Opportunities to build large and scalable business in China abound, but U.S. firms may face some hurdles if they go at it alone, said speakers at law firm Cowan, Liebowitz & Latman’s annual breakfast program at the Harvard Club in New York on Wednesday.
And it is imperative companies make the effort to explore business partnerships there sooner rather than later, said Richard Kestenbaum, partner at Triangle Capital, who was speaking at the program titled “China: Opportunities and Challenges for the Fashion Industry.”
Having recently worked on the distribution deal between streetwear e-commerce site KarmaLoop.com and the leading online luxury e-tailer in China, Xiu.com, Kestenbaum, a frequent business traveler to China, warned that stumbling blocks to doing business on the mainland are not necessarily financial or logistical, but cultural.
“What does a handshake mean in China? Not so much,” he said, to faint chuckles around the room. “A good idea is also worthless in China without the right introduction to the right people,” he added, stressing the importance of getting influential organizations or leaders, like chambers of commerce or municipal leaders, behind you.
Another potential pitfall is copyright issues and the protection of intellectual property, better known as IP. Jeffrey Epstein, partner at Cowan, Liebowitz & Latman, emphasized the need to protect and enforce brands in China.
China’s IP law favors trademarks that are filed first, so Epstein advises brands to apply for marks early on — also because the process of obtaining trademark registrations in China is time-consuming.
“If you don’t [file early or first], a pirate will do it and hijack your brand,” Epstein warned. “And if you don’t create a Chinese character mark yourself [in order to reach Chinese consumers], others, like the Chinese media, will do it for you,” which may result in names with unattractive or derogatory connotations, he added.
But both Kestenbaum and Epstein said U.S. firms should not be discouraged.
“Social norms exist in every developing country. But when you put social forces against economic forces, in the long run, economic forces always win. The U.S. is still the largest consumer economy in the world by far and there is no certainty China will overtake [that] soon,” said Kestenbaum.
Last but not least, “Chinese people love to drink,” warned Kestenbaum. “If you don’t drink with them you’re going to have a really hard time. It all starts innocently with tea in the CEO’s office,” he said, as the attendees chortled.