Chinese products have been a mainstay of the U.S. economy for more than two decades. It may now be time for more goods to start flowing the other way.
The recent IPO of Alibaba (BABA), the Chinese e-commerce giant, was a huge win for investors able to buy the stock early and cash in as shares soared. But Alibaba, the company, may represent a huge opportunity for American businesses, artisans and even craftspeople to profit from the runaway growth of China’s middle class.
“China is a good market to go after,” Savio Chan, co-author of the new book "China’s Super Consumers: What 1 Billion Customers Want and How to Sell it to Them," tells me in the video above. “Alibaba allows any small American company to sell to Chinese consumers.”
Americans tend to regard China with suspicion — if not hostility — rather than thinking of it as a potentially lucrative market for American-made offerings. Polling by Gallup shows more than half of Americans think China is the world’s top economic power. (They’re mistaken -- the United States still is.) Recent protests in Hong Kong have highlighted the anti-democratic mindset of the governing Communist Party, while raising the specter of an ugly military crackdown similar to the 1989 Tiananmen Square massacres.
During the last 25 years, however, China has grown into a more mature capitalist economy -- with consumers eager to spend and leaders reluctant to disrupt the binge. China’s vast population of 1.3 billion people is sure to make it the world’s biggest economy at some point. A surging middle class, which numbers more than 300 million, is already as big as the entire U.S. population. An estimated 600 million Chinese use the Internet and have access to online shopping sites.
Chinese consumers crave American products, whether they can afford them or not. “They want U.S. brands because our products are safe, clean, green, popular and branded,” Chan says. “They don’t like the Chinese brands as much.” In the United States, consumer purchases account for nearly two-thirds of all economic output. In China, it's less than one-third -- but likely to grow quickly, as long as China's overall economy grows as expected.
Many big multinational firms already operate in China, including General Motors (GM), IBM (IBM), Nike (NKE) and Microsoft (MSFT). Smaller firms that want to sell there can use Alibaba sites such as Tmall to get started. (Disclosure: Yahoo, parent of Yahoo Finance, owns a 16% stake in Alibaba and profited from the recent IPO.) In addition to providing a forum for selling, similar to eBay (EBAY) or Amazon (AMZN), Tmall helps with distribution in China and can even help suppliers find Chinese factories where they can manufacture products to sell in China — or back home in the United States.
Tmall charges fees for such services, as do many middleman operations that help U.S. businesses in similar ways. The U.S. Chamber of Commerce can also help businesses sell goods abroad, through export assistance centers in about 100 cities and on-the-ground experts in 72 countries.
Of course, there are risks to selling in China. Scams abound and foreign businesses don’t have all the legal protections they do in the U.S. Cultural disparities require different marketing techniques than Americans may be used to. Those selling on Tmall might find they get no notice, because the site is cluttered and many merchants pay to advertise and draw more attention to themselves.
On the other hand, the U.S. economy is hardly blazing ahead, and rich foreign opportunities could be quite welcome at American firms struggling to eke out profits. Hundreds of millions of shoppers are waiting.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
