E-commerce in China is growing so rapidly and it appears to have big rewards for those who manage to thrive in the market. Problems for companies who want to enter China arise due to limited knowledge about the Chinese market and the variety of e-commerce platforms, but how exactly should you start your e-commerce business in China? Where should you start?
Indeed, there are countless B2C (Business-to-customer) e-commerce platforms in China, Tmall/Taobao are in the leading position, followed by JD, then VIP.com, Suning, Gome, Dangdang, YHD, Amazon China, and so on. Usually each platform has a deposit, some annual fees, and commissions. If your are starting your e-commerce business opening a Tmall/Taobao shop first would be a smart move from your part, later, when your business grows, you could extent and broaden your sales channels. You might be wondering, Why Tmall/Taobao? Why here and not in other platforms?
Firstly, let us look at this from an investor’s point of view, minimizing initial investment. For a Tmall shop different products and shop types have different deposit amounts that range from 50,000 RMB to 150,000 RMB. The annual service fees are 30,000 RMB or 60,000 RMB depending on the category, they may be half or totally refunded if the business is good enough to reach certain revenue. As for the commissions, different categories also have different commission rates, commissions in Tmall start from 0.5% to 5%, this is quite competitive since other usually range from 10% to 15%. After all, Tmall is mainly an open platform for all vendors.
Some small companies or cautious companies should consider starting with a Taobao shop. Taobao is supposed to be a C2C platform, since its requirements, compared to the ones of Tmall, are considerably lower, some small companies opt to start with a Taobao shop first. Why is this option so appealing to small companies? There are two types of Taobao shops to choose from, the first one is owned by a person and the second one is owned by a company. The personal Taobao shop can be upgraded into a company account if the owner is the legal representative or a shareholder. The best thing about Taobao is that it is free, you only need 1000 RMB as the deposit and Taobao has no annual fees or commissions. For those who are really cautious or lack resources, this might turn out to be a wise choice.
Secondly, let us analyse the human resource factor. You might have agencies working for you or maybe a few employees; however, trying to start with all channels at once may not always be the best option for your business. To successfully manage an e-commerce shop it takes dedication and time, even though opening a shop is not a difficult task, managing that shop is. Analyse, optimize traffic and content, and increase sales is something that requires time and focus. The target is to turn those open channels into productive channels, it is worth mentioning that most of these e-commerce platforms are similar or even copy Tmall/Taobao, so getting familiar with platforms is kind of like getting familiar with the e-commerce industry in China.
How is the e-commerce environment looking in China? Tmall/Taobao have been leading the free traffic in China for years, each day there are more than 40 million visitors on Taobao. Even Suning, Dangdang, YHD and Amazon China now opening their shops on Tmall.
As for the payment side, Taobao/Tmall have their own payment method, Alipay. With more than 0.3 billion registered users, 0.27 billion active users, and links to over 180 banks both in China and other countries, Alipay is the largest third party online payment platform in China, some active users even use Alipay to pay for their home power, gas and water fees. It makes it easier for consumers to pay.
Finally, let us discuss product control. Since Tmall/Taobao are mainly open platforms, vendors have almost fully control of their products. You can categorize the type of product your selling, upload or remove it anytime you want and also have full control of the price and logistics company you want to use to deliver your products.
So if you are planning on entering the Chinses market through e-commerce you might want to start with a Tmall or Taobao shop first. Here at 2Open we specialize in digital marketing and e-commerce, our goal is to understand our clients business needs, in order to provide the best possible services. If you have any questions or require any information about our services, please do not hesitate in contacting us, our group of specialists will happily assist you.
This article was edited by Andres Arroyo Olson from 2Open.