This post is by Misha Maruma of Nanjing Marketing Group.
Alibaba’s IPO on the New York Stock Exchange increased this massive ecommerce company’s brand recognition outside of China. But any Chinese shopper will tell you they have been using Alibaba’s ecommerce services for years.
Alibaba’s shopping platforms, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer), are frequented by Chinese consumers looking for ways to buy brands that may not be available to them in physical stores where they live.
In 2008, Taobao spun off Tmall as a platform solely dedicated to official brand stores, allowing brands to sell their goods throughout Mainland China. Tmall now has over 70,000 brands in 50,000 stores.
Then in February 2014 Tmall Global was set up. The aim with Tmall Global was to encourage big foreign brands to enter the Chinese ecommerce market. Here’s everything you need to know about selling on this major new marketplace.
What is Tmall?
One way to look at Tmall is to think of it as an online version of Manhattan’s Fifth Avenue: a prestigious address focused on branded goods.
It has become a trusted platform for Chinese consumers to buy both international and native-branded products, and products that are not available in traditional retail outlets.
In China having a Tmall shop is a validation of your business. For big brands that want a presence in China and maybe a flagship store in the Tier 1 cities, but don’t need a store in every city, Tmall is their entry point.
Tmall Global positions itself to target high-end consumers in China and invites investments from overseas businesses.
Online shopping in China
Tmall is part of Taobao, which is China’s number one online sales platform. It serves China’s 527 million internet users. It is not just the internet population of China that is huge but also its geographical size: it has an area of 9.6 million km2 – twice the size of Western Europe, and three times the size of India.
Alibaba’s three online retail marketplaces – Taobao, Tmall and Juhuasuan – generated a combined GMV of US$296 billion from 279 million active buyers, and 8.5 million active sellers, in the twelve months ended June 30, 2014. That’s more than eBay and Amazon combined.
China mobile shopping market total transactions reached US$28 billion in the second quarter of 2014, representing 26.8% of total online shopping transactions in the same period in China, an increase of 24.6% compared with the first quarter.
Using Tmall is one way how brands can effectively reach out to consumers in such a vast country.
What is sold on Tmall?
Tmall Global offers retailers the ability to sell to Chinese shoppers via bonded warehouses in Chinese free trade zones, which reduces logistics costs and shortens delivery times.
While clothing, household items, and accessories lead the way, some more unusual items are becoming increasingly popular with buyers.
- Luxury imported cars such as Lamborghini and Mercedes have seen a 400% growth year-on-year.
- Following a food safety scandal, there was an increased demand for baby formula made outside of mainland China.
- American cookies and other classic US foods being sold has led to a surge in pre-orders for previously unavailable foods, with retailers regularly experiencing “sell-out” campaigns.
- China is fast becoming the biggest online market for wine, topping global internet sales ahead of more traditional wine-buying nations such as Brazil, the UK and France.
The Chinese online apparel market has seen international brands such as Zara, Burberry and Cavin Klein start their entry into China by opening Tmall Flagship Stores.
Burberry officially launched its Tmall flagship store on 23 April 2014. Calvin Klein launched its Tmall Flagship Store in China on 19 September 2014. Other American brands, in addition to CK, such as Apple, Microsoft, Beats, Bose, NBA Nike, Gap, Levi’s, Disney, Anna Sui, New Balance and Estee Lauder have all launched their own Tmall Flagship Stores in China.
The latest America brand to make waves is membership-only warehouse club Costco Wholesale. They launched a Flagship Store on Tmall Global reaching Chinese consumers directly with competitively priced food and healthcare products, ranging from clothing to groceries, laundry detergent and beauty aids.
Costco sold 3 tons of Kirkland nuts and nearly 1.5 tons of dried cranberries in just the first three days on Tmall Global.
So, what benefits are there to using Tmall Global?
- Tmall uses Taobao’s infrastructure and payment system Alipay, so Chinese users are familiar with all the services, and trust the mechanism that they have been using for years.
- Unlike Taobao, Tmall only accepts verified stores. This gives customers a guarantee that products sold online are genuine, which builds consumer trust and, in turn, conversion rates.
- Taobao promotes Tmall stores over and above other stores, which results in more and higher converting traffic.
- Tmall has exceptional analytics tools. The Daily Update analytics and daily sales reports can help merchants take strategic decisions and compare data against peers in Tmall.
- UCWeb, the mobile browser company now owned by Alibaba, updated its mobile browser to cooperate with Tmall. The new version will allow users to log in with a Taobao account. UCWeb mobile browser users who shop on Tmall can enjoy privileges including special offers, Tmall credits and lottery.
Tmall Global is a straightforward way to reach out to consumers living far away from those Tier 1 cities where foreign brands usually establish a physical presence on entering the Chinese market.
Tmall store formats
Tmall has three different store formats:
- Only brands with a trademark (either ® or ™) can open a Flagship Store. The owner of the store must be a formal representative of the brand or hold exclusive authorization documents for setting up a Tmall Flagship Store, provided by the formal representative of the brand.
- Merchants with brand authorization documents giving them distribution rights to sell products without geographical restrictions in Mainland China are eligible to open a Specialty Store.
- Merchants with two or more brands within one of Tmall’s product categories can open a Monopolized Store. Only one “monopolized” store can be held per merchant in one product category.
What is the process to set up a store on Tmall Global?
Businesses intending to set up on Tmall must have a corporate entity outside of the Chinese mainland. The brand must be registered overseas and have “qualifications” for overseas retailing. They also need to have good credit and an operating performance overseas.
Basic requirements for Tmall set up include:
- A corporate entity outside of the Chinese mainland.
- Qualifications for overseas retailing.
- Brand owner, agency or authorized merchant.
Preferred requirements include:
- The corporation has been run for more than 2 years, and annual sales are more than US$10 million (need to provide relevant proof).
- Branded B2C overseas businesses are preferred.
- Brand owners or authorized agencies are preferred.
- Preferred industries are: maternal and child apparel, health care products, clothing, shoes and accessories.
- Products with famous brands overseas.
Requirements of the products and services include:
- Products originally produced or sold overseas have to be vetted by Tmall Global security, and formally go through Chinese international customs.
- Product pages must use Chinese descriptions, use international units of measurement, and be equipped with Chinese language customer support.
- Logistics services must start delivery within 72 hours of orders being placed. You may choose to deliver directly or deliver to Chinese bonded warehouses first, then to Chinese customers. Shipping needs to be tracked.
- After-sale services must have locations for handling returns on the Chinese mainland.
In general, Tmall costs can be broken down into three categories. Costs and charges include:
- Deposit – this is for reimbursing consumers after a Tmall shop has breached the Taobao Mall Service Agreement, normally meaning they have sold counterfeit products. The deposit required is between US$8,000 to US$25,000 depending on the chosen store format and the trademark status.
- Annual service fee – this fee varies according to product category and either amounts to US$5,000 or US$10,000. The merchant has the chance to redeem either half or the full service fee, if they reach Tmall’s predefined sales targets for the product sold.
- Sales commission – for every transaction made, Tmall keeps 5% of the sales value as commission.
These are just the basic costs and charges. There are other product categories and sub-categories that will require more in-depth planning to accurately assess the full costs.
The process of actual set up is as below:
- Submit product information and wait for checking. This takes up to ten working days.
- Register for an overseas Alipay account. To apply offline this takes around seven to ten working days.
- Sign the agreement and pay the annual service fee and deposit. This takes about seven to ten working days.
- Open the store. This includes registering an account in Tmall Global, taking a test, completing the information needed, adding products and finally launching the store.
Tmall Global in a nutshell
There are excellent prospects for overseas firms seeking entry into the Chinese market, because the demand for high-quality products is increasing all the time.
Tmall Global greatly simplifies the process for Chinese to purchase goods from overseas. Previously, buyers had to know some English and have a credit card with access to foreign currency to purchase from overseas. Delivery would take up to 30 days or more, whereas products in Tmall Global are guaranteed to be delivered within 14 days.
Setting up an online store through a marketplace such as Tmall Global is the easiest and most cost-effective way to start online sales in China. You can fully customize the shopfront, and integrate the back-end into your order management system.
Tmall should not be seen as a temporary addition to your ecommerce business, but a long-term channel that needs a strategic approach to meet consumer demand and build a successful, long-term brand presence in China.
This post was by Misha Maruma of Nanjing Marketing Group, a company helping Western businesses connect with Chinese consumers.
This post was first published on the Nanjing Marketing Group blog as Everything You Need To Know About Tmall Global.