China’s massive e-commerce company Alibaba’s recent IPO on the New York Stock Exchange has increased the firm’s brand recognition outside of China. But ask any Chinese shopper and they have been using Alibaba’s e-commerce services for years.
Alibaba’s shopping platforms such as Taobao (C2C) and Tmall (B2C) are frequented by Chinese consumers looking for ways to reach brands that may not be available to them in physical stores in the vicinity where they live.
In 2008, Taobao created Tmall as a platform solely dedicated to official brand stores, allowing them to sell their goods throughout Mainland China. Tmall now has over 70,000 brands in 50,000 stores.
In February 2014 Tmall Global was set up. The aim with Tmall Global was to encourage big foreign brands to enter the Chinese e-commerce market.
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.
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 is an area of 9.6 million km2, it is twice the size of Western Europe and three times the size of India.
The annual Singles Day sale (an event held on 11th November, celebrating people who are still living the single life) shows just how much Tmall has grown in just three years, with sales amounting to US$8 million, US$153 million and US$549 million in the years 2009, 2010 and 2011 respectively.
In 2012, the total transaction volume of Taobao and Tmall reached US$160 billion, which is larger than the combined annual transactions of eBay and Amazon in the same year.
The total transaction value of China online apparel market exceeded US$71 billion in 2013 with a YoY increase of 42.8%, which accounted for 23.1% of the whole China online shopping market.
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 according to an official press release from Alibaba.
Transactions generated from Chinese B2C online retailers reached US$47 billion, 40.4% of China’s total online shopping transactions in Q2 2014.
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.
Tmall launched a standalone iPhone app at the end of April and it has already received 1855 reviews with an average rating of 4.5 stars. There are currently Android and iPad versions in the works.
Using Tmall is one way how brands can effectively reach out to consumers in such a vast country.
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.
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 Tmall Flagship Store on Tmall Global reaching Chinese consumers directly with competitively priced food and healthcare products ranging from clothing to groceries to laundry detergent to health 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.
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 has three different store formats:
Businesses intending to set up on Tmall must possess a corporate entity outside of 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:
Preferred requirements include:
Requirements of the products and services include:
In general, Tmall costs can be broken down into three categories. Costs and charges include:
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:
There are vast prospects for overseas firms pursing entry into the Chinese market because the demand for high-quality products is increasing all the time.
Tmall Global largely simplifies the process for Chinese to purchase goods from overseas. Traditionally to purchase from overseas customers had to know a little English and own a credit card that has access to foreign currency.
Also overseas delivery may 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 shop front and integrate the backend into your Order Management System (OMS).
Tmall should not be seen as a temporary addition, but rather as a long-term channel that needs a strategic approach to meet consumer demand and build a successful, long-term brand presence in China.
It provides an additional sales channel for brands that want to target consumers outside of the cities where they have a physical presence.
Have you used Tmall before? What do you think of it? Please let me know by leaving a comment below.