Chinese Market: Messes Thrive Amid Challenges

By David S. Cohen -- Tradeshow Week, 8/23/2004

China has been something of a gold rush for the tradeshow business. Its booming economy, vast population and deeply-ingrained preference for face-to-face meetings provide a nearly ideal environment for tradeshows.

So it was natural that German messes would move onto China's fertile ground, bringing expertise, customer relationships and established brands from their long experience in Europe. While German shows slumped in 2002 and 2003, the messes' China show numbers soared along with the Chinese economy. The messes further bolstered their relationships in China by bringing Chinese companies to their own shows in Germany. By 2003, German companies were launching more shows in China than in any other nation other than Germany itself.

But they are discovering, as is the Chinese government, that rapid growth can turn into too much of a good thing. At the national level, China's speeding economy faces inflation pressures, so the government is applying the brakes — gently, it hopes. Likewise, the country's hot tradeshow market is feeling growing pains, and while the messes continue to thrive, they also find themselves wrestling with new challenges.

One urgent issue is the rapid proliferation of tradeshows and exhibition centers. Messe Muenchen's deputy managing director, Eugen Egetenmeir, explained, "In Germany, which is considered a top area for tradeshows, we have something like 350 tradeshows a year. China has more than 2,500. There are lots of no-name shows, lots of very small shows, and for foreign visitors there's a lack of orientation in that jungle of tradeshows."

Muenchen and the other messes have responded by importing their brand-name shows from Europe. "The brand names provide a kind of orientation for the visitor," said Egetenmeir. But even so, Chinese tradeshows are plagued by their own form of intellectual property piracy. Brand names are protected, but successful shows are quickly copied, which splinters the marketplace.

For example, there are 70 auto-related shows in Beijing, Shanghai and Guangzhou alone, according to Betty Heywood, director of trade fairs at Messe Frankfurt Shanghai, which organizes the Automechanika China and Auto South shows. "People don't know which show to go to anymore, and there's competition only on price, and that's not a competition we enter," Heywood said.

The problem is exacerbated by an oversupply of convention centers. While the four major tradeshow cities of Beijing, Shanghai, Guangzhou and Hong Kong find their major facilities booked solid, smaller cities are desperate to fill their new halls, so they encourage shows to launch by charging prices that won't support their facilities. Quality suffers.

That further hurts the industry, because Chinese businessmen have little patience for a show that under-performs. "If you don't deliver, they're not going to show up again," said Heywood. "Your first event has got to be good. That's particularly true for local participation."

Keeping up the quality of participants is also a problem. "Many organizers care more for the quantity of visitors and exhibitors instead of the quality," said Clemens Schuette, Messe Duesseldorf's director of international business. "While visitor promotion budgets are frequently modest, visitors without any buying interest are crowding into the shows, making it difficult for the exhibitors to select their target group. Likewise, the nature of exhibitors and exhibits is in many shows quite heterogeneous, making the show profile quite fuzzy."

As a result of all this, a substantial decline in the number of shows appears likely over the next few years, said Schuette. He predicted that, due to the enormous size of the country, only two or three lead shows per industry, along with a few regional niche shows with a clearly defined profile, would survive. High quality standards and substantial international participation would be necessary for all.

Messe Duesseldorf launched its first China show some four years ago, while Messe Frankfurt has long had a foothold in Hong Kong and opened its Shanghai subsidiary two years ago. Since then Messe Frankfurt launched five shows, mostly with success. Heywood cites Music China as particularly successful. "Music China was up 53 percent in exhibitors and 73 percent in space from 2002 to 2003," reported Heywood. "It's booked full for October, up another 45 percent in exhibitors and 35 percent in terms of space."

Heywood added that the majority of shows are still growing, since more and more companies are coming to China to source their products, but there are other issues as well.

The outbreak of severe acute respiratory syndrome, or SARS, was one highly publicized problem for the tradeshow business. Messe Frankfurt Shanghai's 2003 launch of Prolight + Sound Shanghai, collocated with Music China, took a major attendance hit due to SARS. "The entertainment industry here basically closed down for three months," Heywood said, so buyers decided to put off any purchases. But exhibitors, showing unusual patience, are back for the October 2004 edition and MFS expects it to be a success.

It's tempting to dismiss the SARS episode as a fluke, but the same factors that led to SARS and bird flu — large numbers of people, especially farmers, living in close quarters with birds and swine — make China a cradle for new virus strains, so SARS is unlikely to be the last epidemic to shock the tradeshow industry there.

Meanwhile the growing sophistication of the country's industrial base is also forcing show organizers to change strategies. General-product tradeshows like the Canton Fair have long been a staple of China's tradeshow scene, but the messes' managers are seeing a trend toward specialization. Messe Frankfurt considers its 2003 Dongguan Fair a disappointment, and it will relaunch the event with a new focus in a different South China location.

Messe Duesseldorf has focused exclusively on shows for specific industries, such as shoes, printing, pharmaceuticals, medical instruments, retail and occupational safety. Next month, it launches its Wire China and Tube China shows at the Shanghai New Intl. Exhibition Centre. Koelnmesse began opening shows in China around four years ago and has succeeded with consumer goods-oriented shows in the furniture, interior design, food and nutrition, house and garden tools, hardware and camping equipment areas, as well as with some dental shows.

Even with the super-competitive markets and every sector seemingly saturated, there are still growth areas in China, said the messe managers. With Beijing trying to spruce up for the 2008 Olympics, Muenchen's Egetenmeir sees an opportunity for environmental protection shows. "(The government) wants to create a kind of green image by these events," he said. "But it's not only showcasing these events, it's a policy that even demands from state-owned companies that they improve their environmental protection measures."

The government also maintains a "go west" policy, trying to shift people and development from the overpopulated east to the country's interior. Local manufacturers are already fleeing the high costs of major cities like Guangzhou, and tradeshows are gradually following. Some messe executives predict that interior cities like Chongqing and Chengdu will probably gain shows over the next five years or so.

But Heywood isn't so sure. "Big international shows, I can't see it," she said. "You have those specialty shows going there, but overall the international fairs are still going to be in Beijing or Guangzhou or Shanghai."