Most people have heard of Alibaba, the Chinese e-commerce juggernaut which listed on the New York Stock Exchange in September 2014 raising US$25 billion and setting a record for the biggest public share listing to date. Not content with that record, Alibaba’s 2015 Singles Day sales (akin to the US’s Black Friday or Cyber Monday) managed to sell over US$14.3 billion worth of merchandise via it’s Taobao, TMall, and TMall Global platforms in 24 hours of trade.
It is Alibaba’s TMall Global platform which is grabbing international firms’ attention, allowing companies registered outside of mainland China to sell cross-border to Chinese customers, simplifying and mitigating the previous barriers to entry such as import restrictions, customs delays, and RMB currency convertibility. A network of 3rd party logistics and customer service suppliers helps to fulfil orders and keep Chinese customers happy on the ground.
In this post, Selling Cross-Border to China Without a Physical Presence Using TMall Global, we’ll talk about how you can set up a TMall Global store and benefit from trade with millions of new potential Chinese customers. Let’s dive on in.
1. What is TMall Global, and What Are the Requirements?
TMall Global is a platform designed specifically for firms registered outside of mainland China to do cross-border trade with Chinese customers on the mainland. There are basically three types of TMall Global stores:
- Flagship Store: for brand owners with registered trademarks (e.g. Burberry official TMall Store)
- Flagship Store (Marketplace): for authorised merchants of multi branded product (e.g. Macy’s on TMall Global)
- Specialty Store: for merchants who can show legitimate purchase invoices of all products sold for up to two categories of product. The name of the shop cannot infringe on the rights of legitimate IP holders (e.g. Jessica’s Suitcase – organic food store opened by the daughter of former Australian Prime Minister Kevin Rudd)
TMall Global targets established businesses with a B2C focus that:
- Have been operating in retail outside of mainland China for 2+ years;
- Achieve annual sales of over US$10 million; and,
- Are brand owners or authorised retailers of branded product
This is not to say that your business must fulfil each of these qualifications, however fulfilling the above three points will make your application process easier with TMall.
2. How Does TMall Global Operate?
Merchants complete the application process and set up a “shop-in-shop” type store within the TMall platform, with the URL usually yourshopname.tmall.com. Merchants can benefit from the vast amount of daily traffic that TMall draws (Alibaba’s platforms process a staggering 70% or more of the e-commerce in mainland China).
All listed product information must be in Chinese, and the merchant must provide the following:
- Chinese (Mandarin) customer support
- Local address (within mainland China) for returns/exchanges
- Chinese labelling complete with Chinese descriptions, international units of measurement and Chinese language customer support details
- Logistics operations which commence shipping within 72 hours of the order placed, tracking system required
Each of these tasks can be outsourced to a variety of agencies and 3rd party providers, which work in conjunction with Alibaba’s bonded warehouses in Shanghai, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Chongqing.
3. Application Process and Fees for Using TMall Global
- Merchants will need to choose their store type and complete the TMall/Alipay agreement. The application, documents and requirements can be found here.
- All TMall Global accounts need an Alipay account, which operates like a PayPal account in the west and can be linked to company bank accounts.
The TMall site notes that merchants should expect the process to take 4-8 weeks from application to store launch.
To get started on TMall Global, you will need to invest around US$30,000-35,000, which is broken down into the below fees:
- Security Deposit: US$25,000 (for refunds/chargebacks/customer complaints etc)
- Annual Technology and Service Fee: Varies depending on the category of product sold, between US$4,700-9,400 (30,000-60,000 RMB), which may be refunded in part or fully if the merchant maintains a high Detailed Seller Rating (DSR) and sales volume targets
- Commission Fee: Between 2-5% of gross sales depending on product category
- Customer Loyalty Program Fee: 0.5% of gross sales, which is used by TMall to “reward customers in future promotions”
- AliPay Processing Fees: Between 1.8-3% depending on volume of transactions
Ongoing services provided by 3rd parties will obviously cost extra, including Chinese customer support, logistics provision for returns/exchanges, site upkeep/maintenance and translation.
4. Logistics Considerations & Benefits of Bonded Warehouses
Logistics and warehousing has come a long way in China over the past few years; Alibaba has pledged 100 billion RMB to create the China Smart Logistics Network (CSN) aiming to deliver parcels within 24 hours to 2,000 Chinese cities.
Merchants can ship their goods in bulk to bonded warehouses in Shanghai, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Chongqing, paying taxes and clearing customs regulations only when the product ships from that bonded warehouse to the customer.
In 2014, TMall announced an agreement with Hangzhou customs to streamline customs clearance time and lower import taxes to discourage smuggling of goods, giving merchants who use this channel a considerable advantage.
Merchants can also choose to ship directly from their home port to the customer in China for less time-sensitive deliveries.
A detailed logistics plan is obviously needed when working with TMall global, and is required as part of the application process. TMall can recommend 3rd parties to assist with the application requirements above, or you may choose to enlist the help of a digital agency based on the mainland. Most agencies will give work references and specialise in specific industries or product categories (fashion/electronics/grocery items/cosmetics etc).
5. Key Benefits of Using TMall Global (Versus a standalone website or physical retail channels)
Why would you choose TMall Global over developing a standalone website that you own yourself, or more traditional physical retail channels? Here are a few good reasons:
- Access TMall’s huge volumes of traffic and marketing power
- No investment in Chinese servers, web infrastructure, licensing requirements
- Reliable, fast and stable web platform helping you cut down developing time
- Mobile-optimised e-commerce site (Chinese mobile shopping has seen the fastest take-up in the world)
- Strong and efficient logistics network via bonded warehouses
- Alipay automatically converts RMB into your home currency, avoiding remittance issues (RMB is currently not freely convertible)
- Less product testing requirements vs physical import retail channels
- Streamlined customs clearance and lowered tax rates