Have you always wanted to expand your business in China? This article will explore the opportunities for your organization to drive your sales in China through Tmall Global.
Tmall vs Tmall Global
Although the Chinese cross-border eCommerce market is quite fragmented, it is nearly impossible not to mention Alibaba or JingDong. In China’s eCommerce market, Tmall is the largest online platform. Alibaba Group Holding Ltd. owns it. Tmall has over 500 million buyers, over 50,000 merchants, and boasts over 70,000 brands. As the largest B2C retail platform in Asia, businesses can sell directly to millions of customers throughout China. As an open platform marketplace, Tmall provides the infrastructure to host your storefront and unfiltered access to hundreds of millions of shoppers. A storefront is much like operating your own B2C eCommerce website.
However, to offer your products through regular B2C eCommerce in China, the products must be imported from abroad, which requires a legal entity in China. Similarly, opening up a store on a Chinese B2C eCommerce platform such as Tmall requires a company with a Chinese entity. For that reason, cross-border eCommerce offers a comparatively accessible entry strategy for foreign companies wanting to reach the Chinese online consumers.
We previously highlighted that cross-border eCommerce is subject to fewer taxes as well as compliance checks. More specifically, products on the “Positive Lists” for cross-border eCommerce contain 1,321 product categories, which can be imported into bonded warehouse zones or overseas distribution centers linked to Chinese customs without applying for an import license or an import certificate. If your product falls under the positive list, you will enjoy a preferential tax of only 11.9%. A new round of policy extensions was announced at the State Council Executive Meeting in September 2017. Therefore, products on the Positive Lists will be exempt from compliance with China’s product standards and import requirements until December 31st, 2018. Are you curious whether your product is on the Positive List, then please visit TMO’s “Positive List Helper”.
On February 19, 2014, Tmall officially launched Tmall Global, through which domestic Chinese online consumers can purchase products imported from overseas. Below you may find an overview of the main differences between Tmall and Tmall Global:
Tmall Global aimed to help overseas vendors capture Chinese consumers’ booming appetite for better-imported products. On March 21, 2018, Tmall Global announced plans to open six new procurement centers worldwide to realize those ambitions better. These centers are to be established in Japan, South Korea, Hong Kong, and North America, Europe, and Oceania. This move further underscores Alibaba Group’s ambitions to globalize further and its commitment to close the gap between China’s consumers and international brands.
The Tmall Global platform is the country’s largest cross-border eCommerce platform, with 36.8% market share and over 5,400 available international brands which are either displayed on independently operated shopfronts (stores) or in a particular country pavilion – which bundles products of different merchants from the same country on one page. For example, the image below gives an example of the Holland Pavilion.
Holland Pavilion on Tmall Global
Leveraging Alibaba’s expansive consumer analytics set, Tmall Global provides overseas vendors insights into Chinese consumers’ shopping behavior and preferences. “This year, we are committed to offering our overseas clients more personalized and customized solutions so they can receive faster and more direct assistance from the platform, which will enable and accelerate growth”, said Tmall President Jet Jing. Such information should better assist small- and medium-sized businesses to make inroads in China, he added.
Tmall Global follows a complex merchant workflow from order to delivery, as shown in the flow chart below. Like Tmall’s domestic B2C platform, Tmall Global offers foreign merchants the autonomy to design the storefront. Still, it utilizes its complex online mall structure to combine flexibility and security for its customers.
Tmall Global Merchant Workflow
A company is eligible to participate in Tmall Global if it is registered outside of mainland China. However, Tmall Global will only recruit the purest overseas merchants globally for Chinese high-end consumers. Furthermore, to be considered for Tmall Global, they must:
- Have a registered corporate entity outside of mainland China.
- Possess the retail and trade qualifications overseas.
- Be the brand owner, authorized distribution agency, or possess the brand purchase voucher.
- Possess the relevant stock certificates.
- Possess authentic products
Furthermore, Tmall Global generally targets corporations operating for over 2 years and with annual sales of over 10 million USD.
Moreover, to comply with Chinese consumer laws, foreign merchants need to fulfill a number of the operating process and after-sales requirements. Tmall Global’s Third-Party service providers can help you with these processes. Nevertheless, you must provide the following for your customers:
- Commodities: products originally produced or sold abroad must be genuine and complemented with a certificate of origin. Therefore, products must both clear Chinese international customs and Tmall Global security.
- Webpage and Labelling: product descriptions, as well as labels, must be provided in Chinese, with the international metric system adopted as the unit of measurement. Furthermore, Chinese language customer support must be available, for which Tmall recommends employing Chinese Alitalk customer service.
- Logistics: products should be dispatched within 120 hours and delivered directly through personal packages or delivered from China’s bonded warehouses to mainland Chinese consumers.
- After-sales: merchants must set locations for handling returns in mainland China, Hong Kong, and Taiwan if you sell commodities to those respective regions.
As there are also several requirements depending on the product category or shop type, we will briefly explain the available shop options.
To open a flagship store, the products must have the relevant trade mark registrations in Hong Kong (® or ™) or have applied for the approval of a registered trademark in Hong Kong. Also, if you are the brand owner, you must provide the trademark registration certificates for their products, or if you are an authorized dealer, you are required to provide the trademark registration for the products in combination with the letter of authorization for selling the products.
To open a marketplace, you must have applied for a Class 35 (“service mark”) in Hong Kong. In line with opening a flagship store, owners must provide trademark registration certificates; however, authorized dealers must also provide the “service mark” and evidence of exclusive authorization to operate a store on the tmall.hk website as well.
To open the authorized store, the products must have a trademark registration in Hong Kong, where authorized dealers must provide evidence of operating a store on the tmall.hk platform.
For a specialty store, merchants must provide evidence of the product source and invoices for the products purchased. Furthermore, the shop’s name shall not infringe the legitimate rights of others, and this type of store may only sell up to two categories of products.
Before, foreign companies could sign up on their own on Tmall Global to create a store. However, since March 2015, Tmall announced an invitation-only policy for Tmall Global registration. To be specific, foreign companies must use authorized third party service (so-called Tmall Partners, or TP’s), who have an existing relationship with Tmall, to gain an invitation to the site. Also, foreign companies need an Alipay account to be able to receive payment. Chinese consumers can pay in RMB for products ordered from Tmall through Alipay, after which Alipay converts RMB in a foreign currency and remits it to a foreign companies bank account.
Via this ‘partnership structure’, a local TP will help the foreign merchant to open a Tmall shopfront. The merchant is responsible for the products, branding, and marketing strategy whilst you can outsource daily operations of the storefront to the TP. The remainder of the entry process may be divided into the following steps and will take around 4 to 8 weeks to complete:
- Entry preparations
- Store application
- Store development
Although Tmall Global offers an obvious mechanism for gaining entry into the Chinese market, you should be aware of the Tmall Global marketplace’s costs. The costs associated with operating on Tmall Global can be divided into a Security Deposit, Service and Technology Fees, and an Annual Software Service Fee:
- Merchants opening any store type must submit a required security deposit ranging between 150.000-300.000 USD.
- The annual fee ranges from 30.000 USD to 60.000 USD, depending on the particular product category. Tmall Global also charges a commission fee based on the category of the product sold, calculated in the following way:
Commission Fee = ((Product Price) + (Logistics Fee)) * Applicable Commission rate
- The Annual Software Service Fee is largely divided between a 2% and 5% tier. The distribution further varies between 0,5% to 10%, depending on the category. It is calculated accordingly:
Annual Software Service Fee = ((Product Price) + (Logistic Fee)) * Applicable Commission Rate
More information on the exact setup costs can be found in our recent article on marketplace setup fees.
Other relevant documents are:
Tmall Global allows domestic Chinese online consumers to purchase overseas imported products, and hence may be considered an alternative entry strategy to reach Chinese online consumers. However, the nature of the entry requirements, combined with the costs associated with establishing a presence on the platform, is many entry barriers. Therefore, we recommend entry through Tmall Global for larger, internationally firms with an established brand or sufficient financial assets to stimulate traffic to drive sales and revenue.
Would you like to know what entry strategy will suit you best? Or are you curious about other channels for entry into China? Please check out our article examining Tmall Global’s most notable competitor, JD.com, and the processes of setting up a store on JD.com. The article explains why companies JD offers a higher chance for success in China’s eCommerce market. Please feel free to contact us for a market opportunity scan or an eCommerce strategy development proposal at email@example.com.
If you have missed our newest article about the our predictions for eCommerce in the new year, please look at our previous article, TMO’s 2021 China eCommerce Insights.
If you enjoyed this article, we suggest you look at our piece on Chinese Marketplace Store Setup for instructions on setting up a storefront on one of China’s popular eCommerce marketplaces.