E-commerce in China has seen unprecedented growth in the recent years. Official reports have shown that e-commerce is a key driver of growth in Chinese consumption, with online retail sales sum up to 1.8 trillion U.S. dollar in 2019 and predicted to reach 3.34 U.S. dollar in 2023.
There is undoubtedly many opportunities for brands looking to penetrate the e-commerce market in China, especially in a time where cross border retail is on the rise (approximately 24% of China’s digital shoppers had made a cross-border purchase in 2018). Trends show that consumers in China are increasingly turning to online platforms to buy everyday items from international brands.
It is the right time for foreign brands to enter the vast Chinese market, and WKI is here to help navigate the different e-commerce platforms in China.
1. Tmall Global
Tmall is a business under Alibaba Group and China’s largest third-party B2C e-commerce platform. Tmall has more than 150,000 cooperating brands. Tmall online physical goods GMV, excluding unpaid orders, grew 27% year-over-year during the June 2020 quarter, with all major categories growing compared to the December 2019 quarter, before the onset of the COVID-19 pandemic. It takes 61.5% of the China e-commerce market share.
Additionally, Tmall Global, the international version of Tmall currently on June 2019 has 20,000 international brands across 77 countries and regions, and the number keep growing. Tmall Global is seen as a cross border solution for foreign businesses as they do not need to have operations in China – a key feature that is different from the classic Tmall version. The platform has also launched an English language version of the site to make it easier for international brands to join the platform.
Types of stores on Tmall Global & requirements
This type of store is only open to brands with a trademark (e.g. ® or TM). The owner of the store must be a formal representative of the brand. Alternatively, the owner must have exclusive authorisation documents that allow him/her to set up a Tmall flagship store. These documents will have to be provided by the formal representative of the brand.
Merchants who possess a brand’s distribution rights and the relevant documents to sell products without geographical restrictions in China can open a specialty store on Tmall Global.
Merchants holding brand licensing goods are eligible to open a store of this format. Retailers of this store format are able to sell two or more types of goods in several different categories.
JD.com (also known as Jing Dong) is China’s second-largest e-commerce platform by sales, following Alibaba. Like Tmall, JD.com is also a B2C e-commerce site, but with two models – direct sales and marketplace. The former model is where JD.com sources products directly from suppliers and sells them directly to customers on their website and mobile channels, whereas JD.com’s marketplace allows well-established third-party sellers to sell products directly to customers on their website and mobile channels.
Similar to Tmall, JD.com introduced JD Worldwide as a cross-border e-commerce platform. Foreign brands are able to sell their products on this platform for Chinese customers to purchase. This is an opportunity for international merchants to tap into the Chinese market, and just like on Tmall Global, it can be done without having a physical presence in China.
JD Worldwide is open to brands, franchisees, retailers and traders who are legally registered outside China and are selling products that originate from outside China. Firstly, however, a foreign seller must meet these basic requirements before they can register to collaborate with JD.com:
-Be a brand owner or possess a license abroad
-Established a company abroad with a trademark registration
-Have a positive track record of their products
-Possess proof of operational history to indicate the authenticity of their business
-Have a USD bank account
On the other hand, registration to become a seller on JD Worldwide is not free. Upon confirmation from JD.com that the brand is a suitable fit for the site, a deposit of US $15,000 will be requested. Moreover, a service fee of US $1,000 per store per year will be incurred, and the site will collect a commission of 2% to 8% based on your sales.
Another product of Alibaba, Taobao is China’s largest online shopping platform. The reported number of Taobao daily active users (as of June 2019) is 299 million, and there are 666 million mobile monthly active users on Taobao (as of 2018). Taobao has expanded tremendously since it started out as a C2C platform, and now has over 8 million stores.
Although Tmall is generally viewed as more ‘premium’ than Taobao, Taobao is known to have more domestic brands and has become the go-to platform for low- to medium-end consumer goods – sold to working and middle class domestic market, which makes up a huge portion of the consumer population. The market is vast, and it is an opportunity foreign businesses may not want to miss.
Unlike Tmall Global and JD Worldwide, it is not possible to open a Taobao store with a non-Chinese company. However, if you register a company in China, you are able to open a Taobao store and sell products from certain categories. Foreign nationals are able to fully own both limited liability companies and partnership enterprises in China – or do so with a Chinese partner.
To register a company in China, is a whole separate, complex process and Reindeer Station specialises in the area of helping foreigners set up a business in China. Also, unlike Tmall, the Taobao store is only available in Chinese, which can be difficult for foreign merchants. Fret not – our team can help you navigate the process and set up your Taobao store.
If you want to set-up a store on WeChat for your brand, a solution provider is a must. Unlike Tmall, WeChat doesn’t have a single interface to set-up stores. Instead, WeChat provides a toolbox for many service providers to design their own offerings. Youzan is the largest provider of WeChat stores in mainland China. It provides e-commerce platform with SaaS products and comprehensive services, third-party payment services and related consultancy services, general trading, sales of integrated smart point of sales (POS) devices.
Till now, over 400 million stores on WeChat are built with Youzan . In 2019, Youzan achieved a Gross Merchandise Volume (GMV) of 64.5 billion RMB, with a year-to-year increase of 95%. The Youzan platform is used by major brands such as DELL or Walch, and by top influencers.
Its core service is to help merchants run their mini-programme on Tencent’s WeChat, by assisting them in designing and managing the mini-programme.its SaaS products allow merchants to run different online shops on different social networks by using Youzan’s single platform. Besides, Youzan also provides extended services to help merchants effectively manage their online businesses, such as Youzan Cloud, Youzan Guarantee, and Youzan Distribution, and recently it launched its live streaming e-commerce solutions, as this has become a significant trend in China.
Youzan only accept mainland business license, meaning foreign brands can either cooperate with domestic partner, or register in China with brand trademark registration certificate.
Its annual fee of the basic version is 6800 RMB, the professional version is 12,800 RMB, the flagship version is 26,800 RMB. No deposit needed.
Pinduoduo was founded in 2015 by a former Google engineer Colin Huang. Its business is customer-to-manufacturer (C2M), by eliminating all level of intermediaries, offering customers low price and good quality products. The idea is simple, together to buy in bulk, directly from manufacturers.
Users can use its app, or its mini-app within WeChat. To make a purchase, users form “groups” and post product listings for what they want to buy, usually through wechat. If someone see something that they lije, they can join the group and bargain the price down. Bigger the group, lower the price. By sharing discount code, more buyers can join in.
Not only buyers saving money on their purchase, producers can control better of their profit margin and better match supply and demand to avoid waste. As a good method to drive rural economy, it has been successfully adopted to sell perishable agricultural goods, with strong support from national government and reported by CCTV news.
Now, Pinduoduo is China’s second largest e-commerce platform on an active user basis only behind Alibaba. It skyrocketed from a start-up to a 57-billion-dollar-company with an active buyer base of 585 million that generated over $144B of Gross Merchandise Value. Its marketing power shall not be neglected by anyone whose thinking of selling to China.
As only with discount and limited communication with customers, it could be extremely difficult to success as a new comer. Therefore WKI suggests foreign brand to first build up brand recognition and reputation among consumers before using Pinduoduo to generate sales. Also a fully prepared delivery system is a must.
Pinduoduo only accept mainland business license, meaning foreign brands can either cooperate with domestic partner, or register in China with brand trademark registration certificate.
The operator of the Pinduoduo store must have a Chinese ID. And all registration and approval are processed online.
Deposit on entrance fee of RMB 10000 to RMB 50000 depending on product category. No commission on sales but 0.6% service fee for the payment function supplier.
E-commerce is a key driver of Chinese consumption, especially with the COVID-19 pandemic further shifting purchasing behaviour from offline to online. China is on the top of the list of countries around the world with the highest retail e-commerce sales. Cross border e-commerce platforms like Tmall Global and JD Worldwide offers foreign brands the opportunity to tap into this huge consumer market without having to register their business in China.
However, regardless of the e-commerce platform to expand business on, marketing your brand and driving traffic to online store can be challenging because of the unique Chinese consumer culture. Moreover, the language and tone used should match your brand and target audience. You will also need a Chinese-speaking customer service team on site to respond to enquiry by your customers. These are only a few of the many things you have to think about when opening an online store on e-commerce platforms in China.
WKI can assist every step of this process and provide long-term services of maintaining your online store(s). If needed, we also provide digital marketing services to complement your e-commerce strategy. We are your one-stop service team for (online and offline) business, marketing and digital solutions.