Many U.S.-based retailers want to sell their products in China. While a few of them, including Walmart, are opening up brick-and-mortar stores, others are listing their products on online retail platforms like Tmall. With over 500 million users worldwide and nearly 60 percent of China’s online retail B2C market, Tmall gives U.S.-based companies a way to directly reach new markets where shopping online via mobile devices has become a common pastime among consumers.
For businesses that have a brand in demand globally, are ready to make the investment, and have a solid understanding of the Chinese market, the returns from Tmall could change their company forever. There are time and financial considerations to be made, however. Opening a store comes with upfront costs and a significant amount of money and time must be invested in ongoing maintenance.
Before making their decision to sell on Tmall, companies should consider the following questions.
Do we have the capital to invest?
Between the required fees and the cost of research, development, and integration with the Tmall platform, companies can spend upwards of $100,000 just to become a seller. The type of store—whether it’s a Flagship Store, Authorized Store, or Specialty Store—and the product category also impacts a retailer’s initial investment.
Launch costs aren’t the only obstacles retailers face, however. If a company has no local presence in China or no experience in the online retail market in Asia, they’ll need to hire and work with an official third-party, or a Trusted Partner.
Many U.S-based companies that don’t utilize third-party services often fail miserably in their attempts to capture the Asian market as they aren’t properly prepared to take on the demands of running a Tmall store. Used to operating on feed-driven channels such as Walmart, Jet, Overstock, and Google Shopping, these retailers don’t properly invest in the right tools before they get started.
Are we willing to invest time and resources?
Along with investing a substantial amount of capital, Tmall sellers must dedicate a lot of time to their new venture. In addition to filling out paperwork, creating a logistics plan, and preparing other necessary documents, most store types require the seller to have a trademark registration in China, which can take months or even a year to obtain. The sheer amount of work it takes to officially launch can delay the opening of a store, which in turn, can add to the cost of getting a Tmall shop up and running.
To help carry the load, companies should hire a dedicated team familiar with the Tmall ecosystem and the Chinese market in general. In addition to marketing, team members should assist with customer service and logistics responsibilities. Having enough people with the right experience is especially crucial on specific days like Singles’ Day, a 24-hour retail holiday celebrated every year on November 11th. While the holiday can boost a retailer’s sales tremendously, retailers often find themselves weeks behind trying to catch up with orders if not prepared with enough team members.
Perhaps the most obvious yet overlooked difference between operating a retail store in the U.S. and China is the time difference. While taking a few calls late at night might not seem too daunting, conducting business with Tmall and other Asian businesses requires constant communication, as well as a translator.
Companies must also respect the cultural differences between the U.S. and China. China has seven public holidays throughout the year, and during these times, businesses are often closed. To ensure their third-party partners have enough time to receive shipments and perform other tasks before leaving on a holiday, U.S.-based companies should prepare well in advance.
Is our brand the right fit?
Despite the challenges a retailer may face, running a store on Tmall is a no-brainer for many popular brands such as Adidas, which has had a presence on Tmall for years. Last September, the brand sold the Yeezy Boost 350 V2 Triple Whites exclusively on Tmall and within nine hours, over 70,000 pairs of the shoe had been sold.
While sportswear is sought after on the platform, choosing a popular category does not guarantee a retailer’s success. After all, there are over 3,000 beauty stores on Tmall, but only a handful truly thrive in the long term.
Tmall customers often look for a particular brand, which is why globally recognized names such as Adidas have a leg up on the competition. If U.S.-based companies have not done extensive research as to whether their brand has demand in the Chinese market, they could lose not only their upfront costs but potentially everything they put into maintaining their relationship with Tmall.
With these considerations in mind, selling on Tmall can be a great option for many U.S.-based companies. If they have a brand with strong demand in China, enough capital to support their retail expansion overseas, and a dedicated partner who can guide them through the process, U.S. companies can find tremendous success on the platform. Before making a final decision, however, brands should ask themselves the right questions and consider their options carefully.
Sumo Heavy is a digital commerce consulting and strategy firm.