Brands and online sellers should consider these marketplaces first when looking to unlock China – the largest consumer market in the world.
This post is by Craig Agutter, Head of Corporate Online and Ecommerce, EMEA at WorldFirst.
You will have likely heard it before but it bears repeating – China is one of the largest and fastest growing ecommerce markets in the world. With 804.5 million internet users in China as of 2018, the online share of retail sales is expected to rise to an incredible 33.6% in 2019, amounting to $4.87 trillion in GMV.
For sheer bombastic sales events, nothing comes close to “Singles Day” in China, held on 11th November each year. An “anti-Valentine’s Day” of sorts, it was adopted by the Chinese ecommerce giant, Alibaba, in 2009 and transformed into an occasion when everyone buys themselves gifts. Over $30 billion of products were sold last year – several times Amazon’s Prime Day, Black Friday and Cyber Monday sales combined.
Despite its size, the Chinese market can seem daunting for Western brands or retailers. Before any online seller makes the leap, it is important to bear Chinese consumer preferences and behavior in mind, not least the importance of selling via marketplace platforms, in addition to the usual challenges presented by cross-border trade.
What should sellers know before jumping into the largest ecommerce market on Earth? Which marketplaces welcome cross-border sellers? What are the practical steps involved in getting started?
Tmall was launched by Alibaba in 2008 as a spin-off from its wildly popular Taobao site. It is focused on Chinese and international businesses selling brand name goods to consumers in China. It is the largest B2C retail platform in Asia, reaching over 400 million buyers, and has over 70,000 brands available across the marketplace.
However, for international brands to sell on Tmall, they’ll need to jump through some considerable hoops first, such as:
- Incorporating a Chinese company
- Opening a bank account in China
- Shipping products from within China
Thankfully, Alibaba recognized these hurdles and launched Tmall Global in 2014, aimed at international brands looking to tap into Chinese consumers’ desire to find high-quality imported products. By rounding up selections of products by their country of origin in “Pavilions”, it makes it easier for cross-border sellers to stand out from domestic sellers, on top of attracting consumers via the collective “Best of the West” caché.
Each seller has a “storefront”, which is fully customizable. There are different types of store depending on the level of trademark registration in Hong Kong. Aside from that, the requirements are more straightforward for international brands and sellers – it’s possible to:
- Fulfill orders from outside China
- Be paid in USD or EUR to a local bank account via Alipay
- Use a non-Chinese legal entity
For U.K. online sellers and brands looking for a faster and easier entry point to Tmall Global, Royal Mail’s Tmall Store is a great way to get your products into the Chinese consumer market. Essentially, Royal Mail buys your products from you and handles all logistics, duties, marketplace commission fees and customer service when selling to end customers in China.
China’s second-largest B2C ecommerce company is Jingdong (JD.com), with around 25% market share, over 300 million active users and heavyweight backers, including Tencent and Google.
It is most renowned for its impressive logistics network, boasting 7 fulfillment centers, over 200 warehouses and thousands of delivery/pickup stations. In many ways, they are out-Priming Amazon in terms of local consumer delivery expectations (even down to “delivery by drone” in rural areas).
JD also recently merged its luxury fashion imprint, Toplife, into luxe marketplace Farfetch China. This provides access to Farfetch’s network of 1,000 brand partners around the world, aiming to build “the premier luxury gateway” in a country that now accounts for a third of worldwide luxury goods purchases.
JD offers 3 sales options for international brands and cross-border sellers:
- JD Direct Sales, which involves JD sourcing products directly from international suppliers
- JD Marketplace, which is really only open to brands or suppliers registered inside mainland China
- JD Worldwide, JD’s global cross-border sales platform for brands registered outside mainland China.
To participate in JD Direct Sales (i.e. as a supplier to JD), an international seller will typically need to be active on JD Marketplace or JD Worldwide first, so we’ll focus on the requirements to get set up on JD Worldwide.
So, how do Western brands gain access to JD Worldwide? First of all, it’s not open to everyone – it requires approval from the Business Development team once a brand has submitted the required documents proving that it owns its brands or is authorized to sell them.
Once approved, a platform service fee (starting at $1,000 per month) and a refundable security deposit of $15,000 is payable. Then the shop will be open and the brand will pay commission on sales, which varies between 2-8% by category, plus a logistics services charge if the brand is relying on Jingdong for fulfillment.
Kaola is a relative newcomer to the Chinese ecommerce scene, having been established in 2015 by Netease, an IT giant in China. Its original aim was offering a selection of products from Australian cross-border brands and sellers (hence the name – it means “Koala” in Chinese).
Kaola now offers a product selection from brands based in over 80 countries worldwide and actually beats both Tmall Global and JD Worldwide in being the biggest cross-border import marketplace in China. Besides that advantage, it also offers quick payments (which should be completed within 7 days of sales) and has a heavy focus on food products.
If brands are interested in reaching the 30 million Chinese consumers that shop on Kaola, the cost of doing business is very similar in structure to Tmall and JD:
- An initial (refundable) deposit of $10-15k
- Commission fees varying between 2-10%, depending on category
- A yearly product category fee of $1,000
However, like JD above, there are two sales models. The first is supplying Kaola the products directly, which involves submitting an application via their website and awaiting to receive an offer letter, if successful. The second is as a third-party store and involves the usual overseas corporate entity requirements, plus brand authorization – once approved, brands can then set up their store on Kaola’s website.
The advantage of the first option is the relative simplicity once set up, given that Kaola will handle fulfillment via one of the biggest ecommerce warehouses in China. However, the entry requirements for a brand setting up their own Kaola store are still lower than those of both Tmall Global and JD Worldwide, so could still prove attractive if the brand wanted to refrain from cooperating with Kaola via the direct sourcing model.
Brands looking to harness this marketplace as a sales channel would be in illustrious company, with Kaola counting Costco, P&G, Brita, Heinz and Evian among those already selling via the site.
It feels strange writing an article in which Amazon is an underdog, but that is the reality when it comes to China. Amazon gave Chinese manufacturers and brands a global platform on which to sell to international consumers via Amazon Marketplace, yet its consumer-facing presence within China has always been more modest.
It started in 2004 with the acquisition of Joyo.com, which it rebranded to Joyo Amazon in 2007. It became Amazon China in 2011, as the number of Chinese businesses selling to the rest of the world grew exponentially, and Amazon’s brand recognition increased within China.
Even the most optimistic estimates of Amazon China’s domestic market share puts it in the low single-digit percentages, so it has adopted a cross-border flavor in recent years to differentiate itself from Tmall and JD. The advantage that Amazon possesses is the considerable number of cross-border sellers and brands based in the West that it already has on board, and the ability to simplify the biggest cross-border headaches.
It is quite straightforward for a brand to set up its Amazon China storefront, involving a short registration, followed by paying the relevant product category’s deposit and then uploading listings. Getting paid is streamlined too, as Western brands can use several payment partners (among which WorldFirst/LianLian Pay is featured) to repatriate their RMB earnings.
Amazon China might not change the game for a cross-border seller, but it is still a useful and easy-to-access channel to begin selling to Chinese consumers.
ttHigo (powered by Newegg)
Newegg, the tech-focused ecommerce site that has grown over the last decade into one of the leading U.S. marketplaces, launched ttHigo in 2017. This marketplace is focused on high-end premium branded products for tech-savvy affluent Chinese consumers. As the latest entrant trying to woo cross-border sellers on to their platform, Newegg have smoothed over some obstacles that still encumber some of the bigger domestic players.
Newegg went to great lengths to simplify cross-border sales for all of its Western brands via its Newegg Marketplace Global Selling Program, which ttHigo is a part of. Although the 15% commission fees might look expensive when compared to its peers, none of the typical deposit or registration fees apply for cross-border sellers.
It is marketed as being as simple as uploading product details and opting into Newegg’s Global Selling Program: no translation, local registration or complicated logistics necessary (if you use the “Shipped by Newegg” fulfillment service). Western brands get paid every 15 days in USD directly to their chosen bank account or ecommerce payments provider.
If cross-border sellers are already listing on Newegg to sell on its U.S. or other global marketplaces, that significantly reduces the number of steps involved, to the point that it should be as easy as a brand:
- Logging into their Newegg Seller Portal
- Selecting a preferred shipping method
- Accepting ttHigo’s terms and conditions
- Selecting which products to offer to Chinese customers.
ttHigo does not have the same domestic reach as the other four sites listed above, but its more targeted product selection and streamlined cross-border seller registration makes it a compelling proposition for Western brands to consider when making their first steps selling into the Chinese market.
Are you ready for the world’s largest ecommerce market?
Despite the prominence of the marketplace model in China, not all sites are equal when it comes to facilitating cross-border sellers and brands via their platforms. The dominance of Alibaba and Jingdong (who are estimated to collectively account for more than 80% of Chinese B2C e-commerce) mean that smaller players often get overlooked.
Although those two giants should definitely feature in a Western brand’s plans for penetrating the Chinese market, there are also a number of marketplaces that attempt to cater to more specific niches.
Chinese consumers often favor foreign products and brands due to their perceived quality, authenticity and availability when bought from sellers based outside of China, which is a gap that Kaola, Amazon China and ttHigo have helped bridge.
But the barriers to entry for Western brands are not insignificant. Security deposits are widespread across Chinese marketplaces, to discourage the sale of counterfeits. However, many brands have already found an engaged and lucrative audience within the burgeoning Chinese middle class.
For U.K. brands and online sellers interested in taking the next steps, a great starting point for investigating Chinese marketplaces is the Department for International Trade’s Find online global marketplaces tool. This summarizes marketplace opportunities in China and acts as a portal to get started with the marketplaces themselves.
WorldFirst helps online sellers and global brands expand into new markets, access more marketplaces and make getting paid by international customers or paying overseas suppliers as easy as a local bank transfer. The World Account offers in-country and marketplace-compatible GBP, EUR, USD, CAD, AUD, NZD, SGD, JPY and CNY accounts.