For retailers that want a presence in China, Tmall offers them the opportunity. However, before they make a commitment to the platform, SUMO Heavy CTO Bob Brodie says they should consider the risks.
For many U.S.-based companies, the decision to sell their products on Tmall is a no-brainer. The popular B2C retail platform—which has 500 million users worldwide—gives them the ability to reach new markets where shopping online via mobile devices is the norm.
While entering the Chinese market via Tmall is a potentially lucrative decision, the opportunity isn’t right for all retailers and there are many considerations to be made. Opening a store has upfront costs, and it’s important to understand the time and financial implications of ongoing maintenance. In addition to costs, stores should determine if their brand or products are the right fit for Tmall customers.
If you’re pondering whether to sell your products on Tmall or not, consider these factors as you make your decision.
Expense vs. Payoff
Opening a retail store of any type has costs, and Tmall is no exception. The required fees to open a store on many third-party platforms—an initial security deposit, annual technology fees, services fees, and commission fees—can quickly add up.
“Many U.S.-based companies just list their products on the platform like they would any other feed-based channel, such as Walmart, Jet, Google Shopping, or Overstock,” says Bob Brodie, co-founder and CTO of SUMO Heavy. “Unfamiliar with how to properly market their products to online shoppers in Asia, they experience abysmal results.”
On the whole, a successful implementation with Tmall can cost hundreds of thousands of dollars upfront, considering research, development, translation, and implementation.
Supply vs. Demand
Even if a company has the cash to spend on a Tmall store, that’s not enough to guarantee success. Tmall shoppers are not new to buying cross-border, and as a result, they often shop brands they already know. For example, only three prestige beauty labels—Dior, Estée Lauder, and AvèneDior—were among the top 10 brands on the platform in terms of visibility, while mass global brands such as Maybelline “have the upper hand.”
Of the 3,700 available categories to choose from, only a few stores excel in each. To ensure their products have a chance of success on Tmall, retailers should do extensive research beforehand to see if there is enough demand in the Chinese market. If they don’t, they could lose everything they’ve invested in launching and maintaining a Tmall store.
Time Invested vs. Payoff
Perhaps the most important research a U.S.-based company should perform is to quantify the profitability of the time they will invest in implementing Tmall. Unless they have the necessary resources and experience, these need to work with an official third-party (TP). “When I’ve worked with Tmall directly in the past, our calls often started at 11:00 p.m. Eastern time,” Brodie says about his experiences working with clients who decided to sell on Tmall. “They were long, and there were translators involved since there were executives on the call that spoke different languages natively. Being able to get a message across on either side was vital.”
In addition to different time zones, U.S.-based companies must also respect cultural differences. Chinese New Year, Labor Day, and National Day are just a few of the national holidays celebrated in China throughout the year in which businesses close for a certain period of time. Companies should communicate and coordinate with their third-party partners in China beforehand to ensure they have ample time to receive shipments and perform other necessary tasks before leaving on holiday.
There are also many business documents, including trademark registration and a business license for mainland China, that must be completed and submitted before a brand can open a Tmall store. Failing to turn in these documents promptly can increase the amount of time it takes to open the store, which in turn can increase the costs of getting up and running on Tmall.
If maintaining a Tmall store sounds like a lot of work, that’s because it is. In order to thrive on the platform, U.S.-based companies need a dedicated team familiar with the Chinese eCommerce market to provide customer service and logistics. Customer service, in particular, should be a priority as Tmall shoppers are very engaged, often visiting the site between seven and eight times a day. They frequently ask questions, provide feedback, and more, especially during livestreaming shopping sessions.
With these considerations in mind, U.S.-based companies can be incredibly successful on Tmall if they have a brand or product that is in global demand, are ready to make the investment, and have a solid understanding of the market in China. The returns could change their company forever.
However, Brodie advises them to consider their options thoroughly before making a final decision: “Unless U.S.-based companies have a specific brand with strong demand in China or earnings greater than $250 million to support the effort, they should proceed with caution or potentially avoid using Tmall as a hedge against an economic downturn.”