Today, we are going to analyze deeper Tmall Global, the #1 Chinese E-Commerce platform for brands, conditions of acceptation, cost, logistics.
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I. China’s e-commerce is undoubtedly the largest in the world
E-Commerce revenue in China is expected to grow to 1,095.5 billion U.S. dollars in 2023, making it the world’s first trillion-dollar e-commerce market.
Although the growth rate is slowing down, it still boasts an impressive 18% annually compared to 10% in developed countries.
By 2022, nearly 70% of Chinese population will shop online and each will spend approximately $984.91 USD annually compared to $899.06 USD as of current, waiting for brands to capture the opportunity.
The rapid economic development, increasing middle class with strong purchasing power and a high penetration of Internet have fuelled such fast adoption of online shopping among Chinese.
Any brand, which wants to expand and gain fruit in China market, should definitely understand and invest into its e-commerce strategy.
II. An overview of the e-commerce market in China
When you talk about China e-commerce you have to mention ” Alibaba“. Alibaba is China’s largest e-commerce group which founded different platforms:
- Alibaba.com, the largest B2B e-commerce platform in the world
- Taobao.com, China’s largest C2C platform
- Alipay is China’s largest e-payment platform
- Aliyun which is China’s largest cloud computing platform
- AliExpress which is helping Chinese companies sell to foreign buyers
- AliHealth is the most comprehensive online retailer of pharmaceuticals in China
- Lazada is the leading e-commerce platform in South East Asia
The domestic B2C eCommerce market is dominated by Tmall, part of Alibaba Group founded by entrepreneur Jack Ma, and its closest competitor Jingdong’s JD.com. Together they account for over 80% of the total China eCommerce market share.
A few other players account for the remainder of China eCommerce market, which typically are more specialised in particular product categories.
Cross-border e-commerce market is on the rise and more fragmented
As their spending power climbs, Chinese consumers are increasingly looking for high-quality products from reputable international brands.
In 2018, China’s total imports reached $2.14 trillion, up 15.8% year-on-year from the previous year, according to the Ministry of Commerce.
However, the requirements for opening an online store on domestic platforms like Tmall or JD are difficult, ranging from having a physical warehouse and physical store in China to other regulations of opening a physically present business in China, which is out of reach for many international startups and SMEs.
In order to overcome this obstacle, Alibaba Group and JD.com opened Tmall Global and JD.com Worldwide respectively as a new gateway for foreign brands to sell their products in Chinese e-market without Chinese business licenses.
On top of Tmall and JD, smaller and newer players such as Kaola, VIP.com, YangMaTou and XiaoHongShu are also taking on a significant share of China’s cross-border e-commerce market. We would talk about these smaller sites in part 3 of the series.
III. Guide to selling on Tmall Global
How to sell on Tmall Global?
- Register your company on Tmall Global
- Open a Store and create beautifully design pages
- Advertise on Tmall via PPC on Taobao & Tmall search engine
- Marketing to your social Media to drive traffic (Weibo mainly)
- KOL Use Chinese Key opinion Leaders to promote your Products
- Ads with Banner called Ming Xing Dian Pu
- Taoke : Taobao live streamin and affiliate marketing – CPS (cost per sale)
- Retargetting via emailing – SMS- ReMarketing
1. Tmall vs Tmall Global
Tmall, as mentioned, is the largest domestic B2C online platform in China.
So Tmall enables businesses to sell directly to millions of customers throughout China. As an open platform marketplace, Tmall provides the infrastructure to host your storefront and unfiltered access to hundreds of millions of shoppers.
A storefront is much like operating your own B2C eCommerce website.
Tmall Global, on the other hand, allows international businesses with no physical presence in mainland China – that is you don’t need to have a physical store or a warehouse, you don’t need to be registered with the Chinese authorities, and you also don’t need to have a Chinese business license – to set up an online store on the platform and tap into a huge and profitable consumer base who are excited about online shopping.
2. Further about Tmall Global
Tmall Global is a dominant cross-border e-commerce platform, the first choice for many well-established international brands to land on if wish to sell in China.
It currently hosts more than 20,000 brands in over 4,000 categories from 77 countries and regions.
The aim of Tmall Global is to source the latest and most-popular overseas products for Chinese consumers and on the other hand, help overseas vendors capture Chinese consumers’ booming appetite for imported products.
Holland Pavilion on Tmall Global
3. Who can sell on Tmall Global?
All the companies in Tmall Global are corporate entitles outside mainland China, with overseas retail qualification. Merchants with a turnover of at least 100.000.000 RMB are prioritised.
The goods sold on Tmall Global are originally produced and sold overseas, then imported legally into China.
Domestic consumers can use Alipay or other methods that are used on the domestic platform, Taobao, to buy goods on Tmall Global. Meanwhile, merchants will receive payment in their local currency directly in their home country bank accounts.
4. Business models offered by Tmall Global
Tmall Global Flagship store
Tmall Global allows foreign brands without a Chinese business entity to sell to consumers directly by opening their exclusive flagship stores. Though, since March 2015 companies are required to use authorised third party service providers, so called ‘TPs’.
Via the ‘Partnership Business Structure’, a local TP will help the foreign brand to open a Tmall shopfront. The brand is responsible for the products, branding and marketing strategy whilst it outsources daily operations of the storefront to the TP.
Different cross-border e-commerce services provided by TP:
- Customer Service
- Digital Marketing & Design
- Warehousing & Storage
- Web Store Maintenance
Detailed info about TP can be found here.
For some foreign brands which are unable to open their own retail store in China, opening a Tmall Global Flagship store is a good way to reach their target, Chinese customers.
The platform also offers brands a number of marketing tools available throughout the Alibaba ecosystem such as Livestream to create content that appeals to Chinese consumers born after 2000, or Generation Z, the fastest-growing customer base on Tmall Global.
Some examples of companies that have entered the China market through Tmall Global are Lush, Cambridge satchel, and Japanese drugstore brands.
Requirements for merchants to operate on Tmall Flagship Store:
- Commodities: products originally produced or sold abroad must be genuine and come with a certificate of origin. Therefore, products must pass Chinese international customs and Tmall Global security.
- Webpage & Labelling: product descriptions as well as labels must be provided in Chinese, with the international metric system adopted as the unit of measurement.
- Furthermore, Chinese language customer support must be available, for which Tmall recommends employing Chinese Alitalk customer service.
- Logistics: products should be dispatched within 120 hours and be delivered to customers within 14 days
- After-sales: merchants are required to set locations for handling returns in mainland China, Hong Kong, and Taiwan, if you sell commodities to those respective regions.
On-boarding process (here for details)
After investing considerable time and resources into entry preparations, setting up a shop will take 4-8 weeks.
Before you can open the store, you need to pay a US$25,000 security deposit. Notice that this is a deposit.
The money will be refunded if you decide to close the store. Tmall may also deduct from the security deposit, to compensate customers.
Tmall charges a fixed yearly fee, based on the product category you want to sell in.
Most categories cost around $5,000 to $10,000 per year. If you want to sell in multiple categories, you will pay for the category with the highest fee.
In addition to the yearly fee, Tmall is also charging a commission based on the order value.
It’s calculated as following:
Tmall Commission Fee = XX% x (Product Price + Freight Cost)
The commission depends on the product category, and normally varies between 2 to 4%.
Alipay service fee
In addition, Alipay, which is the payment processor for Tmall.hk, charge a 1% service fee.
For example, if you sell a product for 1000 RMB, you will therefore pay a transaction fee of 10 RMB.
MERCHANTS NOW HAVE NEW WAYS TO SELL ON TMALL GLOBAL
Tmall Global just released a few days ago two key initiatives that would further support Alibaba’s ambition to bring $200 billion worth of international goods into China over the next five years and help businesses of all sizes enter the China market.
The initiatives – the Tmall Direct Import (TDI) and Tmall Overseas Fulfillment (TOF) – are imported solutions offered by Tmall Global to help international brands accelerate their entry into China and capitalize on hot demand for high-quality products.
Tmall Overseas Fulfillment (TOF)
TOF is a consignment solution that allows brands to place a small batch of products at one of the TOF centers to be sold on the Tmall Global platform.
This gives businesses around the world a chance to try out and fine-tune their product assortment before making a full entry into China.
TOF centers are currently available in Japan, South Korea and the US, with plans to expand into Europe later this year.
As part of the TOF solution, the Tmall Global team provides brands with marketing advice and tools to help boost brand awareness.
Analytics generated from platform, such as sales performance and consumer preferences, can help brands make more-informed decisions about their China strategy.
One example is Evereden, an American baby skincare brand that leveraged TOF when it was considering a move into China. By using celebrity endorsements and livestreaming as suggested by the TOF team, Evereden increased its brand recognition and found the right mix of products for Chinese consumers. Three months after first signing up for TOF, Evereden opened a flagship store on Tmall Global and later achieved a visit-to-purchase conversion rate of between 15% and 20% in its first month on the platform.
Tmall Direct Import (TDI)
In addition, brands and suppliers can participate in Tmall Global’s new centralized import procurement program, which leverages six warehouses around the globe to source goods for all of the online and offline outlets within the Alibaba ecosystem, including technology-driven grocery chain Freshippo (also known as “Hema” in Chinese) and Tmall Supermarket.
Similar to TOF, this program is another efficient way for international brands to reach the nearly 700 million active users on Alibaba’s platforms.
Through the TDI program, Italian olive-oil brand Clemente was able to place its product in Alibaba-owned outlets. In two months, Clemente Olive Oil had become a top seller in Freshippo and Tmall Supermarket.
5. Good news: New English website speeds up the registration process for brands
Tmall Global has just launched an English-language website to streamline the on-boarding process for international brands that want to sell on the platform.
The easy-to-use portal will educate brands about Tmall Global and selling into the world’s second-largest economy, as well as allow them to apply to open a flagship store on the site.
Tmall Global’s business-development teams typically identify brands that they think will be successful on the platform and work to launch their flagship stores. With the new site, merchants will be able to make their pitch directly to Tmall Global.
They simply fill out a questionnaire and describe their business, and Tmall Global will contact successful applicants within 72 hours to discuss the on-boarding process. Previously, the process took many months.
We hope this first part has successfully given you an overall understanding about China’s e-commerce market as well as Tmall Global specifically.
In next part, we would continue to talk about JD Worldwide which is another prominent cross-border e-commerce platform in China.
more Questions about Cross-Border, you can get our Report with a simple email to us.
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