Sergi Verchili (Sabadell, 1976) is a Project Manager at Imporium City, a company based in Shanghai, which presents itself as the greatest imported products Centre in China. A “city” where we can find shops, restaurants, hotels, resorts, wine museums, and a long etcetera. Inaugurated only a couple months ago, it also has a distribution network with a total of 3000 franchises in China.
Sergi Verchili has a degree in Translation and Interpretation by the Autonomous University of Barcelona, and for many years he specialized in the Chinese world, linguistically working as a professional translator and interpreter and at an entrepreneurial level, working in imports and exports, internationalization, consular administration, among others.
1. You’ve been living in China for 8 or 9 years, in Beijing, Ningbo and, for the last 7 years you’ve based yourself in Shanghai. What does Shanghai have that Sabadell doesn’t?
Well, firstly I believe these two cities cannot be compared. Shanghai has more than 20 million inhabitants and Sabadell 300.000. But the truth is that I believe you can’t compare Shanghai with any other city right now. Shanghai is this moment’s city. Just as New York was the city where the world’s economy revolved, later on Germany thought Berlin would be the one in the XXI Century… But in fact it is Shanghai. It has a dynamism and business volumes of incredible proportions… The biggest companies are all here, and that means something.
2. Tell as more about Imporium City. Where can we find it and what can it offer us?
First of all, Imporium City is one of our three projects. It’s the biggest Imports and Distribution Centre in China. Construction will finish in 10 years. Now we are finishing the first phase. To be more precise, Imporium City is a platform for foreign producers. For example, a wine producer that wants a direct sales point in China can buy or rent a store in this platform, where the first 2 years are for free. Basically, what we offer at Imporium City is putting together distributors from all around China, the final consumers and we do promotions of products. We do brand and company promotions, products, sector, or even by country.
Imporium City has 72 ha, 20 of which are in Shanghai and the other 52 in Zhejiang, south of Shanghai.
3. Can we understand that Imporium City appears as a result of the demand for imported products by the Chinese population?
Correct, the imported products market is rapidly growing in China. I believe that the main cause is the food scandals in the country, such as the contaminated milk, water, fake products… People are fed up, and are aware of the danger. I have a three year old son, and we buy his baby milk in Barcelona… The consumption of imported products in China is increasing a 15% annually approximately.
No, and I am glad you’re asking. Because another business line we have is our franchise “Ai Bai Fen” (I love 100%). It’s our own franchise, a store with only imported products.
We are very competitive in prices, mainly for two reasons: one is the purchase volume we have, which we achieve by pushing our suppliers; and the second is that we are not the typical small Chinese distributor which adds at least 300% to the cost price, we charge a very narrow margin. Basically, we are going to burst the market.
Therefore, going back to the question, up until now it is true that imported products where synonym of expensive products. But things are changing. We reached a point where it is not that people can’t pay, but people don’t want to pay. In our franchise we have low prices because of this reason.
5. Then, Imporium City is not oriented only to High-middle class? What segment of the population is it thought for?
Imporium City has everything. It has a low price range, middle and a high one… Everybody is welcome. The idea is that any Chinese distributor that wants an imported product will visit Imporium City. For example, there will also be bars, restaurants, clothing stores, a golf resort, among other facilities… And there will be both expensive and economic products. You can find jewelry and art pieces of a very high price, wines of a lower price, gourmet products… All in the same space.
6. According to your criteria and experience, which are the main aspects to take into account or changes to do to adapt a catalan product we want to export to the Chinese market?
We have to take into account that most of the Catalan producers are small or medium companies. When it comes to food companies we are talking about very small productions based in quality. Quality has a production cost and this increases the price. What happens? That Chinese still don’t value the quality of products. They simply like it because it’s an exotic product, as we for example liked the kiwi when it first appeared.
A brand very famous in Spain, in Europe or even in the Amercian market, might be completely unknown in China. Products are starting to be known, but not the brands. Therefore I don’t recommend to go to China to sell as a brand. You need to do a lot of promotions, you need to spend and invest a lot of money in marketing, branding, but it is very complicated because of the lack of resources of the Catalan companies.
Everybody wants to go to China, but if you really want to go to China you need to invest. Or find the right contact: The right importer or distributor with the right channels to sell in China.
7. What advise would you give the catalan businessmen who want to export their products to China?
Don’t go crazy with the price. The first step for those companies who have never exported is to mak use of the government resources, like the chamber of commerce, ICEX, etc.
To those companies which want to grow internationally and that have already a bit of experience, I recommend the use of serious consultancies that can really help. I wouldn’t recommend fairs in China, because in those fairs, 90% of the people who attend just want to eat and drink for free. From the 10% left 5% is trying to copy your products, so only with the other 5% you might have a chance of business. It is much better to use the experience of a professional company that knows the chinese market and that will be able to guide small and medium Catalan companies.
What I trully recommend, and it is something that not many companies do yet is to go together with other companies. The Chinese market is big enough so you don’t have to see everyone as competitors. If they want to attend a fair, it’s better if they go together. In China there are 1.4 billion people. Not all of them drink wine or consume imported products, but with such a population, even the smallest % may mean millions of consumers. It’s a very big market; big enough for all of us.
8. What imported products are most demanded or receive greater attention?
I would forget about technology. The big technological companies, they all want to manufacture in China, because of the costs, obviously. The problem is that to open a factory in China you need a Chinese partner, and you have to bring the technology. The other problem is that often Chinese buy the manual and they spend their manual testing until they come up with the identical product. I believe technology isn’t an imported product, it’s an acquired product.
Pure Importing: food. Up until now it was gourmet, but as I said before, it is changing.
Fashion: all the big brands are already in China, but we are talking about a very high level. In Shanghai there are a lot of Shopping Malls with these brands, for example. But it focuses on the high class of the society. The advantage is that those who have money in China, have a lot of money.
Cosmetics: In China there is a giant cosmetics market. But you find many obstacles to obtain the license. You need to spend a lot of money for a product range and, threfore, there are few companies willing to pay or that can pay. Nevertheless, cosmetics are imported a lot, mainly from Korea and Japan.
9. Is that boom of Chinese products perceived as cheap products over?
Yes: because apart from the manufacturing costs which are not the same as 5 or 10 years ago, China lacks lots of raw materials. It’s not the case of the food industry, but it is when it comes to industrial production. Here you need to add the cost of life which is increasing a lot. In Shanghai, for example, the cost of life is getting closer to Europe’s. Specially hotels, restaurants, textile, real estate.
No: compared to Europe, at a production level, China is still cheaper.
However, there are also many companies which do not manufacture in China, and do it in Vietnam, Thailand… Because they also do a good job, and even if they haven’t reached China’s level in terms of quality, they can learn about it. Normally, we are talking about Joint Ventures with foreign companies that arrive there, prepare the employees, bring in the machinery, and from there they can start producing quality products.
We also need to take into account that the era of China manufacturing for the rest of the world is changing. Now China manufactures also for its own market. Therefore, a product might be cheap in China but not cheap for Europe. Many companies start focusing in the chinese market.
10. Personally, name a Catalan product you would like to find in China but that currently you can’t.
“Pa amb tomàquet” as dinner: Nice “pa amb tomàquet” with sausages and a good wine.
11. Finish the sentence: I will not go back to Catalonia until…
2016. I would like my son to attend primary school there.
If you had asked me more than three years ago I would have answered: until I’m rich.