The Ecommerce market in China is the largest in the world but you might not realise the level of untapped potential it represents for UK manufacturers or retailers. We asked Shanghai based blogger Benji Lamb to provide some advice on how to sell to the Chinese market using their most significant e-commerce platform; ‘Tmall Global’ from Alibaba.
Online sales currently contribute 11% of total retail sales in China (U.S. at 8%), but it’s growing at a rate of 53% year-on-year. There are 380 million shoppers online and it’s predicted that within a decade over 50% of China’s consumption will be conducted online. The e-retail market is estimated to grow to over $1 trillion by 2018, to put this into perspective, that’s larger than the e-commerce markets of the U.S, Britain, Japan, Germany, and France all combined.
This phenomenal growth is due to a high internet penetration rate (just under 50%) and an growing Chinese middle class who look to purchase international products online. It is important to understand Chinese e-commerce practices in order to capitalize on this lucrative market.
Tmall Global is the most important site for international brands
Tmall has become a popular e-commerce platform where Chinese shoppers are able to purchase both international and local brands.It is a popular and well designed marketplace with many international brands opening stores.
Tmall is owned by Chinese internet giant ‘Alibaba’, the e-commerce corporation consolidated its success with a record breaking IPO on the New York Stock Exchange, Alibaba is now recognized globally as the bonafide e-retail giant in Asia. Tmall was launched in 2008 as an e-commerce website which hosts official brand ‘shops’. With so many fake and counterfeit products circulating this guarantee of authenticity has set Tmall apart.
Tmall Global was later launched in 2014 with the purpose of promoting foreign brands and facilitating their access to the Chinese market. Nowadays, Tmall has more than 70,000 brands in 50,000 stores.
Chinese consumers desire authentic, quality products
The launch of Tmall Global reflects the high demand in China for authentic, western brands.
These ‘official’ accounts give western brands the opportunity to promote their products in China and reach the largest number of potential consumers. The key is authenticity, in a market flooded with counterfeit goods consumers want to ensure they are buying genuine brand products.
Bayern Munich have revolutionized the selling of official merchandise to Chinese fans, they were the first team to set up a store on Tmall Global. Dedicated football fans can ensure that the merchandise is official, they want to support their team and will avoid purchasing fake, lower quality copies at all costs. “Making our fan merchandise accessible is crucial to connect with our fans in China,” said Bayern Munich Chairman Karl-Heinz Rummenigge.
This is the key to Tmall’s success. Chinese consumers love to support and engage with brands, overtime western brands have become percieved as a byword for quality. Brands should emphasize the quality and heritage of their products. Each store front can be edited and developed to include video’s and a range of visuals to help communicate this.
What opportunities does Tmall present for companies?
Firstly, a Tmall store account validates a business the eyes of the Chinese consumer. It is the perfect tool to reach Chinese high-end online shoppers. It is also an effective way to maintain an important presence in the Chinese market.without having to open physical stores in every large city. Alibaba have created an e-commerce hub that connects western brands to the right audience and allows them to utilize their extensive Chinese delivery network.
Sales in mainland China are still largely concentrated in the cosmopolitan and affluent cities of Shanghai, Shenzen, Beijing and Guangzhou but with many second and third tier cities now accessible a significant opportunity for growth has arisen. Alibaba are now based in Hangzhou, a smaller city outside of Shanghai, this reflects this general trend towards a more expansive delivery and sales network.
Tmall uses Alipay as a payment system, this is a very popular and reputable payment method in China. Recently an English language version of Alipay has been developed, this signifies the opening up of China to western products.
Tmall includes analytic tools such as “Daily Update” which provides daily sales reports and online traffic analysis. These tools are incredibly useful for marketers who seek to make strategic decisions based on this data.
Different Store Formats
Tmall has three different store formats.
Flagship Store: this kind of e-shop is an exclusive shop for trademarked goods (either ® or ™). To open a flagship store, the owner has to be a formal representative of the brand or have exclusive authorisation documents provided by a formal representative of the brand.
Specialty Store: For e-shop owners who have the required authorization from a brand to distribute on their behalf in China. In this case Chinese companies may distribute on a foreign brands behalf, there are benefits in terms of the local expertise they provide.
Monopolized Store: For marketers who want sell two or more brands within one of Tmall’s product categories.
How to open a Tmall Store
In order to set up a Tmall store certain requirements need to be met. Firstly, the brands have to be registered outside China and have a good credit rating. The company also has to have been running for 2 years or over.
Tmall require a deposit of between US$8,000 to US$25,000, depending on the store format. The e-commerce platform also charges an annual service fee, these vary according to the product category and could be between US$5,000 or US$10,000.
Marketers have the opportunity to avoid paying either half or the full service fee if they reach certain predefined sales targets for the product sold. In addition, Tmall keep 5% of the sales value as commission.
Foreign products must be vetted by Tmall Global security and go through Chinese international customs.
Products must also have descriptions in Mandarin language and international units of measurement. For translation services I would recommend using the online platform Lendalocal, they can connect you to Chinese local translators with expertise in specific industries.
Creating an online store on marketplaces such as Tmall Global is an effective way to kick-start your business in China. Alibaba’s creation has been intelligently designed with western firms in mind and therein lies its success.
Tmall stores are currently geared more towards medium and large brands. For SME organisations, with smaller branded products, you should seek to contact umbrella stores that sell a variety of different brands and request a trial presence on their shop-front.
Benji is a digital marketing specialist based in Shanghai, China. For more information on expanding your business into China see his website and blog here.