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HKCBA National posted an articleHong Kong offers Canadian firms talented workers, the rule of law, modern infrastructure, low taxes see more
By Ken Mark, Special to Financial Post
Bitten by the “Asia is now” bug, three young, Canadian high-tech firms — GuestLogix Inc., Vision Critical Communications Inc. and Neverblue Media Inc. — recently set up regional offices in Hong Kong with a common objective: To leverage Hong Kong’s position as the gateway to Asia’s burgeoning marketplace.
Dominic Barton the global managing director of McKinsey & Co., recently concluded: “By 2025, the Asian consuming class will swell to more than two billion people and spend an estimated US$22-trillion – nearly one-third of global consumption.”
Hong Kong is located five hours’ flying time from half the world’s population. Together with New York and London it is ranked as a global financial and business services centre, a lofty perch decided by its rule of law, independent legal system, well-educated talent pool, modern infrastructure, low taxes and light regulation topped off with an “open for business” culture.
“Hong Kong is a city built by entrepreneurs for entrepreneurs,” says Bruce Wells, Vision Critical’s Hong Kong-based president and managing director, Asia.
All three businesses say they chose Hong Kong for its central location and ease of doing business. But equally important was the mix of languages. “To sell into China, we needed Cantonese, Mandarin and English,” says Brett Proud, co-founder and chief executive of Toronto-based GuestLogix. “Hong Kong is about the only place we could find them all in one place.”
Vancouver-based Vision Critical says its goal is to transform market research into an engine for eliciting timely consumer insights. Since 2002, the company has built branded, online insight communities for corporate clients. They invite targeted participants to respond digitally to a wide range of topics on which firms seek to quickly analyze in-depth consumer perspectives and thoughts.
These include Banana Republic, Yahoo!, Discovery Communications, Molson Coors and Jet Blue. The solution delivers 40% to 45% response rates compared with single-digit levels from traditional research approaches.
Vision Critical’s proprietary technology enables market research firms to abandon outdated face-to-face, phone or online encounters for real-time feedback from a community of targeted consumers.
Consequently, businesses can dig into a continuing, more nuanced flow of consumer insights over a longer time. That replaces previous, one-time snapshots from randomly approached respondents.
Mr. Wells compares this approach to having a customer advisory board providing input on an ever-widening range of topics. In the hands of astute marketers, such rich consumer data leads to more sharply focused offerings and campaigns.
“We try to make them feel special as a member of a select community and that their contributions and suggestions are valued,” he says of the interaction with respondents.
Vision Critical says the signing of Cathay Pacific Airways as a client among other notable global brands operating in Asia validates its decision to set up in Hong Kong. About 10% of its business is conducted in the Asia Pacific region. In 2012, the company had about $80-million in revenue, and in 2013, it is poised to reach $100-million with much of the expected growth attributed to international expansion, including in Asia.
Cathay Pacific has also embraced GuestLogix Inc.’s technology, which expands in-flight sales items far beyond duty-free standbys of alcohol, tobacco, perfume etc. For example, passengers on some Ryanair flights to London can now buy and pay for subway tickets from Heathrow Airport to Paddington Station.
Mr. Proud describes GuestLogix as a revenue enabler. Its technology boosts carrier ancillary income by transforming international flights into specialty, e-commerce outlets. Sales are no longer limited to what can be physically carried on the plane. Around GuestLogix’s head office, the motto is “the sky’s the limit.”
“Passengers can buy items such as cases of wine to be delivered to their home addresses,” Mr. Proud says.
GuestLogix technological advantage rests on its ability to deal quickly and securely with all global payment systems. “Our system captures the transaction and sends it to the most suitable, global ‘pipe’ for the fastest, most secure and lowest cost way to process it,” he says.
“Banks are all onside because we meet all security encryption and safety compliance regulations and certifications.
“Once passengers can order on their own smart phones, airlines will offer higher priced items,” Mr. Proud says. “That will be possible because of real-time purchase confirmation. Now, we can only confirm after the plane lands.”
Potential users are also attracted by its pay-on-performance revenue model. In other words, deploying GuestLogix technology is a variable cost — no sale, no fees.
That’s also part of the appeal of Neverblue, a Victoria-based company specializing in lead generation, client acquisition and mobile advertising. It provides a digital link between online advertisers (product and service vendors and distributors) and consumers
“At the end of each month, an audit reveals the number of hits, transactions and sales,” says Jeff Kwok, Neverblue’s Hong Kong-based director of business development, Asia. “But clients pay only for actual sales.”
Neverblue’s technology serves as an aggregator or funnel for websites of affiliates, i.e., firms and individuals that have bought advertising space on social media sites. The barrier to entry is the speed, scale and power of its technology to track traffic that Mr. Kwok estimates at millions and millions of hits a day.
Neverblue allows consumers to bypass distracting banner ads and control e-mail blasts from unwanted sellers, to access more efficiently websites offering products items and services they want.
Its affiliates include major travel service providers such as Grand Hyatt, the Macau-based Venetian Hotels & Resorts and online travel agents including Priceline and Expedia. Fashion retailers targeting younger buyers such as Quicksilver for clothing and Gilt for bags and accessories are a growing category.
Neverblue reached break even after six months in Hong Kong. “We have to be the most productive link to optimize traffic to our affiliates’ websites,” Mr. Kwok says. “We need to grow revenue, expand our office staff and boost scale to maintain our market dominance.
“Our goal is to get big fast, keep operations efficient and do it properly.”
All three firms relied on Invest Hong Kong in setting up their operations in the city.
— Ken Mark is a 2013-2014 Asia Pacific Foundation of Canada Media Fellow supported in part by Cathay Pacific Airways.
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HKCBA National posted an articleSelling your product in China can be tricky, unless you have the right intel and a good distributor. see more
By Quentin Casey, Financial Post
Stephen Jones has only sold three units in China thus far. But he’s convinced the country represents his company’s biggest market.
The Halifax-based company, Resolution Optics Inc., produces 3D microscopes, some of which are submersible in water. With China spending billions to monitor and restore its lakes and rivers, many of which are “massively polluted,” Mr. Jones sees huge potential for this equipment.
Although he’s only sold a few of the $35,000-microscopes in China, he contends that a recent agreement with one of China’s State Key Laboratories could boost sales significantly — perhaps up to 300 units in the next five years.
Mr. Jones is not walking blindly into the Chinese market, having previously developed Chinese sales for a medical research equipment company. That experience gave him an introduction to the nuances of Chinese business culture, which helped him secure a local distributor to sell his company’s microscopes. “It’s almost impossible to sell a product in China without having a Chinese distributor to represent you,” he said.
But one distributor is not enough. For reasons he does not fully grasp, customers in Hong Kong are reluctant to purchase from distributors in Mainland China. So he is teamed with two distributors: one in Hong Kong and one on the Mainland.
Mr. Jones’s previous China experience also exposed him to the weight Chinese business leaders place on personal relationships. “It’s expected for me to make multiple trips over there, and it’s expected for me to give a guest lecture,” said Mr. Jones, who holds a PhD in physiology and biophysics. “It’s expected that the relationship is about more than a financial transaction.”
Gerry Pond, one of Canada’s top angel investors, says that many Canadian companies lack the international sales expertise to properly crack international markets, including China.
His Saint John, N.B.-based software company, Mariner Partners, now has sales offices in Paris, Istanbul, London and Dallas. But it wasn’t until recently that the company broke into international markets. The key move involved hiring five Canadian ex-pats who had worked in sales departments at big U.S. software firms.
“We struggled hard with international sales — until last year,” Mr. Pond said. “It’s meant a huge jump in customers… Our revenues this year are going to be the best ever.”
Mr. Pond, a prolific investor in East Coast startups, found that many of his investment companies were in need of international sales help. To help bridge the gap, he brought in a consultant. He is also trying to remedy the situation more broadly, by setting up an institute dedicated to training international sales and marketing specialists. Universities, at least in Atlantic Canada, have largely overlooked international sales training. So he’s willing to help fund an institute to fix the situation.
“I have to put money where my mouth is,” he said. “It would be the best investment I’ve made.”
Meantime, Frank Pho, vice-president of global expansion at the Business Development Bank of Canada in Vancouver, says Canadian companies must commit time and money to understanding the countries they want to enter. That’s particularly true in China, he added, where a “paradigm shift” has changed how foreign companies must approach that market.
The old Chinese sales model involved taking an established North American product and adapting it to the Chinese market, often by lowering the quality to make it less expensive.
Now, successful companies are tailoring their products for the Chinese middle class, which totals 300 million people. “That is 10 times the population in Canada. So why would I start by developing a product for 35 million people and then reinvent it to address a 300-million person market?” Mr. Pho says.
“That’s the paradigm shift. If you can take advantage of that, then you can become a powerhouse.”
He pointed to Samsung Electronics’s growing share of global mobile phone sales. The South Korean manufacturer is stealing market share from Apple, in part, by succeeding in foreign markets such as China.
“It’s a fundamental shift,” he says. “The Japanese and the Koreans understand that. But we are still behind that reality.”
Mr. Pho also notes that large-scale urbanization in China offers opportunity for clean tech companies, such as those focused on drinking water and wastewater.
That’s exactly what Mr. Jones is hoping for. “China will probably turn out to be our largest market,” says the Resolution Optics chief executive. “If we can prove our worth and if we can get on the right side of the government, then we have a pretty good chance.”
