As of now, China’s e-commerce sector is more than three times the size of the US market, which currently ranks distant second.

China has has been the largest ecommerce economy in the world since 2015. In 2019, it reached 1.94 trillion USD, representing an addition of 27% year over year and a quarter of China’s total retail sales volume.

Currently, the majority of Chinese are online shoppers which representing about 60% of China’s internet user base. When we compare this figure to US, where 88% of internet users shop online, it is evident why China still has plenty of room to grow in absolute terms. Needless to say, that the sooner your company taps into this vast market, the better off it will be.

Now, to the more practical aspect of China’s ecommerce. Generally speaking, there are two choices of selling online: opening a virtual store in one of the large online stores, or setting up your own internet store as an extension of your main website or as a stand alone site.

Plugging into China’s existing ecommerce ecosystem

The largest C2C ecommerce site in China is Taobao.com which as an equivalent to Ebay. Although, it is an entire universe in and of itself, selling on Taobao is more suitable to small retailers or individuals. It is a very competitive space and is notorious for fakes and pirated stuff. If your goal is building a trustworthy brand image you should stay away from Taobao.

Luckily, there is an alternative from the same Alibaba group that owns Taobao, called Tmall. The company goes to great extend to make sure that the product sold on Tmall are genuine. Sellers on that site have to abide by strict procedures which are even tougher for overseas companies. Read our earlier post for more details on how to establish a Tmall store and whether it’s a good fit for you.

While Tmall holds about 50% of B2C ecommerce market in China, Jingdong Mall (JD.com) is the second in size at about 22% market share as of 2013. The idea is similar to Tmall – Jingdong Mall is for branded products only and you will be expected to prove that you either own the brand or are authorized to sell it.
There are a few more such “online shopping malls” in China: Suning that focuses mostly on electronics and Amazon.cn – scaled down Chinese version of Amazon.com.

The pros of working with the existing ecommerce site can be summarized as follows:

• Traffic that goes through those sites is enormous and you are almost guaranteed to get some of it;
• Setup is not very complex, although it could be a bit tricky for a non-Chinese company. If everything is done right, your store can be up and running within 2-3 weeks;
• You can also benefit from marketing programs within the platform, although it would cost extra;

Of course, there are some cons too:

• It isn’t cheap. There are setup and running costs and a deposit, in case you are found in violation of the terms of the agreement (by selling counterfeited products for example). I discuss the cost of setting up Tmall store in more details here;
• Fierce competition from other sellers, pretty much like what you have in a traditional brick and mortar shopping mall but with more ads from every direction;
• Limited opportunity for differentiation by expressing your unique style or brand experience;

Setting up a stand alone online store

If you have a technical expertise to setup your own functional internet store than this could be an alternative route for your Chinese ecommerce strategy.

The obvious advantages of that approach are:

• You are in full control of your own store as there is no need to comply with anyone’s policies;
• Your store can provide a unique brand experience for a shopper that may not be available in Tmall or JD.com;
• There is no commissions on your sales to a 3rd party and no maintenance fees;

Disadvantages of building your own store could be as follows:

• You don’t benefit from the online mall’s traffic and acquiring it through marketing campaigns may become more expensive than paying to Tmall or JD.com for their marketing programs;
• Building your customers’ trust takes time. In the existing online mall like Tmall, trust level is high – shoppers know what to expect, fairly familiar with how it works and are quite sure that they’ll get what they pay for (and if they don’t there is proven recourse). Your customers have to be just as confident that they won’t be ripped off;
• The technical challenges can be substantial: you have to have the right payment system such as Alipay, Tenpay or Baidu wallet setup; take care of all the technical challenges related to traffic and transactions; having live support through chat; manage inventories; get a delivery system in place, just to mention a few.

As most of the examples show, and considering your marketing budget allows that, the best strategy is the combination of both approaches. Setting up Tmall or JD store for building brand recognition and attracting new customers in addition to having your own internet store for more immersive brand experience targeted at existing customers and brand followers.

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If you are selling a physical product, one of the best ways to find out what is already available is to research Taobao (Taobao.com), the primary C2C marketplace in China and its B2C equivalent, Tmall (tmall.com). Both platform belong to Alibaba and are similar to Amazon but much bigger.

Chinese Marketplace Sites Search

As mentioned before, none of Taobao or Tmall results will appear in Baidu searches, this is why it is important to research this channel separately.

While typing the search term (“sunglasses” in our example), more results will be shown as you type in, giving some insights on what other terms are frequently searched for (of course, you need to understand Chinese to make sense of it):

Additional search terms may give some more clues on what else you should be researching.

Taobao will also display a multilevel filters allowing for more targeted searches. In case of “sunglasses”, the results can be filtered by glasses shapes (oval, round, square, aviator, rectangular etc.), lens color, suitability for different type of face, gender and so on as well as price range.

The results, each with an attractive product photo, short description and the price, will be displayed right below the filters:

Typically, most results will be linking to either Tmall (like in the case of fashion items) or Taobao itself. Tmall is a type of an upscale version of Taobao with a strict policy against fakes. In the physical world, Tmall can compared to a branded department while Taobao is more of a bazaar style market.

How Taobao can help with the market research? First of all, it is the best to research product prices and price ranges for different subcategories of products.

Secondly, you will be able to better understand the overall popularity of the product category, competition and sales channels.
Finally, seeing so many competing offers grouped together may give you more insight on how yours could fit in the mix.
Side note: occasionally, you may even find your own products sold by someone else that you may not be aware of.

Stay tuned for the upcoming post on how to perform basic market research with Chinese social media.

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Here are just some of the most impressive nuggets on what has happened on one minute on China Internet:

• Almost 400,000 people log in to WeChat app every minute;
• 625,000 Youku-Tudou videos are being watched;
• Almost 65,000 Weibo tweets with over 50,000 of them containing images;
• Over 4 million of Baidu search queries;
• $1.1 million is spent on Taobao or Tmall;

China Internet in 60 seconds:

(credit to TechInAsia)

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Singles day is an informal shopping festival in China that has originally celebrated people who are still single. It falls on 11/11 which is meant to symbolize people who are not in a relationship. Since it started back in 2009, it has become the largest shopping event in China, akin Black Friday or Cyber Monday in North America, although much bigger.

Originally, the event was started by Alibaba which began offering discounts on its main shopping platforms, Taobao and Tmall, that lasted for 24 hours. The festival was picked up by other Chinese e-commerce sites like JD.com and now, increasingly, by traditional brick-and-mortar stores. Most of the action still goes online via e-commerce sites and mobile apps.

Every year, the festival kept getting bigger but this year, there were concerns that  it might actually slow down a bit. The main worry was that slowing Chinese economy and the trade war with US would dampen shoppers’ enthusiasm.

“It is possible that there will be a slowdown in growth for Singles Day sales, given that they have had exponential growth in the past,” Xiaofeng Wang, an analyst with Forrester, said before the event.

This did not happen. In fact, 2018 Singles Day raked a whopping $30 billion in the first 24 hours, beating the last year record of $24.2 billion.

Here is the latest data compiled by Statista:

Similar North American events are dwarfed by China’s 2018 Singles Day – the sales on Thanksgiving Day combined with Black Friday are about 5 times smaller.

Attempting to capitalize on seemingly insatiable appetite of Chinese shoppers for foreign products, the event was picked up by platforms outside of China. A recent survey from research firm Oliver Wyman found that 57% of China’s online shoppers consumers were planning to buy goods from overseas during 2018 Singles Day. The top countries that were most popular with the consumers are Japan, USA and Australia.

In addition, Alibaba’s South East Asia subsidiary, Lazada, was offering Singles Day discounts in Singapore, Malaysia, Indonesia, Thailand and Vietnam.

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In the first half of 2018, more than 85 percent of all Chinese ecommerce sales in retail trade were shared by ten major players on the market. Recently, the market witnessed the growth of several smaller e-commerce retailers such as Pinduoduo and Gome. However, Alibaba consistently occupies the highest place over the years, with a 58.2 percent share of all e-commerce retail sales in 2018.

Alibaba.com was originally launched in 1999 as a B2B e-commerce portal to connect Chinese manufacturers with foreign buyers. In 2003, the service expanded to C2C with the launch of the largest ecommerce marketplace Taobao and in 2008 a B2C online retail platform Tmall, which are the current market leaders in their respective business segments.

In the fiscal year ending March 31, 2018, the annual revenue of the Alibaba Group amounted to approximately 39.9 billion US dollars (an increase of 58 percent) with a net result of 9.79 billion US dollars. The annual revenue of the core commerce company rose by 60 percent to around 34.12 billion US dollars, the highest sales growth since the IPO. In 2018, Alibaba retail markets recorded 28 percent annual growth in total gross commercial value (GMV), driven by Tmall and its robust physical goods, GMV growth in clothing, FMCG, household appliances and consumer electronics categories. The following graph compiled by Statista illustrates the current state of Chinese ecommerce sales in 2018.

Chinese ecommerce sales in 2018

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Alibaba still dominates Chinese ecommerce with Taobao for C2C and Tmall for B2C. The other major player in B2C space is JD.com, currently this company holds about a quarter of the total market.

WeChat Weidian is another newcomer that is quickly gaining traction in Chinese m-commerce but it is not featured in this infographic due to lack of available data.

Other platforms in China ecommerce landscape are significantly smaller with market share in single digits. They also tend to be more specialized – for example, Suning and Gome mainly sell appliances and electronics while Vancle is a clothing branded retailer.

China ecommerce landscape

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As this infographic illustrates, increasing number of Chinese online shoppers now put higher value on branded goods over lower priced generics. In fact, sales of not branded goods have dropped to 35% in 2014 compared to 42% in 2011, while sales of branded products have increased to 65%. This trend is certainly good news for foreign brands targeting Chinese online shoppers.

At the same time, the rise of branded ecommerce in China hasn’t been affecting every brand equally. In fact, the share of top brands sales has seen a slight drop of 2% while the sales of lesser known brands increased by 4%. Regional and pure online brands have shown the largest increase of 6%.

How to succeed in branded ecommerce in China?

The infographic gives the following advice:

Beginners:

• Build standalone online marketing and sales systems, supplemented with a small digital sales team.

Intermediates:

• Integrate online and offline channels to improve consumer engagement;
• Rely on full-function digital team or an integrated team for online and offline channels;

Experts:

• Disrupt established business models to create innovative, consumer-led products and experiences;
• Create project teams focused on multiple consumer segments.

Here is infographic:

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We will cover various pros and cons of JD vs. Tmall in upcoming articles. Today’s post will feature the latest infographic by Go-Globe that visually shows what JD is all about.

JD prominence in China’s ecommerce market is bound to grow due to several reason. First one is JD’s recent partnership with Tencent, the company behind WeChat. This would add a powerful mobile component to JD market strategy.

Second reason is that the most popular search engine in China, Baidu, is also cooperating with JD. As a result, due to this partnership on one hand, and the ongoing war with Alibaba on the other, only JD links are displayed in Baidu search results. This provides another powerful source of traffic and makes selling on JD a very attractive opportunity.

Here the full infographic:

Selling on JD – platform overview

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Other rivals, such as Tencent and Baidu with their own ecommerce offers, are still trailing Alibaba which is set to stay as the dominant force in Chinese market for the foreseeable future.

Here I’d like to share the infographic produced by Alibaba from different sources on the state of China’s online shopping. Although, it was compiled at the end 2012 and may be slightly outdated, in terms of market share figures and online shoppers’ behavioral patterns there have been no any significant changes.

Click on the images to enlarge:

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Would opening a Tmall virtual store be a sound strategy for your Chinese market expansion? This depends on several factors which I’m going to discuss next.

The reach

B2C ecommerce market was estimated to be at about 600 billion yuan (~100 billion dollars) in 2013 with Tmall accounting for roughly half of that number. Clearly, if your primary goal is the reach, Tmall platform should be your first choice. Also, Tmall is being positioned for tier 1 and 2 cities, while Taobao covers traditionally less affluent lower tier cities.

Who qualifies

If you are a registered company outside of China, Tmall requires you to be a certified retailer or a trading company and the products should be under your own brand or licensed to you. Also, Tmall has a preference to retailers who have been in business for at least 2 years with the annual turnover of at least 20 million dollars. Of course, if you are a well known international retailer, it would be fairly easy to get approved.

Tmall can be an effective sales and marketing channel for fast moving goods, such as fashion items and apparel. It may not be suitable for companies that want to maintain full control of their brand development and those who seek to project exclusivity, such as luxury goods for instance.

Tmall’s sales conditions

The retailers on Tmall are required to join Tmall’s genuine product protection agreement. If shipped overseas, the products must be delivered with international courier companies through proper customs channels and every shipment must be traceable. All the product specs must be in Chinese and all measurements in metric system. Products should be shipped within 72 hours from order completion and there has to be a return location within Mainland China.

Cost

The costs can be categorized into setup and ongoing. Setup costs include store design at somewhere between RMB6,000 to RMB20,000. Annual fee, aka technical service fee, varies according to product category is set to either RMB30,000 or RMB60,000. The merchant may be able to redeem either half or the full service fee if they reach Tmall’s predefined sales targets for the product. In addition, Tmall requires a deposit which can be set at RMB50,000, RMB100,000 or RMB150,000 based on the chosen store format and the trademark status. The deposit is designed to reimburse customers in case of breach of “Taobao Mall Service Agreement” which prohibits selling counterfeit goods.

Ongoing costs include 5% commission fee on every transaction as well as optional marketing services.

Tmall marketing

Tmall is the part of the larger Alibaba’s ecosystem which actively promotes it within its C2C Taobao platform by pushing Tmall search results to the top. Also, since most Chinese users are already familiar with Alipay payment system, they would feel comfortable using it for Tmall purchases improving conversion rates.

Tmall has its own mobile app for iOS and Android with it’s iPhone app enjoying 4.5 star rating.

Finally, for additional fee, Tmall offers variety of marketing services including banner promotions on its own platform, SEM, and emailing campaigns.

What are the downsides?

Although, Tmall is being actively promoted by Alibaba as the store for genuine products for discerning customers, it still suffers from the perception that it’s just another offshoot of Taobao which focuses on low prices and discounts. Some companies are concerned about their reputation being damaged if they become associated with the platform.

Another drawback is that Tmall allows only limited space and tools to express stores specific brand identity and the expression of a unique marketing message.

In conclusion, Tmall can be an effective sales and marketing channel for fast moving goods, such as fashion items and apparel. It may not be suitable for companies that want to maintain full control of their brand development and those who seek to project exclusivity, such as luxury goods for instance.

One possible strategy to consider is to use Tmall as one of the sales channels that complements the original ecommerce site where customers can go for more information about the brand and, perhaps, more sophisticated buying experience.

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