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 one of the biggest sales channels for cross-border eCommerce: Tmall Global.
Tmall vs Tmall Global
The Chinese cross-border eCommerce market is not particularly fragmented. While there are lots of stand alone brand shops, plenty of small-scale eCommerce sites, scores of specialized platforms – there are a few giants that tower above, amassing lion’s share of the market. We are talking, of course, about TMall and JingDong.
In China’s eCommerce market, Tmall (owned by Alibaba Group Holding Ltd.) is the largest online platform. Tmall has over 800 million buyers, and over 150,000 merchants. As the largest B2C retail platform in Asia, businesses can sell directly to millions of customers throughout China. It is, at the same time, an open platform marketplace: Tmall provides the infrastructure to host your storefront and unfiltered access to hundreds of millions of shoppers. Operating such a storefront is somewhat similar to operating your own B2C eCommerce website, with a few notable differences.
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.
However, there is an easier way for foreign companies to reach the Chinese consumers: large and rapidly growing part of TMall is TMall Global, launched in 2014 – a separate platform, entirely dedicated to cross-border eCommerce.
Cross-border eCommerce is subject to fewer taxes and compliance checks. More specifically, products from so-called “Positive Lists for cross-border eCommerce” 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.
The Positive List is regularly updated, with the latest update happening in February 2022, at which point the list contains 1.476 product categories. To check whether your product is on the Positive List, then please use TMO’s “Positive List Helper”.
Tmall Global aimed to help overseas vendors capture Chinese consumers’ booming appetite for high quality imported products. It is the country’s largest cross-border eCommerce platform, connecting over 100 million active consumers and 30.000 international brands. These brands are represented 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. “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 flowchart below. Similar to Tmall’s domestic B2C platform, Tmall Global offers foreign merchants the autonomy to design the storefront. It utilizes its complex online mall structure to combine flexibility and security for its customers.
Tmall Global Merchant Workflow
TMall Global offers 4 business models to choose from.
Tmall Global Flagship Store
This is the most advanced model used by brand flagship stores. It offers the maximum reach to Chinese consumers and therefore is ideal for building brand awareness. It offers a maximum range of possible tools for running the store – from access to consumer insights data to usage of powerful marketing and promotional tools.
This model offers maximum flexibility too, as it can be used with both bonded warehouse and direct shipping approaches. Brands can choose to run the store themselves or outsource it to a third party agency.
TMall Direct Import
If you use this option, your goods will be sold on TMall Direct Import store. You will get access to a well-developed and mature channel, without having to run your own store. The main downside here is that you have very limited, if any, control over the actual sales process, as everything is managed by TMall Direct Import team who source the goods from you.
TMall Global Ministore
This format is aimed at small and medium-sized businesses. With low entry / operation costs and TMall Global team’s end-to-end assistance, this is a real chance to grow into the next Cross-border sensation!
This option is ideal for companies who want to “test the waters”, but are not ready for the full-fledged commitment yet. With the Overseas fulfillment model you only need to deliver the goods to one of TMall Global overseas warehouses. CaiNiao, the logistics arm of TMall, has partnered with dozens of postal services across the world, so chances are, it is significantly easier than shipping the goods to China.
TMall Overseas Fulfillment team handles the rest – marketing, sales, operations, and the delivery of the goods to the end customer.
Within flagship store model, there are also several store types that can be opened on TMall Global. Each type has its own requirements and opening process, let’s go through the main types.
Brand Flagship Store
This type of store is reserved for brands themselves, or exclusive dealers authorized by the trademark holders. Brand is supposed to sell only its own products. The only exception are group brands – they can sell multiple brands that are part of the group. Goods should be supplied directly from the trademark owner.
To open this type of store, it is required to provide a copy of the original Trademark Registration Certificate.
Marketplace Flagship Store
This category is used by offline supermarket chains, marketplaces, online B2C websites. For each brand sold in the store, you need to provide relevant documents, confirming that the store is authorized to sell the goods.
Industrial marketplace flagship store
This type of stores is used by offline chains / marketplaces that operate in specific industries: (Clothing, Maternity & Baby, Beauty, Personal Care and so on). Such stores will have to limit its inventory to several product categories – there should be no more than 3 of them.
In addition to the documents required for previous types, for goods sold in the store, this group of stores has to provide purchase invoices from trademark owners.
Other store types
TMall provides several more options for potential store types, covering options for franchise operated stores, specialty stores focused on one specific type of goods, stores using direct sales and so on. Please refer to TMalls support page for more information on this.
In theory, any company registered outside of mainland China is eligible to participate in Tmall Global. Practically, however, Tmall Global aims to recruit overseas merchants that can provide highest quality goods for Chinese high-end consumers. To be considered for Tmall Global, they must:
- Have a registered corporate entity outside of mainland China.
- Already have an established retail business outside of China
- Be a brand owner / authorized distributor
- Own the relevant certificates
- Be an authentic products manufacturer
Furthermore, Tmall Global generally targets companies, operating for over 2 years and with annual sales of over 10 million USD.
When a company decides to enter the Chinese market through TMall Global, to comply with Chinese consumer laws, it needs to follow a number of the procedures and requirements. There are Tmall Global’s Third-Party services providers that can help with these processes.
Here are some of the requirements:
- Products must be genuine and complemented with a certificate of origin. They must clear both Chinese international customs and Tmall Global security.
- Product descriptions, as well as labels, must be provided in Chinese, with the international metric system adopted as the unit of measurement. Chinese language customer support must be available, for which Tmall recommends employing Chinese Alitalk customer service.
- Products should be dispatched within 120 hours and delivered directly through personal packages or delivered from China’s bonded warehouses to mainland Chinese consumers.
- Merchants must set locations for handling returns in mainland China, Hong Kong, and Taiwan if you sell commodities to those respective regions.
Between 2015 and 2019, Tmall had an invitation-only policy for Tmall Global registration. Foreign companies had to use authorized third party service (so-called Tmall Partners, or TP’s), who had an existing relationship with Tmall, to gain an invitation to the site.
In 2019, the rules were relaxed. Since then, anybody can go ahead and visit openshop.tmall.hk to leave an application for becoming a TMall Global’s merchant. All information is conveniently available in both Chinese and English, the application process is described in quite a detail.
To begin application foreign companies need to have an activated Alipay account in advance – to be able to send and receive payment.
All required paperwork needs to be prepared. Exact list of documents depends on the store type and nature of the goods that it will sell, but generally you will have to present such papers, as: company registration certificate, statement of authorization of the representative, ID documents of the representative, bank account certificate, trademark registration (or power of attorney from a trademark holder) and so on. Refer to this page for more details: https://rule.tmall.hk/rule/rule_detail.htm?spm=a223k.15929587.7143107721.7.2113548dCeGwQu&id=11000442&tag=self
After all required documents are submitted, TMall will review the application. Official website it would take up to 7 days for the application to go through, but it is not unusual to have it under consideration for a bit longer.
Activation / agreement / deposit
If your application is approved, you would proceed to the next stage where there are a few more things that need to be done. You will receive your TMall Global account in which you can start filling basic store information. You will have to sign all relevant legal agreements with TMall Global. Finally, you will have to submit your deposit, for which you need to have your Global Alipay account verified and topped up.
At this stage you basically get your store started: you have to ship goods to CaiNiao’s warehouse (or whatever is applicable under the model you have chosen). This is when you can customize your store’s appearance, configure the catalog, etc. Finally, as you pay an annual fee, your store can go online.
Although Tmall Global offers a convenient 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:
- Security deposit ranging between 50.000-300.000 RMB and depends on the type of the store, type of trademark, sold product.
- The annual fee (Technical service fee, as Tmall calls it) ranges from 30.000 USD to 60.000 RMB, depending on the particular product category.
- On top of the The Technical service fee, Tmall charges fee based on the percentage of the goods sold – and it is largely ranges between 2% and 5%
- Additionally to these fees, Cross-border transaction fee is charged by Alipay for each transaction.
Tmall Global allows domestic Chinese online consumers to purchase overseas imported products, and may be considered a convenient entry strategy option to reach Chinese online consumers.
However, the nature of the entry requirements, combined with the costs associated with establishing a presence on the platform, can be a high entry barrier. Here at TMO Group, we recommend entry through Tmall Global for larger, internationally established 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? 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. This 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 firstname.lastname@example.org.