Sordid stories of micro-business in China

There’s nothing special about a business venture that goes south, this happens frequently no matter which country, region or market.  Entrepreneurs learn from mistakes and try again.  In China’s case, ex-pats frequently come up with genuinely good ideas, and yet for one reason or another never make it.  Although I can’t honestly say I’ve put my eggs in a basket and tried to form a business in China, I know folks who have.  In Changchun three stories immediately come to mind, and they all have some common characteristics.  The run down, in a nutshell, is that a successful business must be inclusive to local Chinese.

The Mexican Restaurant

What struck me about the Mexican restaurant in Changchun was the price of a meal, which was sky-high due to the cost of imported cheese.  Cheese is not a staple in China like it is in many Western countries, and it sells for Western prices.  Mexican food isn’t typical in the Chinese diet either, because for many Chinese people dairy leads to upset tummies due to a high prevalence of lactose intolerance.  So, when you tabulate expensive products with undesirable food you get a recipe for failure.  The Mexican restaurant chugged along for a while, yet the client base was strictly expats and eventually the business went south.

 Mexican Grill farewell fiesta.  A business that relies on expats alone will not survive.

On a side note, Taco Bell tried and failed to make it in China as well.  I can only assume for the same reasons as the Mexican restaurant in Changchun.

The Doughnut Shop

I’m still convinced doughnuts could sell in China, however, the doughnut shop in Changchun lacked a proper doughnut machine.  The owners, who were smart Australian friends with a knack for Mandarin, knew that street traffic was the way to sell their product.  Several things went wrong.  Most obviously, they weren’t able to find a proper doughnut machine for a reasonable price.  The details are a little sketchy, but when they offered to buy a machine from a local Chinese vendor at an agreed upon price, then let the vendor sample a doughnut, she pulled the deal.  I was told she was afraid the foreigners had a great recipe and didn’t want to compete, again, kind of sketchy on the details.  After months of getting by on the local expats, the shop was handed over to the Chinese business partner and ultimately closed shop a year after I left.

The Coffee Shop

I heard an excellent program once on NPR about Chinese farmers who grow coffee beans as a cash crop, but detest the taste.  The farmer said something like, “I’ve never had a cup of coffee in my life, but I understand it’s so bitter people have to put sugar in it”.  The success of coffee in China revolves around being a status symbol, especially when a typical cup of brew runs 2-3 USD.  Regardless, I had a chance to meet several Chinese friends who started their own coffee shop in downtown CC, and I can only assume twelve owners is the key to any successful venture.  Their end game, however, was not exactly financial winnings.  As I was told, this was more or less an opportunity for each friend to build a resume with experience opening a business.  Academics alone certainly don’t cut it in the USA, and this seems to be increasingly the case in China.

Beijing: the Kro’s Nest Fiasco

This is old news, and not necessarily my story to tell, however when I went to the Kro’s Nest pizzeria in Beijing I ran into the fury of several local expats.  The Kro’s Nest, located at Worker’s Stadium in the San Li Tun district, sells excellent American style pizza.  As per Chinese regulations, the American owner partnered with a local Chinese who officially held majority control over the business.  The pizza was this American’s personal recipe, and it turned into a smashing success.  In 2010, however, the Chinese business partner pulled some nasty strings and had his American counterpart expelled from China, completing a hostile takeover.  I’m a guy who enjoys a nice slice of pizza whenever I find one abroad, and I never thought I needed to stop and consider the political ramifications of ordering “sausage and green pepper”, medium, deep dish.  Not being from Beijing, I was unaware of a boycott by the local expats.  When I sat down at the restaurant with a few friends I made at the hostel, a group of Beijing expats demanded to know why we were there.  That’s a dumb question, I thought, we’re here because pizza is delicious.  Then they told me the sordid story.  So, I fired back, why are you breaking the boycott? It’s hard to give up the best pizza in China.

 Not the Kro's Nest Pizzeria

for an excellent re-cap on the full story, visit:
http://www.adamdanielmezei.com/beijings-kros-nest-debaclein-a-nutshell/2805

If there’s a lesson to take away from these examples of micro-businesses, the bottom line is to develop a Chinese customer base and don’t be totally reliant on expats.  Once a business makes it, you won’t even need the foreign devils.