This article is part of an ongoing โAsia Pacific Insights Seriesโ, co-authored by Vivi Chen, Cica Chen and Jim Xiย designed to give you quick and simple tips to access new markets and elevate your business.
When youโre selling a product or service to a different country, there are always extra risks and complications. With the rapid growth of EdTech in China, more Australian businesses are keen to export overseas.
Before taking the leap, ensure youโve assessed all the risks economically, politically and environmentally. We dive into the top risk factors you should consider when planning to export your EdTech services to China.
Chinaโs local competitors and giant investors
According to the Glocal Edtech Unicorn list[1] released by Holon IQ research in Feb 2021, Chinese enterprises (Yuanfudao, Zuoyebang and VIPKid) took three places among the five most valuable EdTech entities among the world. The same group released another report on venture capital (VC) that indicated in Q1 2021, China outpaced other countries and had the greatest VC funds from 2010 to Q1 2021 in the EdTech sectors. Their total VC fund ($28.38 billion USD) is more than all other countries combined.
What does this mean for Australian exporters?
Australian EdTech business need to select their subdivisions carefully before entering the Chinese market. Domestic VC and giant enterprises ramped up around 2015 and would already have partnerships with local competitors who have a good understanding of the demographics and market needs. You want to avoid competing in the same space unless you have a compelling โnicheโ or service offering.
For example, K12 education has been the most competitive EdTech sector in China and has attracted the most domestic VC over the past two years. Plan ahead and do a competitor analysis to confirm your strengths and weaknesses before you invest money and time to export.
Over the next two years, we expect to see a wave of exits from startups failing to prove profitable structure. The domestic VC in China for Q1, 2021 reported a noticeable drop comparing to Europe and United States. This could be good timing for Australian exporters wanting to enter the market.
Products and services need to be โlocalisedโ
Thereโs a fine line between localising your product and keeping your brandโs authenticity. You need to consider culture, linguistics and customers. A foreign brand entering a market has more challenges than a local business. [2]
Take Uber as an example. Uber encountered problems with local variances and national regulations. The company requested credit card details to open an account, an issue for many Chinese users. Uber experienced issues with map coverage and Chinaโs firewalls and after changing their core product, they sold their operations to a rival Chinese ride-share.
Despite dominating the market in other countries, foreign companies like Uber can be subject to even more regulation than their local competitors. By trying to reach a mass market ย rather than their initial โnicheโ market comprising wealthy Chinese people and expats, they were presented with more challenges.
What does this mean for Australian exporters?
Although the EdTech sector is different, K12 education and culture between Australia and China has various nuances and attitudes that you need to consider. Students and parents in both countries have developed different user habits of EdTech apps. In China, K12 education is more result driven rather than interaction driven.
TIP:
Break down the elements that will make your product popular in the Chinese market. Research is your secret weapon. Look at historical data and what brands have worked or failed and correlation between successes in different segments, brand identity and positioning. The more knowledge youโre armed with, the better you can adapt your product or service to be attractive to local buyers.
The domino effect from trade tensions
Over the past year, China has enforced up to 200% worth of tariffs and sanctions on Australian products. Australian beef and lobster were blacklisted and other policies restricted exports on charcoal and timber from Australia to China[3].
Bilateral relations between the two countries has interfered with exports and many businesses have sought out alternative markets for their supply. There is uncertainty around the near-medium future which causes concern for importers-exporters. Despite the fraction, Chinaโs government is committed to fast-tracking the growth of EdTech and rolling out policies to support AI-based learning solutions.
What does this mean for Australian exporters?
As trade disputes continue, Australian businesses can take measures to safeguard their exports to China. Chinaโs 14th Five Year Plan presents several opportunities for EdTech services. When planning your market entry strategy, identify any particular threats and barriers to your market access. Areas like supply chain flexibility can also affect the viability of whether you can operate in another country.
What resources are available to Australian exporters?
There are a number of financial assistance programs available to Australian SMEs such as the Export Market Development Grant (EMDG). In this series we will continue to share industry updates and spotlight the latest grants and incentives. Stay tuned for our next article which will cover the top resources every exporter should know about.
Other articles in this series:
Chinaโs growing EdTech market and opportunities for Australian tech exports
Whatโs ahead for China-Australia relations โ the export opportunities for Australia businesses
Indonesiaโs digital health boom and the opportunities for Australian healthcare providers
