In this episode, we talked to Josh Gardner, who is an American entrepreneur. He first came to live and work in China 25 years ago. Josh Gardner has a background in anthropology where he studied ethnic minorities in Yunnan, before going into logistics and then e-commerce. Josh Gardner became the co-founder and CEO of Kung Fu Data in 2014. They help identify Western bands which have the potential to do well on Chinese e-commerce platforms. Then they help those brands to launch successfully on these platforms by providing data and analysis. Launching a brand on an e-commerce platform in China is not something that can be easily done by most Western brands, but with China having the largest and most developed e-commerce industry in the world, and many brands rushing in to get a slice of the pie before the market becomes saturated.
Did you know?
Unlike Amazon, where if a brand lists a product for sale it appears on-shelf 24/7 until the brand removes it, products listed by brands on Tmall appear only at the times set by brands. Brands must manually input the times they want their products to be visible to shoppers.
A little bit more about Kung Fu Data, the services they can provide brands selling on Taobao and JD, and how the company fared during the global pandemic
When Gardner launched Kung Fu Data, he initially tried to take a Western business model where he would analyze data and try to sell subscriptions, and repeat it in China. Despite building what he felt was an extremely valuable platform for clients, demand was slack. Then Gardner pivoted to providing consulting services about how to use the platform. After a year of hard work and relying on his wife to financially support him; he eventually began to acquire success in the industry.
They now work with 12 brands mostly selling on Taobao and also working with some stores on JD. Kung Fu Data has teams in many countries. Their operations team is in Beijing, and the client services and brand management team is based in Shanghai.
Josh Gardner’s belief that the digitalization of commerce is a new human behavior helped him weather the storm that Covid-19 presented. Chinese consumption is strong and its growth is going to continue. Gardner believes strongly the 400 million strong, middle class, high spending consumer base in the country are a safe long-term bet, despite the turbulence of Covid-19.
Helping with launching a brand on an e-commerce platform in China is not the only thing Kung Fu Data does
In terms of the way shopping experience is changing in China, Gardner believes that the model of simply selling on Taobao and JD is being threatened. Cooperating with KOLs and organizing live streaming sales events in China is a gamechanger. KOLs have immense power in China. In two recent live streaming sales events in China with celebrity Li Jia Qi, Kung Fu Data works with managed to sell 3 million RMB worth of products in two minutes. Six weeks later in the second live streaming event with the same celebrity, selling the same product the conversion rate was higher. They sold twice as much worth of goods.
Gardner’s theory behind the rise of sales channels such as these has an anthropological flavor to it. He suspects these purchasing channels are a more personal, digital substitute for online shopping. This maintains the removal of the need for going to a store and interacting with sales people in the flesh, but now offer a human connection, albeit through a digital platform. For some live streaming sales events in China, the conversion rate for people who click on the clink on the link displaying the products is as high as 14%. And the conversion rate is going up as consumers trust these channels more and more.
Launching a brand on an e-commerce platform in China isn’t the only recipe for success when it comes to targeting Chinese consumers. Live streaming platforms as sales channels represent a direct threat to companies. Some brands will now work directly with KOLs instead of using the traditional model of selling on Taobao, Tmall, and JD. Unlike before, customers begin their consumer journey outside of these digital marketplaces. Their original point of interest begins on a live streaming platform. Also, they can actually purchase the product directly from their favorite live streamer. More these digital marketplaces will force these live streamers or their content platforms to integrate with their sales channels.
“They [online sales platforms such as Taobao, JD, Pinduoduo] are either integrating it [sic. Livestreaming platforms], they own it already or they are investing in it. So, Alibaba invested in XiaoHongShu/ RED and integrated all the consumer interactions with products into Taobao’s listings. They also had a deal with Douyin (TikTok) to become an affiliate, so that they can pull Douyin’s traffic straight into Taobao and Tmall.”Josh Gardner, CEO at Kung Fu Data
Guanxi, guanxi, guanxi! The importance of nurturing professional relationships in the Chinese business sphere
Josh found his current business partners at Kung Fu Data. At that time he was working as a manager for a Beijing logistics company 17 years ago. He lists two types of relationships in China. Transactional and Guanxi. After going back to America and starting his own business, his two Beijing friends, now partners, came and visited him. They asked him to come back to China and get involved in e-commerce with them. Eventually, he did come back, although he feels he should have come earlier.
“In China, you have to almost rig the game in your favor and create sort of an online unfair advantage and a defendable position. You can try to do it with legal things and IP and stuff, like you would in the west; but it’s super hard to defend without the relationships in China and that’s where they come in. It is having access to resources and privileges being able to sort of accelerate and grow and get support from a community around you gives you a huge advantage over anyone else.”Josh Gardner, CEO at Kung Fu Data
Another competitive advantage he feels he enjoys is the strength of his team. Most of his core team members have been with him since the start of the business. They have senior-level experience when it comes to AB testing, selling a multitude of different products, performance marketing methods; and can offer other insights when it comes to e-commerce in China. Again, a clear example of building good connections in China.
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