From book clubs to real estate and e-commerce – Ekkehard Rathgeber’s career in China mirrors the country’s tumultuous development since 1989. The German entrepreneur spoke about his experiences at the MERICS China Lounge.
E-commerce is Eckehard Rathgeber’s latest passion. Toothbrushes, shoes or furniture – the Chinese buy virtually everything online. The world’s biggest market for online sales is known for its fierce competition. Many foreigners find it hard to navigate, but not Rathgeber.
Rather than trying to sell toothbrushes or shoes to Chinese customers, Rathgeber built an online sales platform for maternity, baby and kids’ products, offering more than 10,000 products. Not only is it an important growth market among China’s urban middle class, but it is also the perfect market for a German businessman in China. German products enjoy the image of being safe and solid among Chinese consumers. For Chinese parents who were rattled by scandals over spoilt milk powder and other unsafe infant products, the fact that the online vendor’s CEO has a German background might be an important selling point.
“It is a cut-throat market, which is already dominated by many big Chinese players”, the Shanghai-based German entrepreneur said at the recent MERICS China Lounge. “But you can be successful if you come in with fresh, yet realistic ideas.”
Rathgeber may not be a household name in international business circles. But when money can be made in China, he is likely to be among the first foreigners to grasp the opportunity. From book distribution and online publishing to real estate and e-commerce – in more than 20 years spent in China, the former Bertelsmann manager has engaged in a wide array of commercial activities. And in many ways, his own career mirrors the twists and turns of China’s development from a planned economy into a capitalist system.
Rathgeber first visited China as a college student, but he was forced to leave Beijing in the wake of the Tiananmen incident in 1989. Back in Germany, he preserved his love for the Chinese people, their taste for a good meal – and their strong business acumen. His first employer Bertelsmann offered him the opportunity to return to China in 1995. His task was to establish the German media company’s first book club in Shanghai.
It was not an easy task at first. Shipping books to the subscribers meant taking on the inefficient Chinese postal service whose computers were too slow to digest the registration of hundreds and thousands of packages. “Rather than shipping them, the clerks would sometimes sell our book catalogues as waste paper. And when we shipped a copy of the latest thriller by John Grisham to Anhui province, it would arrive all sticky and wet”, he recalled. But the project became a success. “At its peak time, the Chinese book club had 1.5 million subscribers – more than the communist party itself”, Rathgeber said with a wry smile.
With the rise of the internet at the turn of the century, book subscriptions no longer seemed like a future-oriented business model. Rathgeber quit his position with Bertelsmann but remained in Shanghai to help his wife Doris establish a practice for traditional Chinese medicine. In early 2004, his career took an unusual turn. He was approached by the Hong Kong-based media company Tom Group, which was part of Li Ka-shing’s Hutchison Whampoa conglomerate. He signed on as the COO, becoming the first German to fill a top position within a leading Chinese company. “They had bought up all kinds of assets: Taiwanese publishing joints, advertising companies and sports marketing rights”, he said about his Chinese employers. “But as investment bankers they didn’t know much about the media business. I was expected to integrate these assets, a real tough job!”
At one point, Rathgeber even had to prevent a tennis tournament with international stars like Serena Williams and Marija Jurjewna Scharapowa from being cancelled after the management team had quit at short notice. “I had to persuade the sponsors and the tennis players not to walk away from the contract.” In the end, the stars did not only end up marketing the event on television, but they even agreed to play some matches with Chinese top-leaders in Zhongnanhai, the well-secluded government compound in Beijing. “Everybody had a lot of fun, sport brings people together”, said Rathgeber.
The real estate market became his next lucrative endeavor. In 1992, he had been one of the first foreigners to purchase an apartment in China. In 2007, he set up the Jilin Investment Group with Chinese partners, specialising in buying and selling office buildings.
He steered clear of the market for private housing, which he considers a very dangerous field for investments these days. “In places like Shanghai and Shenzhen, prices continue to rise unfettered. Buyers have to make down payments of up to 70 percent. Yet everyone continues buying – out of a lack of investment alternatives”, Rathgeber analysed the situation. On the other hand, the surge in construction produced empty “ghost cities” in more remote regions. “The government has realised that something is going wrong, but it is obviously difficult to lead the real estate market in a more sustainable direction.”
In China it can be best not to put all eggs into one basket – which is why the versatile businessman has now added the baby product e-commerce platform to his portfolio. “I had never expected the Chinese internet to develop such a dynamic”, Rathgeber said. But with smartphones being omnipresent, the market virtually exploded. Contrary to many of his German fellow countrymen, who are concerned about the security of their personal data in online transactions, the Chinese are very open towards new media. “One might say, they are more naïve. But people seem to rely on the government regulations for the internet economy.
The Chinese customers may be more flexible, but they are also less predictable than Germans who tend to stay loyal to certain brands. Rathgeber said that he is often surprised to observe which products fit the Chinese taste and which products fail. He also learned that Chinese customers have different visual preferences when it comes to advertising or website design. “Chinese customers prefer websites with a lot of bling-bling, whereas Germans would go for a plain and clear structure”, he said.
Rathgeber, who speaks fluent Mandarin, has learned to read more than one generation of Chinese consumers during two decades in Shanghai. The German businessman’s fascination with this fast-moving country he first came to know in 1989 and now calls home is unbroken – and he intends to stay in China – “until they throw me out again.”