Episode Description
Frank Li, a China market specialist, shares his journey from arriving in Australia unable to speak English at age 10 to becoming the Dux of his Catholic school by year 12! He discusses his career path, including his MBA from AGSM and his transition to China in 2004. Frank founded 31Jiu, a beverage distribution company, and later secured distribution rights for Bundaberg ginger beer in China, which became a huge success. Despite challenges, including a severe lockdown in Shanghai, Frank sold his business to Jebsen Group in 2022. He now consults Australian brands entering the Chinese market, emphasizing the importance of cultural understanding and strategic partnerships.
About Frank Li
Connect with Frank here: https://www.linkedin.com/in/frank-li-6954396/
TBC Enterprises Limited website: https://www.tbclimited.com/
Points of Interest
Frank’s early life: 0:56
The start of Frank’s China journey: 6:32
Understanding two cultures: 16:27
The Bundaberg journey: 19:23
Selling the business 34:28
Getting back to Australia: 43:45
The Geopolitical state of China: 46:48
Finding business partners and the Chinese culture: 1:05:24
Transcript
Note: This has been automatically transcribed so is likely to have errors! It may however help you navigate the points of interest.
Mike 00:10
Welcome to the troubleshooters podcast with me. Your host, Mike McGrath, now today’s guest is a genuine China market specialist and Troubleshooter. Frank Li started bill and successfully sold his large Chinese distribution business to a big European buyer in 2023. This is a great rags to riches story and another testament to the power of hard work. So sit back as I chat with Frank about his journey. So welcome to the troubleshooters podcast. Frank Li, Thank you.
Mike: 00:48
Now you’re a China market specialist, Frank, you’re a great, long track record of being with China. You weren’t born in China, right? Were you? Were you born in Shanghai?
Frank Li 00:56
I was born in Shanghai? Okay. And parents Chinese. Parents are Chinese. Okay, yeah. So I grew up in China, then came out here in the early 80s, okay, and, you know, since then, you can probably hear through the accent, yes, that I’ve been in Australia for a long time, so pretty much, you know, primary school.
Mike: 01:16
So how were you in the early 80s? Then when you came here,
Frank Li 01:18
I was 10 as a tenor, yeah, so the, you know, so you had, you got a good, got a background at that point in China, you knew where home was, yes, okay, and, but then you obviously got very westernized, uh, effectively, yeah, education, a, uh, what was that like in the In the 80s, treated? Well, yeah, look, it’s schooling. Primary School was okay, okay, high school was okay. But, you know, I think you’re English, like, terrible. I didn’t know the ABC, so, okay, so that would have been difficult. That was, that was, but you know, it was happy times on reflection, the I still recall the school I went to, which is actually not far from where we are sitting now, okay, St Mary’s cathedral, actually the same school that our Prime Minister’s from, yeah, although we’re we’re probably too far apart. Is it?
Mike: 02:14
Is that a Catholic school, right?
Frank Li 02:15
It’s a Catholic school, yeah. Okay. St Mary’s cathedral, um, I sacraments and stuff? Did you, I mean, it was a Catholic school, right? Did they?
Mike: 02:24
Did you do your sacraments? Or China is a kind of Buddhist country, right?
Frank Li 02:30
Well, China’s largely Buddhist, okay, but I was not religious, okay, okay, but we, we went through that school more so, because it was probably the most affordable private school option available, Okay, interesting, rather than the publicschool, I think that’s still the decision for many parents, actually, yeah. And, you know, I recall we had something like 150or 100 and something different nationalities in the school. So there was a, you know, that there was a click of Greek boys, Portuguese boys, Italian boys. So it’s quite a melting pot, yeah. And so, you know, school was, you sort of find your little pockets, if you like. And of course, there was a little pocket of the skips as we caught them back then, okay, but you know, that was very interesting. So you obviously did well at school, because you became a graduate you, I think you’re a chemical engineer. Yeah, I had the honor of actually, in year 12 being the Ducks of the school, did you?
Mike: 03:29
So you went from, that’s very interesting. You went from age 10, not knowing any English, to the Ducks of the school by 12. That’s either a very good school or you’re a very bright guy.
Frank Li 03:41
I think it is a combination of year 12 came along at the right time for me, right in terms of my educational maturity, if anything, you know, year eight, year nine, I was a bit of a bit of a rough kid. Okay, I still recall the the warning from the teacher. You just wait until parent teacher night. I will tell your mom what sort of what sort of a child you are. And I was actually quite scared, yeah, but, but come year 11, year 12 was like, you know, knuckle down. Okay, to to do the academics. And great for some and I think with most things in life, if you actually do the work, yeah, you don’t have to be the smartest person. No, you don’t have to be the most intelligent person. But if you are the most diligent and persists, yeah, then you will actually havepretty good outcomes. And for me, it was a case of, you know, I, as you mentioned, you know, I didn’t speak any English. When I arrived in Australia, didn’t know what the alphabet was. Wow,in year 12, I came first in two unit maths, two unit English. Okay, so, so that was a bit of a surprise, even for me as well.
Mike: 04:57
So, so phenomenal. And so I presume you got support and encouragement has probably been polite from your parents, because only Chinese parents are pretty keen on their education with their children.
Frank Li 05:06
My mom was pretty relaxed. She, you know, she, she really worked her ass off. Yeah. My parents were divorced, so I, you know, my dad was back in China. I was here with my mum, okay? And I still recall, you know, working three jobs, okay, to support me, and then so I was pretty much left to my own devices as to whether I was going to study or play around or do whatever.
Mike: 05:35
You computed that by sort of year 12, you thought, okay, mom’s working hard. I work hard as well.
Frank Li 05:41
Yeah. I think potentially it was, was that, yeah, and, you know,it, it was a case of, I sort of set a goal for myself for two years. I mean, year 11, year 12. It’s really only two years when you think about it, yeah, and you have a good go at it, and you see what happens at the end of it, yeah, so, so, so that was a probably internal sort of a clock setting for myself.
Mike: 06:05
Yeah. I mean, that’s a common story for the people that we, we get on the podcast, immigrant parents working extremely hard, trying to establish themselves, and that kind of rubs off. I mean, you know, we’re, I think without strong work ethic, you’re in trouble in business, really, that’s for sure. So where did the entrepreneurial bent come from? What was in your background that got you thinking about business and so?
Frank Li 06:32
So I think if we, you know, jump over to my China journey. For me, going to China was about a couple of things. One was in my work. At the time, I was working for a very large Australian company. I got to a level where, you know, theypay for my MBA. Okay, so this is Carlton United Breweries, yeah. So fosters, they pay for my MBA. And so that, obviously they recognize something in me in terms of future potential in the business, but when it came to having discussion around, okay, I’m about to finish my MBA, what can we do in terms of my my development within the company, within the business? Okay? It was a pretty much standard off ish sort of response, which didn’t really encourage me to say, let’s stay here for the next couple of years. Okay, so you left there in 2002 so how will you then roughly 31/32 so you kind of figured by that stage at perhaps the corporate scene was a bit limited. Well, there was a there was a ceiling that I couldn’t actually get through, yeah. And so it was a case of, I need to go somewhere else to find a, you know, have a career change, or, yeah, or do something different. And then, if we then fast forward to 2004 when I actually went to China and and that was, if you recall, trying to join the WTO in 2002 okay? And that was in the news, or I heard it in the news. It’s like, okay, well, if I’m actually going to do anything in terms of entrepreneurial sort of venture, yeah, now’s a good time. I was single, had a bit of savings, yeah, had a bit of business experience.
Mike: 08:16
And were you going up and down to China by then to see
Frank Li 08:20
I’ve been a couple of times for holidays, okay, not so much for business. Okay, so mom had taken you back a couple of times. Yeah, yeah. My mom took me a couple of times, and I went up there with a school friend.
Mike: 08:31
Okay, so sort of three times in 20 years.
Frank Li 08:37
You wouldn’t say that I knew China. Yeah, okay. If anything, the year actually went to China, didn’t actually speak much Chinese at all, okay, which is quite amazing when you think about my background, right? So I think speaking it really and, well, you speak it at home, but it’s a dialect of it wasn’t Mandarin, it was a Shanghai dialect, okay? And so when I got to China, everyone’s speaking Mandarin. It’s like, okay, I need to learn this. Okay, from from scratch, to relearn it. Yeah. But I had a good you know, you had a good base. You had a good base, a good start, starting point. And so going to China was a case of, it’s joined the WTO. Everyone’s going to be looking at pouring into the country. I had a bit of a invisible armor on myself, if you like, because I just graduated from Australia’s number one business school, agsm, it gives you a fair bit of confidence when you walk out of there. Yeah. And I thought I should be able to start a business in China with my background, with my experience, and also had family contacts, which always helps. So I thought now, now would be good time to go to China, because if I don’t do it now, yeah, it becomes a lot harder to do when you’re married. And this is 2004 right? 2004 so, so, and you were 30 in your early 30, early, early 30s, yeah. And the idea was to go there, set up a business, run for two years, come back. And, you know, rip the rule. Of the China Business. That was the starting point. Okay, little did I know it would take 20 years too many.
Mike: 10:06
Isn’t that the way? Yeah. So people don’t realize how long it takes to build a real it’s,
Frank Li 10:12
I mean, a lot of people talk about overnight successes, and you look at all the different so called overnight successes out there that they never are. I mean, I heard about, I heard, I heard a podcast the other day about BYD, the car that we now see all of the roads in Australia. That guy started business in 1990s Okay, as a battery maker, yeah. So you know now he’s only just now, he’s become a global Yeah, if you like, well known brand or global threat to the incumbent, yeah, car makers and economies.
Mike: 10:39
Yeah. I suppose the catalyst was your background. China’s just joined the World Trade Organization 2002 you thought, okay, there’s an opportunity for me to leverage my background. I understand the culture, and maybe I can make some money and build a business in two years. That’s what you thought. Okay, so what happened?
Frank Li 10:58
So two years became more than two years very quickly. Yeah, when I first arrived in China, all the friends and connections and family people, pretty much were of the one opinion, I arrived too late. Okay? And I sort of questioned, well, what am I too late for? I mean, we can, we can have a good gig about it today. But back then, everything in China was about property. Everyone was invested in property. Everyone was into property. And, you know, I had actually sold my property in Australia to go to China. And I thought, if I actually wanted to get into property, I should just say, back in Australia, I’m not here to jump into property, although, having said that, you know, if you look at the property prices between 2002 versus what it is today, maybe I should have, because the increase is astronomical, more more than 10 times.
Mike: 11:50
Yeah, I’ve never really understood property in China. I must admit, I’ve got a slight declare an interest, because I I earned a whole foreign enterprise in Dongguan and lived up in Hong Kong and spent quite a bit of time in China. This is 20 years ago now, but I could never compute the property prices and land values versus wages correct.
Frank Li 12:10
So it doesn’t compute right? And the thing is, and I think it’s a case of, we’re using the Western mentality of trying to work out my income and property price, and how can I actually afford the mortgage? Yeah, whereas in China, it’s not just you, it’s the whole family. It’s potentially three generations pouring the money into that one property, okay, to help you fund that and also help you pay for that so, and I think that’s where that’s effectively driven the pricing. Well, I don’t know about that. I’m Look, I don’t understand property in China, no, which is why I didn’t get into it. No, okay. And you know, if you look at my history being Australia, it was in beverages. And when I sold the business in China, it was in beverages, okay, so background in Carlton, United brewers, right?
Mike: 12:57
So you understood beverages. You understood, you know, distribution, you understood branding. So, so what? How did that business of yours? It’s called just beer, right? I know it was called just
Frank Li 13:10
No, no that that was okay. That was the first business that I ventured into with a couple of partners that didn’t go so well, okay, but that was, that’s interesting.
Mike: 13:20
So that was beer and other alcoholic beverages, really in China, correct? Okay, so always interested in in the failure before the success. So what actually happened, and what did you pull out of it? So, obviously, not a lot of money, but what did you pull out of it from a learning point of view
Frank Li 13:36
From a learning point of view, pick your partners wisely. Okay, do a lot of due diligence before you jump in. Okay, ask the hard questions, embarrassing questions that you need to ask beforehand. Okay, because it’s gonna cost you a lot down the track. Yeah. Okay. So what happened with that business was, it was, I wouldn’t say we were very successful, but we were pretty solid. We got to get good distribution across China. But ultimately, what failed was when you have partners who are embezzling money from the business, okay, and other partners find out about it, and then not fessing up to the fact that they were doing that, and then really fighting it, that does not end. Well, no, no. And so that’s what ultimately drove that business to the grave, if you like, okay? And the other part with that business was we ended up having four partners. In the end, all three other partners left China, right, and I was expected to stay there and run the business whilst everyone else was getting the same so I think the equity around that didn’t actually quite work out too well for me.
Mike: 14:42
No, okay, so you, you left that big lesson, pick your partners wisely, do your DD and you know, make sure the arrangements are thought through. And then you got into your own business center. So you had a major, major success with 31Jiu, right?
Frank Li 14:59
Correct. So tell us about this. So that was a business we started at the at the end of the previous business. And I was very fortunate that I had a very good friend who backed me, because, you know, coming out of the previous business, I didn’t have a lot of money, right? And as you know, with any business, you need to have a startup capital to actually get it going. So he was very good. He provided the finance behind the business, yeah, because he knew me as a person. And this is, I think, a classic case of, you know, you hear about investors talking about, when they invest early stage in businesses, they don’t really invest in the business, they invest in the people, yeah. So this is where he didn’t even see the business plan. He didn’t even see any numbers, but he said, How much do you need? Here? It is interesting. And so that really helped, yeah, to get rid of the pressure as to where the money’s going to come from, in terms of running, in essence, a startup business.
Mike: 15:55
And then, so that’s interesting. I mean, there’s an old saying that says money follows management, really. So when you know the money’s backing the people, fundamentally, because the ideas, some of them are great, some of them are not so good. But one thing you do know about planning is everything’s going to change when you hit reality. But good management find a way. I think that’s the difference. So it’s interesting that you got back there, but what was the problem that you were solving? What was the opportunity that you’d identified? What is it that got you to start 31Jiu
Frank Li 16:27
So that the thesis remained the same? You know, I understand Australia. I understand Western business mindset, I understand Chinese culture, and I want the new generation of Chinese people who can afford it to enjoy what I enjoy growing up in Australia. Now, it just so happened I understand beer and beverages, yeah. And so that’s where we started. The name 31Jiu. I mean, the 31 is the latitude of Shanghai, yeah. Joe the Jiu, the character is actually the Chinese character for alcohol. So within the name itself, he you hadcombination of where we operate, who we are, and also what we do. So there was no confusion in that. Yeah, and Joel is actually your English, of course. I mean, we were in China targeting Chinese, so, so the name was so people would have just immediately got older. Well, no, they didn’t. But once you explain to them, oh, then I know. Okay, okay. And the funny thing is, everyone in Shanghai who has an ID card the first two numbers is 31 okay. And, and all Chinese businesses in or Shanghai businesses, their tax file number is 31 okay. And so anyone who’s in business should know, yeah, where 31 comes from? Very good, if they thought about it, yeah. And so, you know, it was a case of bring a little bit of what I know to be good quality products to China so that Chinese people can enjoy it. And that was, if anything, the underlying starting point for, you know, the business that we did then over the years that grew too we had Italian beers, we had American beers, we had Welsh beers, we had so beers from different parts of the world that we’re actually building. And also,
Mike: 18:13
There was an emerging market in Shanghai and China for, you know, Western alcoholic beverages, right? And you were tapping into those sort of specialist niche brands, bringing them to China.
Frank Li 18:25
Yeah, there was that. Then also, you know,coincidentally, in 2004 and 2005 both line, Nathan and fosters both decided to leave China, okay, and, and that was a bit of a and I saw that as a bit of an opportunity, okay, as you know, you know, large corporates, when they make a decision like that, they’re probably not going to turn around within five years and say, we’re going to go back. And so I saw at least a five year window in which I can do their products in China, yep, and and have a go without the brands coming back in a big way, right? So, so that that was the aspect of of doing Australian beers, okay?
Mike: 19:09
And then Simon, who introduced us, was telling me that things really took off for you around ginger beer and Bundaberg, so you got the license for that, effectively, for China, right?
Frank Li 19:23
So we, we got the distribution rights for Bundaberg in China, yeah, in 2016 okay? And that massively resonated with that, with the China market, right, correct? So, so we were in the So, so the Bundaberg range of products, so this, just to be very clear, it’s not Bundaberg rum, it’s Bundaberg brew drinks. Brew drinks. So in Australia, we know the Bundaberg ginger beer, but in China, they know the passion fruit, the pink grapefruit, okay, the fruit flavors a lot more than they know ginger beer. Okay? Ginger Beer, if anything, is more of a Western flavor, more of a Western Palette, more English, if you like, yes, then the fruit flavors, whereas ginger in an indulgence product is not, does not go down well in China, Ginger is known more for health and medical benefits. So, so that that really so when we came into the market, a couple of things were happening globally. There was a Moscow Mule movement in the West, and Moscow Mule is made with ginger beer. And Bundaberg tapped into that in the in USA, yeah, and a couple of other markets around the world that was using ginger ale or ginger beer, that there was a bit of a movement around that. And at the same time, the likes of Coca Cola was playing around with Coca Cola ginger ale or Coca Cola ginger flavor drinks. So there was a quite a few brands out there that was in the ginger space, which helped us to get ginger beer into China. Then, when we first started with Bundaberg products, we didn’t know what the market was going to be like. We just saw it as an opportunity to bring another Australian product into the country. So there wasn’t a, you know, like a corporate world, we have a five year plan of what your brand’s going to do, what your marketing plan you got the rights you out of the rights. This was just another set of rights. And you see how it goes. It’s an opportunity. It’s another it was also a very much plannedstrategy on our part to move away or or to add to our beer portfolio. Okay, you know, if you look at the McKinsey’s horizons, if your core horizons beer, if you want to de risk a little bit, if you want to move away from that little bit, if you want to add revenue streams, you don’t add more beers. You add something that’s adjacent to it. So for us, that was soft drinks. We could have done wine, but wine is actually a lot more capital intensive. Yeah, as many companies in the world have shown that it doesn’t work. It’s not a fast turnover cash products.
Mike: 22:12
So Frank, you sign it up, right? How quickly did you know it was okay, it was going to be a winner and transform everything,
Frank Li 22:19
When you were on to win a even before the first shipment arrived. Is that right? Because we actually sold it, okay, pre sold it. So good sign. So that was a good sign. It was also, it also goes to show that we had a good customer base, okay? And we actually sold the first container, first shipment of 1400 cases, before you actually arrived right, which was great for cash flow, in that sense, because you know you’re getting cash in before you even pay for taxes.
Mike: 22:49
So you started this in 2013 So when was this on that? And then you sold out in 23 So where were you on the journey when you got hold of the, the the Bundaberg opportunity.
Frank Li 23:03
I mean, we’re still very early stage, you know, journey, still trying to, still trying to play around with our business model. Okay, so by that, I mean, you know, a lot of people who do distribution in China, there’s couple of ways to cut the cut up the cake, if you like. You could actually do national distribution yourself, yeah, which is very resource intensive, very capital intensive.
Mike: 23:31
So you, you tapped into a distributed network, did you
Frank Li 23:35
Or you could actually do what we end up doing or choosing to go down the path of is using a network of distributors to grow the business, yeah. Now, obviously, when you go from the first model to second model, there’s a whole question around margins, because when you add in a layer of distribution, I’m going to give away giveaway margins. But with China, what you get is a huge uplift in volume. Okay? As we get rights from the brands to distribute in China, we also then give rights away to our distributors to distribute within either a certain channel or within a certain geographic region, okay? And that gives them some certainty that if they grow their business, they’re not going to get cut out by someone else. Yeah, and having that sort of certainty for our business partners in China actually was what I think really helped us get on the escalator to grow in our business. And you already had those relationships. We had some of those relationships. We didn’t have a lot, because our business model in 2013 was very much with your distribution ourselves, okay? Because, you know, on paper, look great, yeah, margins are great, yeah, when you actually go through the other model, you got to give away not a few percentage points, quite, a quite a bit. Yeah. But what you do get is growth, growth and and without the capital to fund. Well, you know, you don’t need to have your own staff to go to each venue, right? You your distributor, have do that one.
Mike: 25:12
And were these venues different to the alcoholic venues? I mean, with it, was it a separate yes or no?
Frank Li 25:18
I mean, retails, retail, onlines online, but pretty much for us on premise was, by and large, still the same venues that we went to. So we will go to a bar and sell our soft drinks and beer. And it just so happened, the soft drink, the Bundaberg soft drink, sat in that space where people either a didn’t want to drink, yeah, which is a trend now globally, the young, younger generation, but they still want to go out. They don’t want to drink, either because they don’t want to drink or because they need to drive, okay? And China has a zero tolerance to drink driving. Okay? And so we sat in that fridge space by ourselves in a category that was came out of nothing, okay? And it was at a price point that was just a little bit below the beer price, or about the same. And so people you know were getting the same drink size, having a good night, enjoying themselves. And you have a product that look great, taste the Great, yeah, which is also very, very important. And so we were able to leverage that, and in that sense, the markets that we sold to for beer was the same markets or channels that we sold to for Bundaberg. Okay, so there were synergies in that, and with the growth of that, we then developed on trade off trade, so retailers and then E commerce took off as well,
Mike: 26:43
And you’d been there since oh seven, so you’d had some of those relationships for a while, and you’d learned a lot aboutabout China, because you were new to China. So you’d learn a lot about the culture and the game by that stage.
Frank Li 26:55
So because it is different, isn’t it, it’s very different. The relationships that we had in oh seven were very different to the relationships we had in 2013 okay, because our business model is different, it changed pretty much overnight. We didn’t have distributors. I mean, we had to find new distributors in different parts of the country, which is new for us so and we then took on things like doing trade fairs to try and find distributors. We brought on wholesale managers whose only job was to go and find distributors around the country, and then we will qualify them, and we will, you know, look, bring them on board, and then we work with them. Yeah, for us, it was a case of having a little bit of success with that business model of using distributors and then doubling down on that
Mike: 27:44
Okay, so were you considered local Frank at that point that people saw you as local Chinese boy, you know? So the business crew became successful. When did you get your knock on the door? When who approached you? And how did that come about?
Frank Li 27:52
So what I think the easiest answer to that question will be, it depends, okay, to to the Western person in China that considered me as local, okay, to the Chinese person in China that considered me as foreigner, okay, I had a good friend who said, did that help you or hinder you? It helps, because I can actually play both sides, okay? And I understood both sides, okay. You know, people talk about the whole Chinese banquet culture, where you got to drink lots of alcohol, my staff knew that I didn’t drink a certain I don’t drink the Chinese white white liquor, the rice spirit. And so whenever we have a meal with a client, they would say, I only drink beer or wine, okay? And that’s, you know, stated up front, because they say in China, I might look Chinese, but because my growing up in Australia, I don’t, I’m not used to that. So I’m actually used to be so setting those sort of things early on with our customers, our distributors, was good, yeah, yeah. So, so I was able to, you know, play both sides, if you like, yeah, in that sense, yeah. So I my daughter was born in 2012 Okay? And, you know, we were quite happy in Chinathroughout all the years. Yeah, I think couple of turning points. One was realizing that, you know, one of the holidays back here, that okay, maybe when you think about education for for my daughter when she’s a bit older, and this is not, not to say that Chinese international education is not good, if anything, you know, China, or Shanghai at least, has some of the best education in the world in terms of academics and so forth. So it wasn’t so much about that as more so around the more well rounded education that, you know, okay, you would get in Australia versus, say, China. Okay, so that was one, I think one, one thing that we that was probably important, and then the other aspect was probably around COVID, okay? Um.And for anyone who lived through the lockdown in China, that was probably,if you like, the last straw, yeah, but you know, we were well on the way towards an exit, or looking for an exit, just before that.
Mike: 30:15
Okay. I mean, for those that don’t know, it was fairly brutal. I mean, Simon Minetti, as you know, work works for us. And was up there during the lockdown, and, you know, I mean, he said it was pretty he couldn’t wait to get back.
Frank Li 30:29
So, so Simon, you know that they had a tough because they had two very young kids, and they were, they were getting, if you like, getting the full on Chinese treatment, yeah. Whereas for us, put us right. We were locked inside for 66 days. Okay? And I speak to people you know in Australia, talk about about LockDown. They say, Yeah, we have lockdown. We had 100 odd days in Melbourne, or whatever it was in Sydney. And you know when, when I explained to them the Shanghai style of lockdown versus what they had? Yeah, it’s chalk and cheese. I mean, we were not allowed to leave our front door, right when you think about it, you live in an apartment block, yeah? And you can’t leave your front door, wow. Let’s put it this way, a person in jail has better rights than we had at the time if you’re in jail, yeah, let’s get let out for bit of time for sunlight during the day. Yeah, we were not even allowed to leave for that. Okay? The middle it got better towards about a month in. But, you know, in the first two weeks,
Mike: 31:32
It was a remarkable time. Was it was emotional. It was a remarkable, I mean, it was almost biblical. I mean, I mean, it’s understandable, Frank. I mean, I remember I was able to come to the office, but I remember looking up and down George Street, there’s just nobody there. It was just, I mean, it’s a big by Australian Standard. Sydney’s a big city. There was literally nobody out. It was amazing.
Frank Li 31:58
I mean, at the end of March, 2022 he had one of the vice mayors of Shanghai come out on international news saying, We will never do a lockdown. Now, typically, when someone from the government says something like that, that means they’re not going to do it. Okay. But on the first of April, even before that, Shanghai started with a four day and four day quarantine between the east of the city and the west of the city. So pu Dong and pushy So the city is divided by the river.The Financial guys knew that it wasn’t been more than four days they actually send their traders into the office and told them, You stay inside right because they needed to trade right now. Either they had foresight, they had more news. They were just well prepared, whatever it might be they did that they had traders who stayed in there for two and a half months. Is that right now they were well fed because they were getting food brought in by their company. But I was fortunate in that I live in one of the best parts of Shanghai, if you can think of a mix of a double bay lifestyle with Harbor Bridge sort of environment. That’s what I lived in Shanghai, so I wasn’t doing badly, but for the first two weeks, we had no food. I mean, you can imagine that in a city of 27 million people, we had no food. How does that happen? Yeah, right. So, so that was incomprehensible in that sense. I mean, when you live in China as a guests of the country, you’re always gracious to the host. You’re always respectful of the rules and the laws, etc. But for that to happen so suddenly in Shanghai, it was incomprehensible, not just for me, but and I think for a lot of locals as well as expats who live there. So so that if anything sort of made us say what you know, we probably need to think about in terms of just lifestyle.
Mike: 34:17
So you sold your bus, you remember you sold your business just before COVID? Did you
Frank Li 34:23
We sold our business at the end of COVID? So October, 2022 was when we closed the deal
Mike: 34:28
And what happened to the business during COVID. So if anything, may 2022 was our best month ever. Wow, in terms of sales, wow. And this is this goes to, you know, and I have to say, both myself and my team were very good at what we do. So we’re very, very good at getting products from A to B, right. You know, during, if you look at 2021 when Australia and China had its political bust up in. You like, Yeah, we actually cleared products through the port within two days, right? Whereas a lot of people who were bringing non one products, non green products, that were not on the banned list were having the product stack of port. Okay, so in channel 21 we actually, how was that?
Frank Li 35:15
How are you able to do that? You had relationships. Well, what was going on? Combination of having good service providers, yeah, with strong relationships, yeah, yeah. And also, you know, leveraging our service providers in our time of need, okay, right? And then wording them up prior to that. So, so once people are ready for the fact that, you know, we need to, then, yeah, we need them. Then to, you know, pick up their game. Yeah. So who bought you and how did they approach you? We went to market with a financial advising company, okay, in the end, we decided on a company that was a small investment company. They called EJ Makai, okay, it’s a small, boutique investment firm with China footprint and USA. Footprint, okay, the founder of that James, James Lee. He’s based most of the time in Boston, but he also travels with China quite a few times a year, and also goes to the Scandinavian countries, okay, regularly, because that’s where his connections are, okay. So we work with them. And then so, because they were actually very good, that they got our proposal out to many, many companies, and in early 2022 we got a inquiry from Jebsen. So Jebsen group is a Hong Kong based Danish company, okay, they’ve been in the region for about 130 years. Wow, so long history. I think they’re now into the fifth generation, or sixth generation of Mr. Jebsens. They started off life as shipping merchants, I think so, shipping goods from Europe to China, and then they developed into product distribution. Today, the businesses running couple of geographies, so Hong Kong and mainland China, they operate couple of verticals. So automobiles is one of the major verticals. They’re the dealer. They own a dealership for Porsche cars, consumer products. So electronics, like watches, vacuum cleaners, electronic goods that you see around the house, they have a vertical around that. And beverages is one of the other verticals that they have. So they’re the owners of the blue girl beer brand in Hong Kong. So put it in Hong Kong, you will know that pre brand, yeah, that brand commands something like 30% market share. And the gypsum beverage beer business in Hong Kong has something like 50% market share of the Hong Kong
Mike: 37:50
Okay, so they and so you’re ostensibly the agreements that you had with various IP owners and manufacturers, the Bundaberg one was a big Did you have a fight, you know, some kind of long agreement with them, or, yeah.
Frank Li 38:11
So we had a long term agreement with Bundaberg. So we had, that’s what you were assigning, really, to them. That’s one aspect of it. So we, we had a business that top line that was growing wrapper, right? Not small digit, no, not small number, double digits. It’s quite, quite high. I won’t go into that with numbers, sure. And our ebook percentage was actually quite high. Again, double digit, all right, so we, I operate very lean ship, if you like, yeah, because I’m across all aspects of the business. And I think that is probably because my both, both the Fosters and BOC gas experience that I had, and also the agsm training that I had that actually allowed me to see all facets of the business,
Mike: 38:59
Just as a matter of interest. When did you, did you manage to pay your, your partner back? That how you found he was paid?
Frank Li 39:06
He was paid handsomely within the first 12 months. It’s outright, isn’t that great? It was many years. He didn’t have to wait too long. No, it was, it was early, which is great, because he risked his position, right? And even towards him whenever we needed, you know, as you know, with any business that’s growing, you cannot be self sufficient in terms of funding for the business. And our business was always cyclical. It’s a summer intensive business. And in terms of cash flow, you know, was always January through to August. Was very tough. September through to about Christmas time was always very good. And so, so it’s always around about, you know, each year we would go back and say, Well, next year we need, okay, a bit of a bridging loan. Already. Season, more funding. Quite predictable. But seasonal. Yeah, seasonal, very seasonal. And, and, you know, when you get consistent growth and, and, you know, we, I believe in what you promise to people you actually do okay if you can’t do it, don’t promise. It’s not just about setting low expectations, but it’s also being who you are as a business person, you know, any any brand that we take on board, be it Bundaberg or it was cub back in the day, or whoever might be, we never actually talk trading terms. No, there was always a given that I would pay them cash up front, right? So we get that out of the way. Yeah, I have no history with you. Well, why should you give me terms? But if we show some, you know, trading history, and we show that we pay our bills on time, and we show that we are consistent with what we do and we deliver on what we say, then that is a start of a building of a trust. And we do that with not just the international brands we work with, but we do that with all of our local Chinese suppliers as well. Yeah. So, so you, you’re able to exit successfully. The Danish backed Hong Kong guys bought you. And were you out straight away? Or did you have to do some kind of Yeah? So, so I worked till the end of last year, so, okay, for about 15 months in the business. Cool. And you know that Jebsen is very good. They again, they deliver on what they say they will do. And you know they, they went to find a replacement for me, going to market for that. we interviewed a lot of high profile, very talented, very experienced China operators, okay? So, so they, you know, definitely went to, went to do that work very well. Okay, that didn’t sting on, you know, trying to get someone on the cheap. So, so, because, you know, one of the questions earlier, what are the bias? One is for the contractual rights that we have, because that then shows that they have some longevity as a distributor. But the first and foremost is we were a very profitable business that was growing very quickly. And then we also actually had real customer database. A lot of people, when they talk about China, they say, yeah, we’ll get your products into China. But what they really means that they know someone who might know someone, and they’ll land your product on a shelf somewhere, yeah? But they don’t actually do any sell through, yeah? So not we were, not only were we good at selling into a retailer or selling into a bar, we actually actively help them to sell out, all right, which means you had that consumer pool, yes, so that then gave you longevity and sustainability in all the channels, in all the markets that you work. And we were very good at doing that. And you know, when we saw the business, we had 11 offices around the country, okay, where we have sales staff on the ground to help our distributors, yeah, do that? Do, do the distribution business and do or do the sales, if you like, yeah. So Jefferson saw that part of our business, and at the same time, I think strategically, they were looking for growth. As you know, you can either get organic growth or you can acquire it. And we came along, I think, you know, perfect timing as to where their business journey was for China at the time, and we had a basket of brands that they were interested in, fascinating. And, you know, they’ve now re they now have a whole new business division called Jebsen wellness, okay, purely because they now bit that they have our business unit that’s sitting there, which, so it was very strategic for them. Yes, absolutely, yeah.
Mike: 43:45
And so you, you worked on and then you, when did you get back to Australia,
Frank Li 43:51
January of this year
Mike: 43:52
Okay, great. So ostensibly, you are a definite, you’ve got a great pedigree there in China. So you, you’ve really set up as a China market specialist now in Australia to help brands and companies that want to break the Chinese local market, which is very difficult to do, yeah.
Frank Li 44:10
So, you know, my original idea of coming back to Australia was, relax. Do not much. Play a bit of golf. Do a bit of sailing.And, you know, say, long into retirement, yes. But I think you know when you when you go from a market and environment like China to Australia,you know people talk about China speed and China speeds about and you know you lived in Hong Kong, so you understand what Hong Kong speeds. Like China speeds Hong Kong, but on steroids, yeah,to come back to Australia, where it’s almost,I don’t know, to put it nicely, maybe, maybe not the best term, but it’s almost like a retirement village sleeping, right? You know, many people don’t pick up phone calls. It goes to voicemail and Um, try and get off someone after five o’clock is almost impossible. If you want to trade it to come around you, you’d be expecting at least two weeks for them to turn up, or if you or if you want to turn up today or tomorrow, you’re paying a lot of money that that was a bit of a, if you like, reverse culture shock. But not just that. It’s, it’s the lack of, I guess, intellectual stimulation as to where I’ve come from to where I’m at now. And I think I realized that, you know, a lot of what I have to give is still pretty much related to China. A lot of the connections I’ve got is still much related to China. Yeah, and there are still a lot of brands, even when we were, you know, in China, but even after came back, people were approaching me about how to get into China. Yeah. So I thought, Well, why not bit of mental stimulation, leveraging what I already know, yeah, why not? Why not get back into it, not in the same level of intensity that I was when I was operating my own business, but to the level where I can hold someone’s hand on their entry into China, and then hopefully on their first couple of steps of growing in China. It’s almost like, you know, if you think of a child, right, you can hold, you can hold their hands up to maybe primary school before they start to go. You know what? Thanks. I can look after myself now. So, so it’s almost that sort of a pathway, interesting, yeah, and
Mike: 46:30
So you, you spend some time up there. You, you back and forth to,
Frank Li 46:35
I’ve been, I’ve been up to China. So, so I was just up there for a bit of holiday, for October holidays, but I’m actually up there in two weeks, okay, in about 10 days, actually. Yeah, cool. And so we left a brand that I that’s engaged me to go up to China, yeah.
Mike: 46:48
So let’s talk we let’s get your insight, Frank, so let’s talk a little bit about China and the kind of geopolitical state of the place. So certainly you mentioned earlier, and I think it was very striking to Australians, how China fell out with Australia,around the comments that were made by our then prime prime minister about a lot of things, but yeah, yeah. Well, I mean, ostensibly we understood he was quite keen to know, yeah, how this thing came about that affected the world Tedra that was really taken badly, wasn’t it by the Chinese?
Frank Li 47:24
I think it wasn’t just one thing. It was a combination of many things. And I think just got worse and worse and worse
Mike: 47:30
And it really, it’s really effective relationship. I mean, I mean, we’ve got, we’ve got clients that are in the wine industry that have been dramatically affected by some of the fallout rate from that which still isn’t fixed.
Frank Li 47:47
Well, the one, if you like, it’s called a tariff. Call it a ban, whatever you want to call it. When someone loves 206% tax on you, call it whatever you like. That’s the end of that. That’s the end of that as a market, as a product category. So I think look, if there’s any learnings from it, you look at Australia, you look at New Zealand, throughout all of recent history, New Zealand does business with China. Australia does business with China. Australia stated China is our largest trading partner. Yeah. I mean import and export, right? Yeah. But at the same time, if you’re the largest trading partner, do you say bad things about your trading partner in a global environment, in the public news, if you have a gripe, maybe you’ve seen a say it in the background. It’s, you know, we spoke a bit about soccer at the start. If a coach has a problem with their captain, as Chelsea’s coach had a problem with his captain, you don’t say that in the news. You say that in the dressing room, you know, one on one, you don’t broadcast it to the world that this is our issue, right? So you can see from China’s perspective whether if that was one thing or many things. Yeah. And you know, if you read in the news, you know, when the previous Chinese Premier came out to Australia, around about 2015 or 16, he was meant to sign the Belt and Road Initiative at Parliament. And I think it was the day before he was meant to sign Australia walked it back. Now, you’ve invited the premier to come here. He’s meant to sign it, yeah. And at the 11th hour, you said we’re not going to sign it, yeah? You don’t give a real proper explanation, yeah, the guy walks back with his tail between his legs. That’s loss of face, yeah, yeah. That, you know, you know, you sometime, some point down the track, there’s going to be payback, yeah? All right, yeah. And so I think it’s combination of many things, but I think China’s also pretty smart. They didn’t do it unilaterally across all categories. They only picked a few. Well, they didn’t pick iron ore correct, and they didn’t pick mining, even though mining was on a bit of a gray area. For No pun intended. It was in a bit of a gray area for a little bit. Yeah, they did pick iron ore because they know they needed it. Yeah, and if anything, during those years, iron ore prices went up. Yeah, right. So, so look, it’s politically, I think was a slap on the wrists. But you know, a lot of lot of business people, a lot of Australian citizens, a lot of farmers, a lot of people were hurt by it.
Mike: 50:27
Yeah, no, no, definitely. It’s interesting where we are now, because we’re a few years on from that. Now we’ve got a new government here. There’s been, certainly overtures. Perhaps it’s not mended entirely, but certainly there’s, there’s improved diplomacy. I think going on, what would you agree?
Frank Li 50:45
I agree. I mean, I think if you, if you show some sort of respect, show a bit of show that you were maybe potentially not doing the right thing. And I think having a change of government allows that message to the hell didn’t it, right? Because, you know, the Liberal government of even if there was a, let’s say Prime Minister Albanese didn’t get into government, it was another liberal Prime Minister, I think would be pretty much in the doghouse, still, not more difficult, but having a switch in government, which, in terms of, you know, the ethos and the way of thinking is very different. It allows the government to walk a lot of things back, which is why you see us in the situation that we are now.
Mike: 51:26
But what about the future? Because, you know, if you look at China’s our largest trading partner, both import and export. You know, the Chinese is largest trading partners the USA still. So we hear things about, you know, that President Xi is under pressure. We hear things about the crisis, the property crisis and the financial we hear things about the demographics, right? There’s a huge demographic cliff. Go, what are your views on all that? Because we’ve still got 1.3 is it 1.3 billion people up there?
Frank Li 51:59
No. 1.3 or 1.4 Yeah. So give or take, yeah.
Mike: 52:02
And, I mean, at one time that was being talked about at 1.6 so there’s definitely been a downward spiral there. But, but for Australia, I mean, Australia has to, you know, you know, has to develop this relationship further. I think,
Frank Li 52:20
Absolutely, I think Australia is in a very unique situation where, you know, we, we are now in a very good spot with China in terms of relationship, okay,
Mike: 52:30
You think that you would describe it as a good spot. What better than what it was back in 2000
Frank Li 52:35
I mean, it couldn’t have been a lot worse there. I mean, right? I mean, some of the language coming out of China is fairly dramatic
Mike: 52:39
Absolutely, right. You know, I think China, in a lot of lot of ways, are very pragmatic. At the end of the day, there’s 1.4 billion people to feed, yeah, if you look at a lot of things that they’re doing today, it’s about security, yeah, be it national security, food security, whatever it might be, it’s around security, okay? And so, and I said, Australia is in a very unique situation in that it’s one of the bigger western world partners, and at the same times, it’s one of the countries that’s actually doing relatively well with China, yeah, so it’s, if anything, it’s a good conduit to have conversations with China about different global issues without upsetting, yeah, too many people. I mean, it’s interesting, you know, we look at the M and A market and, you know, obviously, I mean M and A is my day job, and, I mean, I got into this about 15 years ago, specifically. And there was a lot of talk at the time about, you know, Chinese companies wanted to perhaps buy Australian business assets. That’s never happened. I mean, at the big end of town, we saw some food security. Horrible land. Interestingly, I looked earlier that Chinese owned about 2.2% of our property in Australia. So not that high. The Dutch and the US and the UK are more property China’s. But we, all we talk about is the fact Chinese have bought all our apartments, right? So, but so that’s fairly modest, but certainly on the business front, in the five, $200 million enterprise value range, there are no Chinese mainland business buyers in the market. And that surprises me, and I do think it’ll come. I probably won’t be around when it comes, but I particularly manufacturing. So we do a lot in manufacturing assets, and I’ve been surprised we haven’t been able to tap into interest from mainland China, particularly where there’s strong IP and that can be leveraged and brought back to China. But I just think culturally, we’re not there yet. But I think one of the things that I’m seeing is that, as you know, we’re a generation on from when I started now 15 years ago, A Lot of the Chinese business owners now who are emerging have been trained in the West. They’ve been educated in the West. And I do think we’ll see more integration coming out of matter. What are your views on that?
Frank Li 55:15
It’s an industry that I’m not really into, but just very broad strokes. If you look at Chinese investment in terms of waves, a lot of it would be, I mean, the top end of town will be driven by the government. If government says, Go, Go this way, yeah, then the SOEs and the southern funds would go that way, okay?
Mike: 55:43
So that, because we’ve got a, you know, the the the Chinese Communist Party got a tremendous struggle hold on the country. I mean, let’s have it, right, and, and they’re probably the most watched and recorded people in history, right? But so ostensibly, the government set the agenda, really, for what, where we’re going to invest in
Frank Li 56:02
so, so, you know, there’s been a, I listened to a number of podcasts, and really, pretty much about China and global economies. If you look at where, you know, in 2015 china set up the Made in China 2025, roadmap, and that’s coming up next year. If you look at the key areas where they wanted to succeed, and I think the report card is pretty much that in a lot of areas, they’ve succeeded. The only one they haven’t is probably silicon chips, and that’s driven by USA not allowing them to grow. But you know, something like EVs, they probably outperform, then against the expectations. So if you look at, you know, where China’s headed, and as a result, where they might want to invest, you look at the high level documents, such as Made in China 2025 which actually does extend it into 2030 and then all you got to do is read their five year plan. Now, we are now in the FYP 14. You look at where a lot of Chinese investments go. It comes out of the high level central government documentation. If you listen to all of that, then you know, okay, directionally, where they’re going to go as a result, that may then define an industry. It may then define a geography, and that may then define a particular industry, right? So, and I think a lot of people who become successful overnight. I mean, not so much overnight, as we said before. About BYD is because when they see something that actually the government wants you to invest in and head in, everyone jumps into it. Okay, it’s interesting, yeah. And if you look at the EY industry as an example at the moment, because it’s quite a hot topic globally, right in China, there’s something like 200 200 plus EV service provider or EV manufacturers, yeah, and that’s because everyone jumped into it, yeah? Not because, I mean, yes, there was government subsidies, but everyone jumped into it, and now there’s over, over capacity. So, so that’s, that’s why they, you know, some companies are actually not profitable, but unless it’s still trying to sell their cars, yes,
Mike: 58:24
Because I know 20 years ago, when I was up there, we there was, you know, a lot of forget the name of it now, but they’re a lot of government owned companies. So you had, what were they called? Again, the state, state owned enterprise, SOEs, yeah. So in Chinese, we call them gorge and young, yeah. So, so, fortunately, the less of those now is,
Frank Li 58:42
There’s still a lot is, I mean, you know, it’s everyone, you know. I think one of the biggest gripes USA has with China in terms of market access is that the SOEs get better market access than private enterprise, right? So by that, I mean, you know, if we look at EV as an example, yeah, if the government decides that EVs will be an industry that we want, they want business to get into electric vehicles, yeah, they will then support certain companies in EV by giving them better, better loans, by having local government give them cheaper land to build factories, by Giving them better, better, uh, concessions and better opportunities, whereas small business or individual operators will get less of that. Yeah, okay, okay, yeah, because at the end of the day, you know that the government looks after itself. That’s something that you know the Australia and maybe to an extent, America, don’t actually have as a as a sector.
Mike: 59:39
Yes, yeah. I mean, certainly. I mean, my experience of setting up a wo fee in China was, I mean, they’ve taken bureaucracy to a new level of China. So you said yours up about 20 years ago, right? So that would have been a nightmare. So I remember was a complete Yeah. I’m not even sure it’s even set up. Yeah, right. Yeah.
Frank Li 1:00:00
So it is a, I mean, it’s not the intent of the central government to have that sort of bureaucratic nightmare. In my experience, the red tape is because the different departments don’t know how to work with each other to actually get you all the paperwork that you need. They’re like, you know, tax Bureau is doing its work, doing its job, and it’s got its requirements. The Business Bureau is doing its job and it’s got its requirements. The bureau that gives hands out liquor license, they do their job, so they all have their requirements, which are pretty much written in law for Chinese businesses. And so when it comes to wolf, is like, Well, what do we do?
Mike: 1:00:42
I mean, corruption was pretty rife up there 20 years ago, I can tell you, right? But do you think, and I know that the xi government is trying to clean that up. I mean, do you think that’s worked? Do you think there is do you think they’ve eliminated a lot of that kind of government type corruption?
Frank Li 1:00:59
I don’t know what the numbers are these days, but I do recall. It’s always hard to know. I do recall some, some, something like 2015 was the third year of President Xi’s reign, if you like, because he came to pass in 2012 I think was 2015 there was some data around over 1 million Chinese politicians. So this is from local government, although, after central government were either indicted or investigated for corruption, yeah, yeah. I mean, put that into perspective, there’s not even 1 million Australian politicians, from councilors up to federal level, sure. And that was in 2015 Yeah. And I think, I think, from a Chinese perspective, is those individuals either because they can or because they have no choice, yeah, will take that risk. Yeah, right. I mean, you look at it from a someone holding office, if someone comes and sees you in hands of a bag of money and insists that you take it, what are you going to do? Yeah, there’s a certain implication, if you don’t take it,
Mike: 1:02:04
Yeah, no, it’s interesting. But, I mean, you’re, you’re now on the ground, seeing, you know, taking, you know, organizations into China, in terms of trying to secure them, distribution. Now, is it, is it a bit easier now, is it, is it less, problematic when you’re trying to get set up
Frank Li 1:02:24
In terms of finding business partners, it’s easier, okay, there, you know, I started there in 2004 so that’s a generation ago. Yeah, there are, there’s the new generation, by and large or speak some level of English. Okay, so, so we know one of the barriers is less. So the language barrier is a bit less. The current generation, if they got wealthy parents who sent them overseas for education, would have had some Western cultural experiences where they’ve lived overseas for a year or two or three. So that’s remove another barrier around cultural misunderstandings, okay? And so that, in that sense, has become a bit easier, okay? You know, in the FMB sector, which is still, I mean, FMB is not finance, it’s not high finance, we know. So, so it’s not as attractive and lucrative as that sort of business, so that the people who who end up working in FMB don’t have the same skill sets as someone who goes to the Ivy League school and finishes, you know, an MBA school. So but by and large, that they will have some English, they’ll have some overseas experience, yeah, it becomes easier to find the right partners and so and because of technology, you know, things like that smartphone, yeah, in terms of connectivity, it’s easier to then connect with people.
Mike: 1:03:56
Okay? I mean, that’s a very good point about connectivity, because, you know, there’s obviously no YouTube up there, no Facebook, no Twitter. You’ve got WeChat and others so, so all those platforms you mentioned,
Frank Li 1:04:07
YouTube is equivalents i chi, yeah, yes, yeah.
Mike: 1:04:11
And look, the Chinese have been very, you know, they’ve been very effective at that, haven’t? They’ve got a kind of war around the place, and, and, but they’re very wide because, you know, I was probably there 20 to 25 years ago, and as technology was kind of emerging, but they effectively missed the whole desktop computer thing. They went straight to a phone, right? And so apparently, the 50% of people buy all their clothes and shoes online, in charge. So this they really adopted. As soon as that iPhone came out, that smartphone came out, God, did they adopt that online game?
Frank Li 1:04:54
I think you know that that is probably one of the things that you. So that’s about China in, you know, adopt, adoption of new technology, yeah, which probably goes to the culture of, you know, China’s, you know, the modern China’s gone through the cultural revolution where they’ve, you know, you look at couple 100 years ago in terms a lot of technology, China was the leading country in the world to, at the end of the Cultural Revolution, they were falling way behind everyone else, so that there is that mentality now, Chinese people are very proud people. Chinese people are very intelligent, and they want what is the best for themselves and for their kids and for their family, so for their child and for their family. Yeah. So they will. They’re willing to try new things, yes, rather than assess then and then say yes or no, that they’re willing to try a lot of new things. Yeah? So I think that’s what you’re seeing in the modern day. Yeah? China, yeah. And also, you know, with the smartphone, your example, buying buying clothing online, I think things like having a good user experience. Now, the one thing you don’t see is that, of the 50% who buy their clothes online, how much of that gets returned? Okay, right? Because China allows you to have a free return policy, okay? Now, I don’t know what it’s like with Amazon and eBay and all the different e commerce platforms in Australia.
Mike: 1:06:19
I think some are better than others. But, you know, it does seem to be a phenomenon where clothes, they allow you to send them back, right? So, so I’m an expert at this, not because I buy but my wife, in fact, the first week of COVID, I thought she was dealing drugs. We had so much, so many parcels, so many parcels arriving.
Frank Li 1:06:36
So, so I think the use experience allows the person to try without the hassle of dealing with someone in store, right? So there’s no pressure.
Mike: 1:06:48
Yeah, okay, so, and I think that’s something that is that cultural thing. Do you think? Do you think they they prefer to be in control than we do?
Frank Li 1:06:59
I don’t know. No, I mean,
Mike: 1:07:01
Or do you think that’s just a kind of universal thing if, because that’s it, I suppose it’s the convenience of it. I mean, I can’t stand doing other I mean, I’m, I’m going to London in December. I tried to book a hotel the other night. I gave up after 20 minutes, and thought, you can stick that and I’ll figure it out another way. I’ll probably get my wife to do, I guess I’ll get someone here to do, because I was just in a loop. I got in the loop, and I just don’t have the patience for it. Yeah.
Frank Li 1:07:28
So I think there’s a generational thing, definitely, the older generation do not do that, that they want to touch and feel. And you know, how can I buy clothes online? Because it might not be the right size, the fabric might feel different, the colors might not be what I want, etc, etc. So I think there’s bit of that. And so definitely, the younger generation are willing to try and for them. There’s no costs, because we don’t like it. Send it back. There’s no cost. Got it right? And if you lower the barrier of entry, really, that just said, yeah, it’s a no brainer. Yeah. And you know, the large e commerce platforms in China allow them, facilitates that experience.
Mike: 1:08:06
Yeah, okay, very interesting discussion, Frank, and I’m very grateful that you came in. I mean, certainly we, they’re our largest trading partner, import and export. China’s a reality. I’m glad that the waters a bit smoother between us. You wouldn’t have wanted that to continue down the road it was going particularly So, yeah, great stuff. And look good luck with you. I know you’re certainly a specialist. You’re going to be a great help to companies that want to find their way up to China. It’s a very exciting place, isn’t it? You mentioned the speed there. I mean, I lived in Hong Kong, and I remember used to commute every couple of weeks, and I would come back to Australia, and just, I just couldn’t get over what was going on. I mean, you couldn’t get on a Monday night in Sydney, you couldn’t get anything to eat after about six o’clock at night. But in Hong Kong, I could get anything I wanted, any time of the day seven, right? Yeah. So, I mean, Hong Kong was genuinely one of those 24 hour cities, so that was a bit of a shock for me. I think I’ve now slowed down to Australian speed, but, but yeah, it’s certainly very, it’s a very exciting place, isn’t it?
Frank Li 1:09:18
It is so so you know, on that, on that experience of yours with Hong Kong. So in China, in Shanghai, you probably take it to the next level. Wow. If you’re hungry at two in the morning, you just get your phone out. You order something, it’ll be there in half an hour. Yeah. Man, is that two in the morning? Amazing, right? So now, obviously, not every city is the same, but definitely, if you’re living in Shanghai or Beijing, on either large cities, or even that, some of the tier two cities you will get that service, yeah. I mean,
Mike: 1:09:45
Hong Kong was a sort of gateway to China for a long time, but now, I think people are just, it’s not the same.
Frank Li 1:09:51
Well, I think now Shanghai is a gateway. We were talking about that 20 years ago. Shanghai will be the new Hong Kong, effectively, yeah. Yeah, people go straight there. And in the interesting Hong Kong’s change, because 95% of the visitors now are mainland Chinese. So that whole Hong Kong market is is got itself together around that those visitors, rather than before, it was the it was a stop offer all the Westerners come in.
Mike: 1:10:17
Yes, correct. So it’s changed a lot as well. Yes. Frankie, thanks for coming in. Good luck with everything. Thank you.
Frank Li 1:10:24
Thank you very much. Thanks for having me.
Mike: 1:10:29
Wow. Being in lockdown in Shanghai was clearly not much fun. So there you have it. Frank Li arrives in Sydney. Can’t speak a word of English. Seven years later, he’s Ducks of the school. I hope you enjoyed my discussion with Frank as much as I did. Now, a quick shout out to our sponsors, Oasis partners, the only m&a firm I know who passionately believe in truly leveling the playing field for their clients, who are selling, often to much larger buyers. So if you think it might be time for you to consider your strategic plans about the future. Give the guys a call at Oasis partners. Finally, if you like today’s episode, do share it with your friends until next time, stay safe.
Link to previous episodes: https://www.oasispartners.com.au/troubleshooters-podcast/