How viable are foreign businesses in China's small towns, especially at a county level? A couple days ago I was talking to a friend about restaurants, travel service firms, and guest houses in these small towns. Some of these ideas are working and some are not.
These small towns are a completely different business environment from the cities and even prefectures. On one side, because they are smaller, the lack of volume or traffic is an issue. On the other side, a foreign business may be able to provide the only such service or product without any fear of competition.
In many ways, the basic question of how viable foreign businesses are in China's small towns goes back to the foundations of all business: supply and demand. Some do have a good idea, but you really need to know the demand for the service or product you seek to provide. Will there be a sufficient amount of people willing to pay?
I have a friend that has started a guest house and restaurant in a small town, but that town did not already have a strong tourism industry. In that situation, a foreign restaurant and guest house has few advantages over a Chinese-run operation, but more than likely, does have a higher lifestyle to support, comparing a foreigner with an average local a small town. That is fighting an uphill battle.
It is the old adage in a different and more broad application: "location, location, location." Not only is the location within an area important (neighborhood, corner, downtown), but also what town is picked in the first place is of vital importance (this specific town over that town). My little hometown of 5,000 people back in the United States is never going to have a Starbuck's. We are lucky to have the grocery store and a fancy gas station.
I have had to drag my own business ideas through the grinder, and in most cases, not much is left of my ideas once they come out the other end. Most ideas could be too easily copied by the local Chinese. If they can do the same thing and do it cheaper, they will win. That is not bad; it is just reality.
Supply and demand. Location. Competition.
