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Five Reasons to Separate Sales and Manufacturing in China

Apr 16, 2019

separate sales and manufacturing in china 

China is the world’s largest economy and the fastest growing consumer market. Thus, there are many opportunities to succeed when selling in China.  And if you’re already manufacturing in China, it probably seems logical to sell there as well.

Initially, it may seem like a good idea to run sales out of the same facility you’re using for manufacturing for efficiency’s sake.  However, there are five reasons why that may not work out as well as you planned. 

Brand Erosion

Making is one competency, and selling is another. Control your brand, not your manufacturer.  Empowering your manufacturer on how to sell your product invites temptation to modify, private label, and market your product to others at a price point beyond your control.  Once you've educated your manufacturer about how to sell your product, it’s nearly impossible to maintain control over your brand experience.

Intellectual Property (IP) Control

CMD has been privy to many examples of unauthorized parties registering trademarks without a brand owner’s consent. This famously happened to Apple, and today unlicensed dealers are using the Apple logo on retail shops across the country.

Additionally, we’re hearing about situations where products manufactured in China are being held up in China customs (goods leaving China) when an authorized party has registered a brand without the owner’s knowledge or consent. 

The takeaway here, and an inexpensive one, is to control your trademark registration process early and directly. The process is straightforward in China.

Business Flexibility

Giving your contract manufacturer control over selling makes it difficult to change your manufacturing strategy in the future, should problems arise (quality, pricing, bankruptcy, etc.).

Skillsets

The skillsets needed to sell and make are very different. By splitting the two, you’ll have a more strategic focus for both segments, free of the distractions of everyone’s day jobs.

Product Leakage

Isolating sales, marketing, warehousing, and distribution from the factory geographically is a best practice used by the brands which are most successful selling in China. This works to prevent unauthorized leakage of product into your distribution chain. It’s just too tempting for product to move out the back door into the grey market. It takes just one bad actor to unwind the years you’ve spent building your brand in time and treasure.

The Bottom Line

Be wise and separate the Church of Sales from the State of Manufacturing to protect the product and brand experience you’ve worked so hard to create.

If China offers attractive upside, then you’ll need a locally based support team prepared to nurture the unique needs of China’s consumers.  How we go to market, price, setup e-commerce channels, process payments, and manage digital marketing—is very different than in the West. 

Over the last three decades, we’ve seen plenty of examples of what works…and what doesn’t in China. Have questions and need some expert advice? Connect with CMD today.

Topics: Manufacturing, Intellectual Property