Not only is e-commerce an appealing proposition for consumers it is also great for sellers and businesses too. Selling online on sites like Taobao is a great way for sellers to distribute their product and get their brand out there, without the same costs of having a physical store. It also means you can distribute your product to a wider range of consumers from a variety of locations. Something a single physical store cannot do. In addition to this selling online allows consumers to leave feedback and rate the service of the seller and the quality of the product, this can act as a great marketing tool and keep customers coming back as well as allowing new consumers to purchase from you; Just make sure you have good feedback! Negative feedback could detriment your brand, your business and your credibility, losing you customers and sales!
Let’s outline a scenario to help you truly understand how helpful online purchasing can really be. Imagine you are at home and are about to make yourself a cup of tea before bed, and to your complete disarray you realise your favourite mug is now cracked. You have lots of mugs, but this was your favourite, perhaps it has sentimental value or perhaps you just like the colour. The option of leaving your house is an unappealing one, but thankfully you have the option to purchase the product online, without leaving your house. You can browse the particular mug you are looking for across a range of different sellers, allowing you to shop around easily to find the cheapest, or best quality item, without the hassle of shopping around in physical stores or markets, nor having to spend time and effort haggling or finding the exact mug you want.
In addition to this, online shopping in China offers a variety of ways of collecting the item, it can be collected from the post office (similar to the Western world), but it can also be collected from large electronic collection boxes, which are often located at the bottom of apartment blocks or business buildings. The latter option is a more common one as it provides a lot more flexibility, this means that you can scan the barcode, or enter a code you’ve been given into the machine, meaning that you can collect your required mug at any time that you please, thus this prevents the issue of someone not being at home at the time of delivery. So the mug can be delivered to you with minimal hassle.
Taobao, Tmall and JD.com
So, what are the Chinese alternatives to eBay and amazon that you should be aware of? In fact there are many different sites, but the main three are: Taobao, T-mall and JD.com, and unlike amazon and ebay, each of these Chinese sites are very different, they sell different sorts of products and cater to different types of consumers.
There is no doubt that you would have heard of Taobao before. Taobao is operated by Alibaba, and is the China’s largest ecommerce site8 with 369m monthly active users9 and one of the largest in the world. In fact, Taobao has outsold eBay and amazon combined, in terms of gross sales volume.
In order to understand the sheer size of Taobao in China, it is interesting to see that Taobao is actually China’s largest creator of jobs, creating 9.7 million jobs in China since it was opened. Taobao is China’s third most visited website in China (after Baidu and QQ)5 and the 11th most visited sites in the world10 and provides a C2C (consumer-to-consumer) e-commerce platform (but also a B2C – business-to-consumer platform), where Taobao acts as an intermediary between buyer and seller. Taobao thus allows individuals to open up their own online shop (as long as they meet certain requirements) at a cost, but this means that Taobao offers a wide variety of products, with over 7 million vendors and 800million products4.
Taobao offers a variety of features that allow for an easier shopping experience. Users can purchase products by using their phone camera, taking a picture of an item, you want to purchase will bring up a variety of sellers selling that same product (or similar products). This means that consumers can compare prices with physical stores and decide whether it is worth their while purchasing on Taobao or in-store. In addition to this user can access the sellers profile, which includes the sellers ranking and feedback from other consumers, this helps consumers make decisions on which seller to purchase their product from and increases confidence that their product will arrive and be of good quality. Furthermore, consumers can easily contact the seller before, during or after a purchase, through the app. This allows consumers to enquire about their product, its quality, its genuineness or where exactly it is, this level of communication further increases consumer confidence. Again, this emphasises how crucial it is to ensure you provide excellent customer service and quality products to guarantee positive feedback, and ensure consumers chose to purchase your product instead of others’, this is even more important if you sell a product that other sellers also sell.
Looking back at our mug analogy/story, you can utilise the camera feature on Taobao, you can take a picture of your favourite mug, which will generate an abundance of sellers selling that same product. You can now easily shop around to find the price you want, the seller you trust and the exact mug you want. You haven’t even left the house and you’ve placed an order for the mug that will make you happy again. Furthermore, you can easily contact the seller with any queries, and you can track the item to see how soon the item will be with you.
Therefore, Taobao is very similar to the Western alternatives amazon and ebay, however it is designed to target Chinese consumers, this is evident due to the large range of functions the single “super-app” contains.
Overall, Taobao’s multifunctional app means that it is essential to properly design your Taobao store. This means ensuring high quality photos, so that the camera function on the app can detect your product. It also means ensuring that you use the correct buzz words, in the correct language. Thus bad quality pictures and using the wrong words in your title or product description will most certainly cost you sales and lose you potential customers.
It is important to realise that shopping on Taobao as a non-Chinese can be a very difficult endeavour, not only is the interface in simplified Chinese, but the user interface is targeted to the Chinese population, this means things can appear cluttered and overloaded with information (as discussed in our previous blog on Chinese websites). Furthermore, a Chinese bank account is a requirement in order to make a purchase. A very popular proposition for non-Chinese consumers is to use a Taobao agent, this means non-Chinese consumers can access the Taobao framework, albeit being slightly more difficult than for a Chinese person. However this means as a seller you can target an even greater variety of consumers when selling on Taobao.
Tmall and Tmall global
Many people consider Tmall and Taobao to be the same thing. Tmall and Taobao dominate the Chinese e-commerce market; however, they are very different. Tmall was set up by Alibaba, as a separate platform to Taobaos, with the intention of preventing the distribution of fake goods and increasing consumer confidence. This approach essentially removes the risk of unscrupulous sellers with products of dubious quality. Therefore, Tmall guarantees authenticity and high quality in the products sold on its site. This is supported by certificates of authenticity, which can be found on the seller’s page.
Unlike Taobao, Tmall (Taobao mall) offers only a B2C (business-to-consumer) platform and is China’s largest third-party platform for brands and retailers8 and is the most visited B2C platform in China17. Given that Tmall is B2C this means that the seller must be a legal entity, to prove so, sellers must provide an array of documentation, which confirms this. Tmall dominates Chinas B2C online shopping market, claiming 55% of the market6, followed by JD.com who are Tmall’s primary competitor with 33% market share7
Over 70,000 official stores exist on Tmall and it includes popular brands such as Nokia, Adidas and Samsung. Therefore, Tmall and Taobao cater different consumer needs, with Tmall offering less variety, but guaranteed authenticity. The costs of selling on Tmall are inevitably higher due to paying to use the Taobao infrastructure, investing more in marketing, providing authentic products, as well as providing evidence of authenticity. Consequently, this means a greater premium for consumers, but it guarantees quality products. Even so, Tmall typically offers lower prices than physical shops, due to lower costs of operating online rather than in physical stores and also allows sellers to gain access to a wider range of consumers.
Opening a Tmall account is considerably more pricey, in addition to all of the mentioned requirements, opening an account costs approximately 160,000rmb, where 100,000 is a refundable deposit, but 60,000rmb is the yearly fee paid to use the Tmall platform.
Tmall global was set up in 2014 to enable overseas brands to sell directly to Chinese consumers, this came off the back of the development of a cross-border e-commerce platform, as well as the increasing concern of Chinese consumers with fake goods. Tmall global removes the distrust of Chinese consumers by supplying products via direct mail or bonded-warehouse. It offers international brands, with lower barriers to enter China.
Tmall global offers over 14,500 international brands from 63 countries. Interestingly, 80% of these were introduced to the Chinese Market for the first time through the Tmall global e-commerce platform17.
Tmall global offers international brands to enter the Chinese market in a lot cost way, these brands do not need a Chinese business license to join the platform, there is no need to create a Chinese legal entity, nor register a Chinese Trademark, or worry about warehouse and shipment logistics.
As mentioned JD (京东 Jingdong) is Tmall’s closest competitor, thus also targeting the B2C e-commerce market. JD.com, and initially started off selling only electronics, which meant that it targeted a different type of consumer than Taobao and Tmall, however recently JD has scaled and sells almost anything, with 85% of JD.com's revenues coming from electronics11. Even so, JD is the go-to site for Chinese consumers looking to purchase electronic items. Similar to the other e-commerce sites JD offers lower prices than physical stores, however there are some reservations with consumers as 1st and 2nd grade fake items are a possibility, so often consumers prefer to purchase electronic products in physical stores
JD offers its own shipping platform, having links with their own logistics company, this is fixed, meaning the seller cannot chose to distribute the product with another delivery firm. Furthermore, the delivery service used for JD.com is quicker than the other sites, and goods are often delivered in a day. On the other hand, on sites like Taobao, the individual sellers choses which company to use to distribute the product. This provides more leeway, but generally offers a slower delivery time.
JD.com generally charges slightly higher fees than Tmall, which is inevitable given the nature of its products and given that profits from electronic devices and home appliances is greater, the transaction fee is between 5-8%, whereas the transaction fee for Tmall is 3-7%11.
Comparing each of these platforms to Amazon/eBay
Clearly, the Chinese sites mentioned, offer greater functionality in their apps, which is something that appeals massively to Chinese consumers. Chinese consumers like apps that serve numerous functions, which we call “super-apps”, whereas the western sites offer simplistic and clutter free sites with fewer functionality https://www.247locksmithservice.org/residential-locksmiths. Furthermore, Amazon’s business is based on both 1st party and 3rd party selling. 1st party selling refers to when amazon sell their own items to customers, while 3rd party is when they sell their own items, but they also allow other sellers to sell their items ting for premium quality. Given that PayPal is essentially a foreign payment service, it isn’t well known in China so has a low user rate, in fact, only 2% of all online transactions in china are done using foreign-credit cards or payment systems12
In China, Alipay acts as Paypal’s equivalent. Alipay is linked to Taobao in the same way that PayPal is linked with eBay and each of these companies offer similar services to each other. Alipay is the largest third-party online payment service provider in China8, while PayPal is the most popular payment method in North America15. Currently PayPal has 210m active users13 while in 2016, Alipay reported having 450m registered verified users14. Both PayPal and Alipay aim to serve the same purpose, both allow peer to peer transactions and both charge transaction fees. However, PayPal also charges cross border exchange rate fee, which Alipay does not. Furthermore, Alipay has a host of other functions, such as touch pay technology in shops in China and they also offer loans. In fact, Alipay claimed mobile payments accounted for 71% of total payments14
Overall, PayPal and Alipay are very similar, Alipay appeals to the Chinese market, and PayPal to the Western world. However, even though they are similar, Alipay offers a selection of other services, not offered by PayPal, which appeal to the Chinese market and help Alipay maintain its dominance in China.
In order to expand your business in China and appeal to Chinese consumers, it is important to understand the different e-commerce sites offered in China, and the way in which you should decide which one to sell on. As well as being aware of the payment methods (Alipay). Furthermore, it is crucial to understand how important it is to correctly use pictures and buzz words, as well as ensuring high quality products and excellent customer service. This will allow you to gain access to a variety of Chinese consumers and help build and maintain customer loyalty.
Food and Groceries
Shopping online is not only just for products, but it can also be used to shop for groceries, and even more popular is fast-food.
The food culture in China is massive, almost everything revolves around food. In fact, a common greeting is “have you eaten yet”
1 - https://www.statista.com/statistics/277391/number-of-online-buyers-in-china/
2 - http://www.seosolutionsindia.com/blog/2015/02/23/amazing-facts-about-worldwide-e-commerce-online-shopping/
3 - https://www.nchannel.com/blog/retail-data-ecommerce-statistics/
4 - http://www.wsj.com/video/what-is-taobao/69BD4B54-0417-4075-A54D-5FC895B5B3F3.html
5 - http://daxueconsulting.com/success-of-taobao-on-chinese-internet/
6 - https://www.chinainternetwatch.com/19289/online-shopping-q3-2016/
7 - https://www.chinainternetwatch.com/22338/online-b2c-retail-q2-2017/#ixzz4tlltOAtL
8 - https://www.chinainternetwatch.com/tag/alibaba/
9 - https://expandedramblings.com/index.php/taobao-statistics/
10 - http://goodyfeed.com/10-facts-taobao-probably-didnt-know/
11 - https://www.forbes.com/sites/ericjackson/2014/02/04/jd-com-isnt-the-next-amazon-of-china-its-the-next-dangdang-of-china/
12 - https://www.chinasalesco.com/services/exporter-tips/110-how-does-alipay-compare-with-paypal
13 - https://www.statista.com/statistics/218493/paypals-total-active-registered-accounts-from-2010/
14 - https://www.chinainternetwatch.com/19551/alipay-2016/
15 - https://www.statista.com/topics/2411/paypal/
16 - https://www.forbes.com/sites/johnnyjet/2017/09/25/how-to-maximize-online-shopping-portals/#1af29dfb71c4
17 - http://ehubnordic.com/actual-difference-tmall-tmall-global-china/