The Ultimate Guide to Crowdfunding in China
So, you’ve decided to crowdfund your product in China... 😈😈😈
That's a great idea, but just remember that DIY crowdfunding in China is not for everyone.
In addition to having a ready-made product, here are some other things you will need:
- A Chinese speaker;
- A registered Chinese company
- An unusually high tolerance for pain and suffering! (skip to application processes)
If you are missing any of the above, you are not off to a great start, and you should probably just hire Chinable!
At Chinable, we can handle your entire campaign from zero to bank. We are experts at all of China's major crowdfunding platforms. We also have some serious marketing chops when it comes to Chinese social media and influencers.
That being said, if you're still feeling gung-ho, or if you just wanna see why Chinable gets paid the big bucks, then read on!
This article was written for Kickstarter creators, director-to-consumer brands, wholesalers, distributors, and anyone else looking to sell products in China!
What will you get out of this article?
In this article you will learn:
- The different types of crowdfunding;
- Why you should crowdfund in China;
- The differences between US and China crowdfunding;
- The most popular platforms in China and how they work; and
- The best practices for marketing your campaign, especially with regard to trust and reputation.
We're also going to squeeze in some case examples involving two famous international brands.
Let's get started!
The different types of crowdfunding
In this article, we are focusing SOLELY on the rewards-based variety of crowdfunding as popularised by US platforms such as IndieGoGo and Kickstarter.
As for donation and equity crowdfunding, we recommend giving those a miss in China. There is too much funny business here. In fact, I remember in 2018 when the Chinese government banned all P2P lending. There were literally dozens of scammy P2P lending companies in my building in Shenzhen that packed up everything and vanished overnight.
For weeks to come, mobs of angry lenders, just regular people who had lost their life savings, went door to door with sticks and garden tools trying to get their money back.
What I'm saying is, unless you have some experience in the shady arenas of China's donation and equity-based deals, it's best you keep your distance.
Why you should crowdfund in China
For the money, of course! But also to establish your brand and build up a reputation.
By now, you've probably heard about China's booming e-commerce platforms. But did you know that that there was $1.2Tn worth of online sales in 2019? Or that during their 2019 Singles Day (China's answer to Black Friday), Taobao.com, China's biggest online marketplace, sold a whopping $38 billion worth of consumer goods in one single day? That's more than Amazon does in an entire quarter.
So, absolutely — If you want to get a piece of that action, or if you are already doing in business here and you want to bring in more revenue, crowdfunding is a solid option — Provided you have the right team and partners.
Just like in the US, companies use reward-based crowdfunding in China for a variety of reasons: It helps them enter the market. It connects them to new fans and influencers. And, if nothing else, it's just a great way to make bank.
You do not need to be a direct-to-consumer brand either, or an exclusive licensee. You could be a wholesaler, an influencer, or something else. China's crowdfunding platforms don't particularly care.
That being said, just like in the US, gone are the days when you could expect to get results without first understanding the market and having a game plan.
The differences between US and China crowdfunding
The two main differences are culture and shopping ecosystems.
Adhering to cultural norms in China is far more critical than it is in the US.
China's crowdfunding platforms are also relatively newer. Demohour was the first Chinese rewards-based platform to emerge in 2011. Nowadays, it is virtually a zombie app. However, it does teach us a valuable lesson about China.
You'll notice we talk a lot about trust and reputation in this article. That's because these things are very, very important in China (VERY!). If Chinese consumers can't research your products; If they don't feel like other people are already buying them, nothing else will matter.
As a carbon copy of Kickstarter, Demohour ultimately failed because it did not adjust to China's cultural differences. Chinese people are highly accustomed to rip-offs and scams. The average Chinese shopper will not put money into toys, gadgets, consumer goods, or other physical products without an ironclad guarantee that they will get what they pay for.
To protect consumers, all of today's popular Chinese crowdfunding platforms require that sellers have ready-made products before they launch their campaigns. In that way, crowdfunding in China functions more like "Crowdbuying." The way you should market your campaigns is less about reaching early adopters and more about providing value through exclusive access to hot products and lower than normal pricing.
In the US, crowdfunders buy products that don't even exist yet. Maybe they feel cooler or smarter than other people, or perhaps they are nerdy. But they tend to size up every feature. They are also beneficent; "This product must exist!" they think. "We need to support these creators!"
In China, don't try to target the same sentiments. What works for your regular product marketing in China will work for crowdfunding.
As for shopping ecosystems, and I think this speaks to the same point about trust—four out of the top five platforms were created within pre-existing leading e-commerce channels such as Taobao, Jingdong, and Suning.
Except for one platform (Modian,) they are not standalone channels like Kickstarter and IndieGoGo. Their ecosystems have user bases of more than 800m active shoppers who do not need to create new accounts or input new payment methods to participate in your campaign. This is all excellent news for your brand.
Popular Platforms
Here are the top five platforms (and the only ones we recommend). The 6th one, Pinduoduo is unique.
Website: https://izhongchou.taobao.com
Biggest ever campaign: Xiaomi Mobile Phone — Raised USD $5,085,000
No. successful campaigns so far: 2,000+
No. backers so far: 100,000+
Main product categories: Tech, design, food, art & culture
Commission: 0%
Campaign lengths: 30 days
Product must be ready-made? Yes
Creator must have local company registration? Yes
Application and setup process
The seller should already have a Taobao Shop.
When publishing a project to IZhongChou, the seller will need to sign the "Taobao crowdfunding platform service agreement".
Depending on the product type, the seller may also need to meet these conditions (Sorry about the less than friendly translations):
1. The three indicators of the Seller Rating of the store in the past six months are not less than 4.6 (the date of opening the store for less than half a year from the date of opening the store);
2. The store must be open for 30 days or more.The commodities involved in the project and project are executable (i.e. ready to ship), and the project objectives or commodities must be clear, specific and measurable.It must be an innovative product (including online sales and offline sales) that has not been sold in public.
3. The seller must bear all the freight for the first shipment, only the mainland region (excluding Hong Kong, Macao and Taiwan regions and countries and regions outside the People's Republic of China).
4. If the project sponsor is not the main body of the store, it must provide the certificate of the authoritative relationship between the promoter and the store, the business license of the project sponsor, the identity document of the legal representative or the person in charge of the company, and the letter of commitment;
5. If the person is not a business, the identity document of the project sponsor and the Letter of Commitment must be provided.
6. All submitted product and event page materials must ensure that there is no information that infringes on the intellectual property rights and other legal rights of others.
7. The project information should be clear and regular. The project shall correspond to the category, and shall not issue lottery tickets, lottery, startup company/website/store, equity, bonds, dividends, interest and other related items.
For certain product types, the seller will also be required to submit qualification certificates:
Science and technology projects
Products within the scope of 3C compulsory certification must submit a 3C certificate.Products within the scope of non-3C compulsory certification shall be submitted to the quality inspection report issued by a third-party certified by the state within one year.Apple-related digital accessories must be submitted with the certification of Apple MFi.The electric travel tool shall submit a quality inspection report issued within one year issued by a third-party certified by the state and product insurance not lower than the total selling price of the electric travel tool.
Food items
Taobao sellers must meet the "Taobao Food Industry Standards" and "Taobao Health Food Industry Standards", Tmall merchants must comply with the "Tmall Food Management Regulations" ;Alcohol, prepackaged food, health food, and food for sale shall be submitted with the Food Circulation Permit or the Food Production License or the Food Business License or the Catering Service Permit;Meat and poultry shall submit the "Inspection and Quarantine Certificate".
Books/audio and video projects
It is required to submit a Publication Business License or a Book Publishing License;Books or audio and video that must be published by the mainland publishing house.
Adult Products/Sex Toys
Taobao.com sellers must meet the “Taobao Adult Products/Sex Toys Industry Standards”. Small merchants must meet the “Tmall Adult Products Industry Standards”.
Bags and leather goods
The sellers of Taobao.com must comply with the relevant provisions on the release of goods and information in the “Material Standards for Taobao Products.
Other projects
If the project is jewellery or precious metal, the certificate of the relevant department shall be issued; and the seller of Taobao shall comply with the relevant provisions on the release of goods and information in the “Material Standards for Taobao”.
Website: https://z.jd.com/
Biggest ever campaign: Taichi Circuit-Breaker — Raised USD $17,219,144
Main product categories: Tech, design, food, art & culture
Commission: 3%-8%%
Campaign lengths: 25-60 days
Product must be ready-made? Yes
Creator must have local company registration? Yes
Application and setup process
The requirements differ for Individuals and Companies.
For individuals:
1. Citizens of the People's Republic of China who are over 18 years of age (excluding Hong Kong, Macao, and Taiwan);
2. Currently limited to designers, directors, writers, musicians, inherited heirs, farmers, etc. Or ability, the rest of the categories can not initiate personal crowdfunding;
3. Have domestic mainstream bank savings cards;
4. Provide the necessary identity and qualification certification, according to the project content, may include but not limited to an ID card, passport, education certificate, etc.;
5.
Read and fully agree to Jingdong's crowdfunding "user agreement," the product category crowdfunding should carefully read and fully agree, "Jingdong crowdfunding return the service agreement."
For companies:
1. Companies registered in China (excluding Hong Kong, Macao, and Taiwan);
2. Business license (make sure the goods sold are in business scope). Organization code certificate. Tax registration certificate or three certificates (three certificates) The contract includes the business license, organization code certificate, and tax registration certificate);
3. Trademark registration certificate or trademark acceptance certificate (the trademark acceptance certificate is more than six months if the change or transfer is required to provide the replacement, transfer or renewal issued by the General Administration of Trademarks) Notice: If the non-trademark holder initiates a step-by-step sales authorization, it can be traced back to Jingdong from the brand; if it does not involve the trademark, it is not provided);
4. Provide a bank account opening permit (with the seal of the People's Bank of China) The legal representative is consistent with the business license. If there is any inconsistency, please provide the certificate of change issued by the Industry and Commerce Bureau.
5. Provide the legal person ID card (copy of the front and back). If the authorized person is a foreigner, please provide the resident domestic certificate;
6. Patent certificate ( no not provided);
7. If the project uses a star's image or endorsements, then need to upload the relevant authorization documents;
8. The necessary industry-related qualifications
Note: Self-employed households do not belong to the main body of the company and cannot initiate projects according to the main body of the company.
Qualified individual or company sellers should apply for an account ID and wallet from https://z.jd.com/ as follows:
1. Submit documents as described above to get requested to get a certificate verification. If the applicant is an individual, this certification will take 30 days to verify, and another ten working days to verify the project. If the applicant is a company, the certification phase will be complete in 2 working days
2. After submitting the certification verification, the seller can publish the project immediately.
Website: https://home.mi.com/crowdfunding?_rt=weex&pageid=5 (mobile)
Biggest ever campaign: Hand held vacuum — Raised USD $5,874,285
Main product categories: Tech, design, food, art & culture
Commission: Neg.
Campaign lengths: Not stipulated
Product must be ready-made? No
Creator must have local company registration? Yes
Application and setup process:
To publish a project on the Xiaomi platform, they have to like you. The only way to apply is to send them an email with your product and company description to: mijia-mall@xiaomi.com. They have been known not to answer emails. Sometimes their customer support are helpful. Other times not.
Website: https://www.modian.com
Biggest ever campaign: Interactive cultural puzzle book — Raised USD $2,886,057
Main product categories: Tech, design, food, art & culture
Commission: 6%
Campaign lengths: Not stipulated
Product must be ready-made? Yes
Creator must have local company registration? Yes
Website: https://zc.suning.com
Biggest ever campaign: Suning membership card — Raised USD $15,690,000
Commission: 0.6%
Product must be ready-made? Yes
Creator must have local company registration? Yes
Website: https://en.pinduoduo.com
Main product categories: Household items, everything
Commission: 0.6%
Product must be ready-made? Yes
Creator must have local company registration?
Pinduoduo has two platforms: The Pinduoduo platform for Chinese Users (In Chinese) and the Duoduo platform for international users. Pinduoduo requires sellers to have a local company registration in China. Duoduo International supports overseas business entities. However, it's not that popular.
Overview:
Pinduoduo is an e-commerce giant in its own right and not like the other crowdfunding platforms.
Many years after the rise and demise of concepts like Groupon, Pinduoduo's combination of massive discounts and social virality has turned out to be a big hit in China.
They call their model "team purchase." They basically turn every one of their 400m+ users into affiliate marketers. If you can convince several or more of your friends to buy the same item as you, you will all get up to 90% off. Typically the more people you convince to buy, the more you save.
Buying targets may also be publicly funded. If the buying target is reached, everybody gets the deal. Pinduoduo went public in 2018. Nowadays, they are a household name in China with sales volumes of USD 6Bn per year. And its doubling in size every year.
As you might have already guessed, Pinduoduo is a good place to buy cheap, generic, and frequent replacement products. There is very little brand cachet on this platform. The average sales price for each item is around US $2.
However, you do see some quality FMCG brands using the platform to build their reputation and test the market. Because after all, getting your brand name and product out to 5m+ buyers is not a bad thing right —Even if your margins are slim or non-existent. TechCrunch wrote this article about Pinduoduo in 2018, which goes into more detail about their model. Here is a handy video tour explaining how the Pinduduo app works.
Best practices for marketing your campaign
To run a successful crowdfunding campaign in China, make sure your key messaging includes a strong value proposition (i.e., cost-benefit analysis and "getting a great deal"). Also, draw attention to your branding and reputation as much as possible. One way to do this is to link to customer reviews on other channels. Even if they are in the US.
Chinese shoppers under the age of 45 usually know what Amazon is. On the whole, they actually trust foreign companies and platforms more than local ones. However, only around 5% of them can read English. One idea is to provide a link to your English language reviews, then include some translations to help your audience follow along. Use graphic design to put reviews and translations side by side in a single image, or a series of images.
Another way to create trust is to link your crowdfunding campaign to pre-existing communities and conversations on Chinese social media platforms.
Of all the potential ways you can enhance your reputation, the most timely and effective one (which is also the most costly) is to engage targeted influencers, which we discuss later in the article.
In sum, do whatever it takes to get word of mouth in China. Be bold. Be different. But do not do any marketing around Chinese cultural themes or stereotypes. And do not say anything even remotely political.
Smart marketers in China may use nationalistic messages and Chinese solidarity to garner results, but it only works for local brands.
Lastly, remember that given the sheer size of the Chinese market, niching your product is crucial. Be willing to make distinctions about who your product is made for. Appeal to those communities' aspirations and make them feel like they are buying a major life-upgrades through your product.
China's social media channels
WeChat is the largest social channel in China, with over a billion users in total. To compare with Western platforms, it is like Facebook, Skype, and Whatsapp all rolled into one. But it also allows its users to play games, sort out their finances, and shop. Most well-known brands advertise on WeChat through personalized user feeds that are not too dissimilar to Facebook. They also operate 'Mini-apps' within the WeChat app, which are like mobile websites. Mini-apps can do just about anything that a website can do, like giving users forms to fill out and taking their payments.
Sina Weibo
Sina Weibo is the Twitter of China with just under half a billion users. Although it does also provide long-form content. Weibo (Which means "blog") is an excellent tool for creating word of mouth and doing market research.
Duoyin
This is TikTok in China, made by the same company. It works almost exactly the same way its just in Chinese. Users post 15 second video clips of whatever they feel like. Influencers make big money for reviewing products on Duoduoyin. Humorous content gets the most views.
Social commerce platforms:
All major e-commerce platforms in China integrate social features in a much bigger way than US platforms like eBay and Amazon. Some Chinese e-commerce platforms, such as Pinduoduo, which we detailed earlier, as well as XiaoHongShu ("Little Red Book" in English), have made it their mission to combine social behavior with shopping. Think of XiaoHongShu as Instagram plus a buy button. They mostly cater to young Chinese women. Anyone can post and talk about products they like or give tips about beauty, travel or building a designer home for example. XiaoHongShu focus on high-quality content, well-known brands, and upgrading their users' lives through materialism. They have over 100,000 influencers using their platform's native influencer tools.
Influencers
Influencers (also known by the old-schoolers as Key Opinion Leaders or KOLs) are an essential part of your marketing stack in China. The creme-de-la-creme of Influencer stars in China are out there commanding vast armies of hungry shoppers to love or hate your shit.
One properly-thought-out post has the potential to drive tens of thousands of page views to your crowdfunding campaign and significantly influence the purchasing decisions of your would-be customers therein.
Several influencer platforms such as Robin8, Newrank, ParkLu, and Weiboyi make it relatively easy for brands to connect with Chinese Influencers who are suitable for working with specific product types and demographics.
Without previous relationships or warm introductions to influencers, here is what you can expect to pay:
TIP: For rough conversions to USD, divide RMB by 7.
Although influencers might seem expensive, the trick is to use well-placed posts by Influencers to get traction for your organic marketing, while at the same time connecting with new influencers that might support your brand without charging.
Influencers need content. They need to provide value to their audiences.
If influencers come across your content posted by other influencers, and they think it has value for their own audiences, they may reproduce or repost it free of charge, including your call to actions.
If influencers and their audiences have material incentives to share and create word of mouth for your brand via affiliate deals, discounts, or giveaways, that's even better. Try using influencers as a way to kick-off viral loops. Use FOMO (fear of missing out) and exclusive access to hot products.
And don't forget that influencers are like journalists. They are more likely to work with you and repost your content if you already have a reputation and a story to tell. There is a well-proven approach to public relations that talks about building a pyramid of promoters. The same can work for influencer marketing.
You start by reaching out to hobby bloggers and wannabe influencers who are enthusiastic about your products and happy to work with just about anyone who shows an interest in them and their work. After they post about you, you move up to the next group of bloggers and/or influencers who are slightly more established and have bigger audiences. Seeing your previous recognition from the first group gives the second group the validation they need to work with you. And, so it goes with the third, fourth, and fifth groups of influencers.
Why does this work? Because the first time an influencer hears about you, they will search for your brand, and they will look to see what other people are saying about you. If they don't find anything, or if they have loads more clout than the last guy or gal who wrote about you, they probably won't be interested.
By climbing the PR pyramid long enough, you can eventually reach out to the holy grail of influencers. In China that looks something like this guy, Li Jiaqi - a male influencer who reviews women's lipstick.
Granted— Jiaqi probably doesn't get out of bed for anything less than fifty grand USD (look how many people he has working for him in the video), but he also doesn't advertise non-established brands and products. Hacking influencer marketing in China is just like hacking PR. The formula is value x reputation. Try to work with influencers who are different, and have a niche product or lifestyle focus, but aren't controversial.
Case examples of successful campaigns
A great example of a successful campaign on IZhongChou is the Phillips Smart Lock.
Philips was able to lock in 985 buyers and sell over USD 1.2m worth or product. What's great about their campaign is that they were able to convince people to spend around 2-3x the cost of similar products made by local brands.
Their value proposition was strong: A brand you can trust and a free "one-step" installation by direct employees of Philips.
Let's also recognize the quality of their video. It's super sleek and goes straight to the heart of upgrading customer's lives. On the front door of an expensive-looking apartment, you see the very cool Philips smart lock which connects to a top of the line mobile phone. You open the door to peek inside, and you see a plush 12-seater couch as well as some tasteful artwork on the walls. Philips wasn't selling a door lock. They definitely weren't selling something new or technologically advanced like you might expect from a Kickstarter campaign. They were selling success.
Limited edition, family-oriented, and loads of value through bundling. This neat little campaign had it all. The seller (who was not the brand itself) sold almost fifty thousand US dollars worth of lego bundles in the space of one month. It also got a list of 1200+ uber lego fans, which they would be mad not to retarget later for further sales.
Summary
We hope you liked the article. If you want to work with the best crowdfunding agency in China, go to our homepage and choose a package. If you've got something else in mind, feel free to hit us up for some free, no-bullshit advice about China.
E: dean(at)chinable(dot)io
