First published on December 10, 2015 by Lesley Ning
You’ve probably heard about Taobao, the largest e-commerce site in China, but did you know that if you’re not a Chinese business you couldn’t set up a store there? Instead you need to turn to Tmall Global, another Alibaba platform that gives non-Chinese businesses access to China’s huge e‑commerce market. The booming Chinese e-commerce industry is certainly tempting for brands looking to grow their sales, but it’s important to note that success is no guarantee. Entering the Chinese market raises a lot of challenges that you need to be prepared to face before there’s even a possibility of a sale.
First off, what exactly is Tmall Global? It is a B2C e-commerce platform owned by Alibaba Group, the same company that runs Taobao and Tmall. Taobao and Tmall are, respectively, C2C and B2C e‑commerce marketplaces that account for 80% of China’s e-commerce market. Whereas Taobao is a market, Tmall is a mall. What’s the difference? Think of a traditional market: it’s crowded, chaotic, and full of individual vendors. Now think of a mall: it’s structured, contained, and represents a variety of brands or businesses. The distinction between the two is the same in the digital world; Tmall is a more regulated setting for you to sell your products. However, there’s a catch: both Taobao and Tmall are only accessible to vendors who already have a presence in China. If you’re an international brand looking to enter the market, these are not the spaces to be. However, there is still a way to access the Taobao and Tmall marketplaces: Tmall Global.
If your business does not currently have a Chinese presence, Tmall Global gives you an entryway. However, just because it gives access doesn’t mean it’s accessible to all businesses. Before getting started in Chinese e-commerce it is incredibly important to be aware of the high costs and risks associated with the current market. Here are a few things to consider:
1. You Need Deep Pockets
Opening and operating a store on Tmall Global is not an easy or inexpensive venture. To begin with, registration requires a $25,000 USD security deposit and, depending on the industry, there can be additional annual fees ranging from $5,000-$10,000. For example, sellers who provide health food products and supplements are charged $5,000, while those selling children’s clothing are charged $10,000. Where would your business fall on this spectrum? Consult Tmall Global’s price card to find out. In addition, there are commission fees for each real-time transaction, as well as the Alipay Service Fee (currently 1%).
On top of those charges, there are also some logistical costs to consider. To open a store on Tmall Global, vendors must be able to provide a Chinese-based product-return system and provide customer service support in Chinese. You’ll also want to invest in the development and decoration of your online storefront, as well as continued marketing campaigns to gain visibility.
The bottom line: Tmall Global is not for businesses that don’t have cash to spare. Entering the Chinese e-commerce market is a huge investment and shouldn’t be done without serious resources.
2. Be Prepared for the Long Haul (and Some Serious Competition)
Tmall Global requires a substantial investment of both money and time. Businesses setting up a store expecting to see immediate sales are almost guaranteed to be disappointed. Many brands set up shop and then wait years for initial sales to begin, let alone a steady flow of orders. It’s not impossible to see results sooner, but for most vendors Tmall Global involves a lot of patience.
Given that China has a huge e-commerce market, why won’t your business immediately get a slice of the pie? In a word: competition. Yes, there are hundreds of billions of dollars in transactions and a massive user base, but there are also tons of other brands out there likely selling products similar to your own. E-commerce remains a very risky and volatile market for many businesses, and the Chinese market is no exception. Setting up a shop on Tmall Global isn’t a fundamental path to success. You need to be able to provide an in-demand product or service, while also establishing brand awareness and loyalty to stand out from the competition. Businesses opening on Tmall Global need to be prepared for long-term development and high competition levels.
3. Sometimes It Just Doesn’t Work Out
Given that Tmall Global is a costly, long-term investment, there is one last thing businesses should also know: success is never guaranteed. While that may sound obvious, the size of the Chinese e‑commerce market can make it feel like an exception. Rather than a source of immediate sales and wealth, Tmall Global is really a highly competitive platform filled with examples of tried-and-failed businesses. Even if you have the most amazing product and release it at the perfect time with all the financial and marketing resources in great supply, it is still possible to get nowhere. The most important thing businesses need to seriously consider before setting up on Tmall Global is whether or not they can stand to lose their investment. Yes, there is the potential for great results, but there is also huge risk. If your business can afford to take the chance, great – read on to see how we can help. If not, you may want to reconsider your plans and search for a more viable option.
You understand the risks and are still interested in this huge platform…what are the next steps? Unless you are fluent in Chinese and have connections in the country, you’ll want to work with a company who can help you get through the registration process and set up a presence on Tmall Global. At LAT, we will oversee your set-up and provide continued support. From assisting with initial paperwork to decorating and marketing your store, we can bridge the linguistic and cultural barriers that many international retailers struggle with. Contact us and we’ll set up a meeting to discuss your business’s particular circumstances, including risks, challenges, and opportunities.