China, as you’ve often heard, is the world’s fastest growing economy, and not just for its low-cost manufacturing. It’s also home to a rapidly growing consumer market. Big American companies like GM, Harley Davidson and Amway have made big bucks selling to Chinese consumers.
But for smaller American companies, breaking into the Chinese market can be difficult, confusing and expensive.
This week, the Michigan Economic Development Corporation announced a new program to help small businesses make that leap. It’s the first program of its kind in the country.
“The program will offer Michigan companies the opportunity to test their products in the China consumer market with limited risk,” MEDC President and CEO Michael A. Finney said in a release.
As part of the program, the MEDC is partnering with Export Now, a private company that specializes in helping businesses export their products to China. A hundred small Michigan companies will get a chance to take part. For them, the program could be a transformative opportunity.
But it’s also a sweet deal for Export Now, which is based in Ohio. And the owner of a Michigan-based export services company hopes he won’t be left behind.
Export Now, which is based in Akron, started in 2010. Its CEO is Frank Lavin, a former ambassador to Singapore and Undersecretary of Commerce for U.S. Trade.
Export Now typically charges clients $3,000 to send over a pallet of products to China. Export Now handles all the logistics, taxes and customs issues. The products are stored in a warehouse and sold on Tmall.com. The site is basically the Chinese version of Amazon. But way bigger.
“E-commerce in China … is about twice as big as a share of the retail market as it is in the U.S.,” Lavin says. “This platform we’re in in China is the largest e-commerce platform in the world.”
Under the agreement with the MEDC, Export Now will cut $1,000 off the cost of its service for selected Michigan businesses. The MEDC will also pay $1,000. So the total cost to Michigan businesses will be $1,000 – a discount of two-thirds off the usual price.
But perhaps the biggest winner in the deal is Export Now. It’s a startup company that only began shipping products to China within the past few months. With its new deal, the MEDC will help recruit up to 100 new clients for Export Now. Right now, Export Now has just 11 clients. The MEDC will also directly pay Export Now up to $100,000. The new clients will bring in another $100,000.
Frank Lavin negotiated this deal that could increase his company’s size almost tenfold, all in exchange for a 33 percent discount on Export Now’s services.
“It sounds like a pretty good deal he has,” says Tim Parker, who’s trying to launch an export service business of his own.
Parker says perhaps the best part of the deal is that the MEDC has sent out press releases, and plans to hold four informational meetings across Michigan.
“Any publicity like that is good,” Parker says. “It’s directly building your business for you, and you’re leveraging others’ resources, so of course it’s a good thing.”
Parker started his export-to-China business last year. Unlike Lavin, he’s actually a Michigan resident. But he says his company might be a few months behind Export Now in the race to get U.S.-made products to China. There’s even been talk of partnering with Export Now.
“I guess in some ways, you could think of it as a competitor,” Parker says. But he says his business will market Michigan-made products directly to retail stores. Export Now only sells on the web.
But still, Parker hopes when the time comes the Michigan Economic Development Corporation will help his company, TS Parker Products, just like it helped Export Now.
MEDC spokesman Michael Shore says he hasn’t heard of Parker products, but he says the agency is open to arrangements with other companies that can help market Michigan-made products abroad.
“Export Now came to us,” Shore says. “I can’t speak to any other companies that exist out there, but given similar capabilities, and qualifications and pricing, I don’t why we wouldn’t consider them as well.”