Market Research Prevents Potential Damage in China
Wallbarn manufacture and supply a range of products which are used in the building envelope, including paving and timber decking, waterproofing and protection and landscaping products. A key product is green roofing systems including a pre-grown modular sedum extensive green roof system, M-Tray. The business is based in Croydon, Greater London.
Wallbarn had been exporting successfully to the Gulf region, USA & Canada, South Africa and Hong Kong, as well as Scandinavia and some other European markets. China as a market was first discussed by a customer in Hong Kong, who was receiving interesting enquiries from China. “We had met many Chinese companies at trade shows who worked in construction – both design and manufacture”, explained Julian Thurbin, Managing Director at Wallbarn. “The market is clearly huge – rather than just build one building, the Chinese will construct whole cities at a time”. The potential for Wallbarn was clearly enormous, however Julian had been warned about product imitation and wanted to scope out the opportunity before appointing a distributor or selling directly to the market. “There’s a big gulf between knowing a market is a certain size and being clear on how to enter the market”, he explained.
Julian had heard about the UKTI’s Export Marketing Research Scheme (EMRS) from his International Trade Adviser (ITA), Colin Melhuish. The EMRS provides professional advice to help businesses understand the dynamics of a potential overseas market before creating an appropriate launch strategy, and decided to contact them. There is a nationwide team of professional Research Advisers to support individual companies, and Julian arranged to meet with Clive Hogan, Research Adviser for the South East of England.
Clive helped Julian to plan how to undertake the research in China in a robust and cost effective manner. First, they identified the key decisions Julian wanted to make:
- Should they enter the Chinese market at all?
- Would the current products require adaption – Wallbarn’s product range included modular plastic trays and seed mixes suitable for roofing plants for a Western European climate which are grown in the local market?
- What would be the best route to market – would they be able to sell directly from the UK or require a distributor or agent; how should they work with a partner to convert interest from a developer to sales?
- What pricing point and margin should they target – Julian was aware of the possibility of cheaper copies flooding the market and wanted to understand the financial implications in the short and longer term.To make these decisions, Julian arranged a series of meetings with a range of different people in China, some he’d met previously at trade events, some had enquired on the website and for others he used his network of contacts. Armed with a discussion guide, setting out the key information he wanted to find, Julian spent 10 days in Shenzeng, Guangzhou, and Hong Kong. He interviewed 20 people including: landscaper designers, horticulturalists, business owners, construction installers and growers. He also spent time at a large regional trade show, Ecobuild, viewing competitor products.
The research findings were very informative. It was clear the market for green roofs and sustainable construction products was massive, sustained by large developers with equally large budgets. However, Julian could see that the market was 5 – 7 years behind the UK, “we saw a lot of products of dubious quality which would likely damage the market reputation”. The risk for plagiarism was also borne out by what Julian discovered, “it was obvious that our designs, our molds and our systems would be copied far quicker than we’d anticipated and undercut on price”, concluded Julian. Another interesting finding was the lack of space, particularly in and around Hong Kong; Julian had expected that the plants would be grown locally but the lack of affordable space would escalate prices beyond what the market could currently stand. Another finding was the need for a locally respected business partner whom Julian could trust; not an easy task, he decided.
Julian concluded that, once the market had matured and the poorer quality products had gone, there might be an opportunity for Wallbarn to establish a premium offering in the market, manufactured by a local Walbarn subsidiary or well-vetted partner in the region. However, the research enabled Julian to take the difficult decision not to enter the market yet. “We concluded that our resources would be better spent increasing our sales to existing export countries and growing our product ranges with them”, said Julian.
“The Export Marketing Research Scheme intervention prompted us to do a comprehensive market evaluation” said Julian, “Without the market research, we probably would have simply appointed a distributor, which could have caused considerable damage to the future of Wallbarn”.
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Topics: Export Planning, Export Process, Getting Started, and Market Research