TMall – gateway to China's growing eCommerce market

TMall is arguably the most significant online commerce platform in China today, and it’s set to outpace Amazon by 2015. Elisa Harca, our Global Client Partner and Regional Director – Asia, gives some expert tips and advice for brands on how to set up shop, as well as fascinating insight into what people are buying, from Lamborghinis to baby formula.

According to Euromonitor, Alibaba Group’s TMall, a B2C sales platform solely dedicated to official brand stores selling to Greater China, will overtake Amazon in revenue by 2015. It will officially become the world’s biggest eCommerce site, leaving the likes of eBay and other pure-players in its wake.

And, to further cement its position as a key global player, Alibaba Group has just announced a $586 million investment in Sina Weibo – the biggest deal yet for the Chinese internet industry. In the past, Alibaba’s ventures into social and mobile selling just didn’t deliver the required results. But this close collaboration between two of the world’s most significant platforms is clearly designed to enable them to become the dominant force in social and mobile commerce. It’s a win-win situation for both businesses – Alibaba will get the social/mobile reach it requires to generate even greater profits, and Weibo will take an important step towards becoming a social business platform.

What this adds up to for brands is that, now more than ever, TMall is becoming a force to be reckoned with on the global digital stage; one that can’t – and shouldn’t – be ignored.

THE digital sales channel for brands in China?

An increasing number of ‘big names’ (Coca Cola, Nike, Microsoft, Disney, Apple and more) are looking to the East as a viable and long-term source of revenue, and it’s no wonder - the eCommerce figures for China are impressive:

  • More than 242 million people in China shop online, and they’re expected to have spent $265 bn by the end of 2013
  • Collectively, they currently spend around $40,000 a second online

And it’s evident that brands with ambitions to expand into China need to consider TMall as part of their strategy:

  • 54% of all online shoppers in China use TMall, way ahead of its nearest rival 360Buy, at 17%

Currently, TMall has over 70,000 official brands in 50,000 stores and is attractive to businesses for a variety of reasons:

  • It’s based on the infrastructure Alibaba developed for Taobao Marketplace, China’s leading C2C online platform for small businesses and individual entrepreneurs, and uses the payment system Alipay. Users are familiar with the way it works and all the services offered, and trust the mechanism they have been using for online shopping over the years.
  • Unlike Taobao, TMall only accepts verified stores , so there’s a guarantee that products sold online are real, which builds consumers’ trust and, in turn, conversion rates. Trade in counterfeit products is a serious issue, and consumers are prepared to pay a premium for items which are certified as genuine.
  • Taobao pushes TMall stores actively over and above other stores, which results in more and higher converting traffic.
  • TMall’s mobile app for iPhone, iPad and Android has an average rating of 4.5 stars and contributed to a massive 600% increase in mobile commerce in 2012, for TMall and Taobao marketplace combined.

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 since 2008, with sales amounting to RMB50 million, RMB936 million and RMB3.36 billion in the years 2009, 2010 and 2011 respectively, leaping to a massive RMB19bn in 2012.

Terms and fees

Besides having impressive sales figures, TMall is a straightforward way to reach out to consumers living remote from tier one cities where foreign brands usually establish a physical presence on entering the market. However, setting up a TMall shop without understanding the Chinese language or having a trusted local partner can be challenging – here’s a breakdown of the main facts.

TMall has three different store formats:

  1. Flagship Store – only brands with a trademark (either ® or ) can open flagship stores. The owner of the store must be 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.
  2. Specialty Store – merchants with brand authorization documents giving them distribution rights to sell products without geographical restrictions in the Greater China region are eligible to open this store format.
  3. ‘Monopolized’ Store – merchants with two or more brands within one of TMall's product categories can open this type of store. Only one ‘monopolized’ store can be held per merchant in one product category.

For smaller brands and those wishing to test the water with TMall before committing to their own store, there’s also the option to set up shop in the virtual equivalent of a department store. This has the dual benefit of allowing retailers to promote their products in the same space as other respected brands, while keeping costs and potential risks to a minimum.

Costs depend on the type of shop you opt for, but within this there are other factors which define the cost structure. In general, TMall costs can be broken down in three categories:

  • Deposit – this is for reimbursing consumers if a TMall shop breaches the ‘Taobao Mall Service Agreement’ and has sold counterfeit products. The deposit is based on the chosen store format and the trademark status.
  • Technical service fee – this is an annual fee that varies according to product category. 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.
  • Sales commission – for every transaction made, TMall keeps a percentage of the sales value as commission.

These key considerations should provide a good starting point for brands planning to take their place on the TMall sales platform. However, the dozens of product categories and sub-categories will require more in-depth planning to accurately assess the costs.

Long-term planning over short-term testing

TMall has quickly developed to become the sales platform of choice for people in China when researching and buying branded products online. It provides a strong sales channel for brands that want to target consumers outside of the cities where they have a physical presence. With nationwide broadband coverage still developing and an official commitment to improvement (the number of broadband users in China is currently around 159 million, or 11.7% penetration, and the Chinese government has said that it aims to increase broadband coverage to 95% by 2015), 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, stable brand presence in the territory.

Unexpected items in the (digital) bagging area – 5 popular purchases on TMall that might surprise you

While clothing, household items and accessories lead the way, some more unusual items are becoming increasingly popular with buyers:

  • Lamborghinis, Mercedes and other luxury cars – TMall is promoting the internet as the most convenient way to buy imported luxury cars, and its automotive products category has grown 400% year on year
  • Baby formula – following a food safety scandal which led to high demand for formula made outside of mainland China and the subsequent government-imposed purchase limit, TMall is officially working with overseas manufacturers to sell it online, ensuring quality, authenticity and freshness
  • Face masks – pollution is a concern for citizens in major cities such as Beijing, and purchases of face masks increased 130% after a recent spike in air pollution
  • American cookies and other classic US foods – availability of international goods, in particular items such as cookies, dried fruit and nuts – has led to a surge in pre-orders for previously unavailable foods, with retailers regularly experiencing ‘sell-out’ campaigns
  • Fine wine – 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. It’s predicted that 47% of the Chinese population will buy wine online by 2020.

This blog post was written by Elisa Harca and first appeared in two parts on ClickZ Asia: Part 1 and Part 2.

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