The Top Challenges and Opportunities of Doing Business In China, With Stephen Rector, Founder of Bakertown Consulting

Smile when you walk down the street — it is contagious and could make someone else’s day.

I had the pleasure of interviewing Stephen Rector, Founder & President of Bakertown Consulting. Stephen is an international retail executive and consultant, with extensive experience leading merchandise strategy, sourcing, pricing, and curation across a variety of channels, including ecommerce, mobile, physical stores, and digital marketplaces like Alibaba’s TMall & Taobao platforms, Tencent’s WeChat platform & Amazon’s Marketplace.

Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?

I spent most of my career at Macys holding several merchandising roles — both for stores and online. As I held more leadership positions, the thing I enjoyed most about my job was helping people solve their problems. Because of this love for helping people solve their problems, consulting seemed like a move that made sense. It was a risky move, but in 2017, I created my own consulting company, Bakertown Consulting — with a focus on international retail commerce. I was blessed to have as my first client a subsidiary of Macys Inc, Macys China Limited, which was a joint venture between Macy’s Inc and Li & Fung based in Hong Kong. It was an amazing 8

month experience working with teams in Hong Kong, Shanghai and a team at the Alibaba campus in Hangzhou.

Are you working on any new or exciting projects now?

Currently, I am working on a Direct to Consumer (DTC) business model for a brand management firm based in New York — DTC is a huge push in the retail space and I love helping this company build out this strategy. I am also maintaining the network of people I know in Asia to work on other projects there in the future.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

Personally, I am so grateful for the support of my partner Alfredo. It is not easy moving to the other side of the world without your better half. His support has allowed me to grow my consulting business in ways I would never been able to do on my own.

What do you think are the new untapped markets in China that may become the next “big thing”?

I would say the untapped market is actually the people living in Tier 3 and 4 cities in China. 59% of China’s GDP comes from these smaller cities and almost 75% of China’s population live there. I love what Pinduoduo is doing with their platform — focusing on the people that live there. That’s a lot of people who are now starting to move into the middle class with money to spend. The brands that move quickly into this market will win.

What challenges does that new market face? How would you address it?

The amount of disposable income with this consumer group is rapidly rising, so for brands entering, the biggest challenge is brand recognition and getting a piece of market. The ecommerce platforms definitely help — however with “New Retail” being the mantra of China these days, physical stores must be a part of the overall business strategy. Feet on the ground is a must as well — a company must have local talent as part of the team — they truly understand the Chinese consumer — as well as the logistical challenges that must be overcome to succeed in this market.

Can you share the top challenges of doing business in China and how you overcame them?

For a foreign company to enter the China consumer market, you must first throw out what you think you know about the consumer you currently have because more often than not, the Chinese consumer is not the same. You have to be able to listen to the customer and what they want — that is why it’s important to have local Chinese talent on your team. There have been many companies that have gone into China and have failed — John Lewis is one that comes to mind — the product they presented to the Chinese consumer was completely off from what was happening in terms of trends in China.

At Macy’s China, we were utilizing the inventory in the USA to sell to the Chinese customer. We quickly realized that much of the assortment was not what they wanted. For example, dresses without sleeves did not sell — generally speaking, the Chinese female is more modest in terms of how she dresses. Another thing was heel height in shoes — high heels were not well received by the Chinese consumer so we changed the assortment focus to flats.

Once in China and working with the team at Tmall, I also recognized the importance of relationships at all levels when doing business with a Chinese company. The Managing Director had great relationships with very senior level people at Tmall, however, the relationships were very strained at the lower ranks. This was affecting business on the platform. Once we realized what was happening, we made it a point to strengthen those ties. The business turned around quickly because of that.

We keep hearing about the “Trade War”. What are your thoughts about it? Given the unknowns, how do you plan to pivot?

The US/China trade war has the potential of long lasting effects on both countries economies. While the US is looking inward, China is already moving quickly to shift exports into SE Asia and Africa at a much faster pace than the US — which will be critical going forward for export driven

businesses. US companies need to still pursue China as an important marketplace, but they need to start diversifying before Chinese companies dominate other markets.

Sub-Saharan Africa and India will be the next regions with a new middle class emerging. Companies that recognizes this early (and many are already there) will win.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Pele, the great soccer player said the following — “ Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing.”

I was not given any handouts throughout my life. I worked hard and pushed myself to succeed in all that I do. But with that comes a passion for retail and the love of the disruption that is happening today. A leader in the industry said recently — “Either disrupt yourself or get disrupted.’ That is so true right now in retail.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

Smile when you walk down the street — it is contagious and could make someone else’s day.