amazed that no one in the presidential entourage whispered over to him as follows: “Sir, take the gum out. This just doesn’t look good and it will create a storm in a teacup with your Chinese hosts.” Maybe someone did say something to Obama, and in true Obama fashion, he ignored the advice. Who knows. But can you imagine if Xi Jinping were to visit Washington and as he walked in the White House Rose Garden with Obama were to light up a Marlboro ? There would be a media firestorm here unlike any other and everyone would remark how uncouth the Chinese were.

But Obama’s ignorance or arrogance, whatever it was, is a microcosm of condescending Western attitudes towards China over the past 30 years. No effort is made to understand China and its customs, while we dictate to China what we need, whether that be an order of upholstered chairs, a container of washing machines or a signature on an international carbon emissions agreement. But times are changing. If you don’t respect China, then you will find China difficult to deal with. And judging by the tone of President Xi’s remarks after meeting with Obama, the President should have saved the stick of gum for the privacy of his State Guest House.

sam days 7 to 10 151 (105)

China’s Great Leap Forward with Intellectual Property (IP).

A former client of mine sent me an email a couple of weeks ago asking me to help him with his trademark application in China. He applied for a trademark in China last year and he is just getting the results of his application now. But that is par for the course in China with trademark registrations, the process easily taking upwards of a year. This may sound like a long time but it really is not because the trademark bureau has to search quite a few filings to make sure there are not similar trademarks. China has the largest patent office in the world in terms of how many patent applications it receives per year, well over 500,000, and I imagine trademark applications are just as many.

The result of my client’s application was that some of his product has been approved and some of it has not. It seems there is a similar trade name on the market in China that the Trademark Bureau felt too closely resembled my client’s tradename. I looked at the report from the Trademark Bureau and I can see where they might have a problem with my client’s tradename. The law firm in Beijing that is handling my clients application said he could appeal if he wanted. But my client seems reluctant to spend more time and money on this. My advice to him was to consult an English speaking lawyer in the US or Canada as language seems to have been a bit of an obstacle in his correspondence with the law firm in Beijing. Although undecided about what to do, he says he is glad he has gone through this exercise and has acted in good faith to protect his name in China. I agree.

But I am impressed how far China has come in terms of protecting Intellectual Property. China’s first trademark law was implemented in the early 1950s but it was more a law in name than in practice given the communal nature of post revolutionary Chinese society and the suspension of many commercial laws during the Cultural Revolution. With the opening of China in the early 1980s the Chinese Government saw fit to establish a new Trademark Law and they did so in 1982. That law has been revised three times since, most recently this past May. It is evident that the Chinese Government, facing severe criticism from overseas firms doing business in China, has identified a need to catch up to international Patent and Trademark standards, and I at least see my client’s application as one example that they are doing a pretty good job of it. It is pretty amazing when you consider that 30 years ago trademarks and patents meant next to nothing in China. Now they are protected.

IMG_6637

The importance of counter samples

I visited a company the other day and was surprised to learn that this company does not as a rule keep counter samples when they do production in China. The handmade nature of the product and the small order QTYs leads them to believe that counter samples are really not necessary as they pretty much inspect every piece upon delivery. Although I have never heard of an importer, particularly for a design driven product, that did not keep counter samples on hand, I can’t argue with them since they seem to be doing a pretty good business. Theirs is a design driven product with big margins. I simply suggested to them that counter samples is a very good idea. Maybe when their business grows they will see a necessity to do this. And most certainly if they get a large order from a big-box retailer they will need to do this.

As a rule I think it is a very good practice to keep counter samples on hand and to make sure your vendors have them as well. A case in point: a past client of mine emailed me recently and asked me if I could request samples of one of his products from a vendor we had discussed an order with a couple of years ago. It seems my customer had no more samples of his own product. When I emailed the vendor to see if they could do some more samples, they very politely declined. They explained that it was a lot of work for them to do samples and they did not wish to make any more samples without an order. And I do not fault them since it has been two years since we first approached them and my client has not given them an order in that time. Reading between the lines, I would just say they are busy and do not want to be bothered. But that is their right. Still in the end my customer does not have a sample of his own product. Hard to believe, isn’t it. He will have to dig out the artwork for the product and approach a new vendor to get new samples. This will cost time and money. And it just goes to show the importance of keeping a counter sample on hand at all times.

IMG_8028