Is your business too small for Alibaba’s e-commerce marketplace Tmall?
5 Things to know before aiming to open on tmall
by David Ries (E-commerce expert)
Last month in November 2020, the world’s jaw dropped once again at the staggering sales volume reported by Alibaba after “Singles Day” (aka. 11.11) — over 800 million participants and 498 billion yuan (75 billion usd) of gross merchandise value in 24 hours (Source: alizilla.com), an increase of 26% YoY. Which would have been remarkable even if we were not still reeling from the effects of a global pandemic.
Yet small and big brands alike are closing shop and moving to other platforms at an increasing rate, and even giants like Adidas limited their participation in the promotion, withholding hero products and trying to direct traffic towards their own Chinese homepage instead. So perhaps things aren’t all sunshine and rainbows in Alibaba land.
Despite these worrying signs, 80% of foreign brands trying to come into the Chinese market still choose Tmall as their point of entry (Source: DMR Business Statistics Mar. 2019). So are they steering for failure or is Tmall still the “yellow brick road” into the Chinese market?
Battle Ground for Foreign Brands: Competition is extremely fierce. Hundreds of thousands of brands selling 4,000 product categories are available on Tmall. With numbers like these it’s no wonder even the most conservative providers recommend spending of at least 400 thousand yuan (60 thousand usd) a year in ‘performance marketing’ alone.
*insert Game of Thrones battle gif
2. Link not available: Many brands new to the market rely on the effects of word of mouth or cross-channel promotion to get their e-commerce off the ground, however, they should take into account that direct links from most of China’s top social media platforms to Tmall are either partially or completely blocked (e.g Tmall to Wechat).
3. Cheap, cheaper, cheapest: Tmall rewards the brands who offer the greatest discount. In 2018, Alibaba altered their selection process for which products would be included in their official Double Eleven event, based on the sales record and which brands in each category were willing to discount the most, meaning slashing margins and devaluing products. This high markdown strategy may be damaging to brand new to the market.
4. Risky move: Alibaba claims a modest 5% sales commission (may vary based on category https://about.tmall.com/tmall/fee_schedule ), which seems very reasonable, but it’s just the tip of the iceberg. Once the costs of necessary software, the rest of Tmall’s fees are considered and a brand has employed the necessary personal necessary to meet Tmalls requirements the total starting figure appears reaches the six digit figures, US dollars, not Chinese Yuan.
5. Tmall is not the only market placer: Although 64% is a very impressive market share (Source: Statista 2020 Q3) and for many brands it is a great starting point, but unless you have the resources and merchandising to play in Alibaba’s ball court, It may not be the best first choice for you.
If you are interested in finding out more about which platform or strategy may be best for your brand specifically when entering China; feel free to reach out to Dynamigs consulting for a free consultation, otherwise stay posted as we explore WeChat Miniprograms, in the next edition of Dynamigs Data e-com!