setting up a Taobao shop

How to set up a Taobao shop to enter the Chinese market

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Taobao is Asia’s largest network retail business, founded by Alibaba group in 2003. As the largest online shopping platform, current business includes both C2C and B2C transactions. Today, Taobao has also become the most used online entrepreneurship platform. How can foreign businesses set up a Taobao shop and enter the Chinese market?

Why it can be profitable for a foreign brand to sell on Taobao

China has a huge number of online shoppers

According to the China Internet Network Information Center (CNNIC), the number of Chinese internet users reached 939.84 million in June 2020. It shows an increase of 188.68 million new Internet users from the same month in 2017. The Internet penetration rate in China also climbed to 67 percent in June 2020, compared to 54.3 percent in 2017.

China has the most internet users in the world

Source: CNNIC. China has the most internet users in the world.

When it comes to online sales in China, the growth is even more apparent. Last year, Chinese shoppers spent ¥9 trillion online. The Chinese online retail market has increased at a spectacular 70% average annual growth rate since 2009. Since 2014, China’s five-year online shopping retail sales have increased by ¥621.6 billion. China has been the world’s largest online retail market for seven years in a row since 2013.

Why sell on Taobao? Low cost and low operating risk

sell on Taobao by setting up a shop
Source: Taobao, How to set up a Taobao shop

Starting a business on Taobao includes no inventory pressure, space limitation or management risk. Selling on Taobao eliminates traditional business obstacles as a logistics, rent, storage, and personnel management fees. This will reduce the cost for the seller on a per-product basis and then reduce the final price for the consumers. As commodity prices are the most important influencing factor of consumer buying decision, compared to traditional brick and mortar shops, Taobao has absolute advantages in the operating cost and operating risks. This significant advantage of selling on Taobao will naturally attract a large number of consumers quickly; Business on Taobao can be very profitable method of market entry in China.

It is easy for foreign brands to quickly adapt their marketing strategy on Taobao based on consumer feedback and the information gathered about their specific market. As entering China’s market brings the risks of strategic mistakes and cultural misunderstandings, selling on Taobao can be a good opportunity to reduce these risks.

Taobao Alipay, the secure payment system

Like Taobao, Alipay is a service founded by Alibaba group. It is an independent third-party payment platform looking to provide a “simple, safe and fast” solution for the Chinese e-commerce online payment.  When a buyer purchases a product, the money is put in escrow until the product is safely delivered. This system creates a safety net for the customer to ensure their money will not be sent to the seller if something is wrong with the product.

Alipay is necessary to set up a Taobao shop
Alipay, the primary payment method used on Taobao

However, the aim of this solution is not only to ensure the safety of users’ online payment, but at the same time let the users from both side, buyer and seller, build up mutual trust through the platform, to establish a pure Internet environment in accordance with the Chinese business culture of trust and friendly relationship. Once you set up a Taobao shop, the next step is marketing.

How to make a marketing strategy on Taobao 

Pay attention to your keywords

When online shoppers look for specific goods, they will more than likely use the  “search” bar. This is why keywords you have defined for each product will be important.

However different buyers who search the same goods may use different keywords. So how can your business on Taobao appear on the first page of search results?

Keywords can be the brand, the model, the product features, the promotions, the product characteristics, adjectives describing the product, the shop name, and even the credit rate. Thus, these keywords can be developed with a wide variety of combinations such as store name + brand + model; Promotions + commodity characteristics. This will require some research about the most searched keywords on Taobao, insight from native Chinese speakers or those in the industry.

Use opportunely your community

Taobao is a place where buyers and sellers can meet each other. Animating the community of users will reinforce their loyalty and will make the networking between buyers and sellers easier. By posting hot discussion topics you will step up attention rate, create awareness for your shop, improve organic views and extend your business.

Secondly, popular discussion posts will be ranked higher in the Taobao community and possibly elsewhere on the internet to become viral. The Taobao shop associated to the discussion will be more likely to be found by shoppers. Moreover, multiple quality posts can make your shop appear more professional and gain the trust of buyers.

Developing an attractive Taobao promotion

Price value is still one of the most important factors in determining the demand for goods. Thus discount promotion are one of the most effective ways to attract buyers.

Taobao offers a specific solution for promotion activities with a specific page dedicated to  showing the best promotion offered in the Taobao shops.

Selling on Taobao
Source: Inside, The Single’s Day promotion

Another solution to offering relevant and efficient promotion with your Taobao shop is to take advantage of festivals such as Valentine’s Day, New Year’s Day, Spring Festival and the most important for online shopping, the Single’s Day, also known as Double 11. These festivals are marked by a significant increase in online shopping in Chinese households. Offering special promotion during these days can allow a foreign brand to make a great entry on the market as well as showing good expertise of China’s culture and shopping customs.

Gain the confidence of your potential customers

The brand image is an important factor to influence consumer behavior. In a virtual online mall, this statement is even more important.

Even if the low price and attractive communication can temporarily catch the eyes of the consumer, poor quality goods, service, and the publication of false information will contribute to losing customers. This is especially true in China where the trust and the safety are culturally important criteria of decision. According to online marketing experts, having only positive product reviews can signal to consumers that your brand is buying fake reviews.

Market your brand beyond Taobao

Businesses willing to sell in China should not limit their marketing efforts to the platform they sell on. However, with a country so vast one can wonder where to concentrate their marketing efforts and still promote their brand efficiently. The answer is social media; according to the CNNIC, 85% of Chinese netizens used WeChat Moments in 2020 and 40.4% used Weibo. Douyin (China’s Tiktok) counted in 2020 900 million monthly active users and represents great marketing opportunities for all kind of brands. With users pools this large, viral marketing campaigns and paid advertisement have a lot of potential for your brand to take off.

Chinese infulencers also represent a great opportunity to market a product online in China. Key opinion leaders and consumers (KOLs and KOCs respectively) have grown in influence in China in the past years. From Bilibili videos to private WeChat rooms and live streams, Chinese consumers rely more and more on social media for shopping. Whether a brand may contact a KOLs or KOCs will depend on their need and the type of product they sell, but either way that option should not be dismissed for a successful marketing strategy.

KOL and KOC marketing on Taobao and Tmall

Infographic by daxue consulting, read more about KOL and KOC marketing in China

Enter the Chinese market through Taobao

Establishing a company on Taobao: how to create your account

Chinese businesses can easily create a new account  just by completing the registration form and submitting the application. However, foreign companies are only allowed to sell on Taobao if they have a registered joint venture or foreign owned company in China. Fortunately, there is a solution to circumvent this issue: creating a Tmall Global store. To do this, foreign businesses simply have to go on Tmall Global and follow the registration procedure. While it has some amount of red tape, the process is far shorter and cheaper than setting up a foreign company in China.

What is the difference between Tmall and Taobao?

Tmall global offers the possibility for overseas companies to sell their products online in China, but what exactly is the difference between Tmall and Taobao?

  • Taobao and Tmall are both owned by the Chinese internet giant Alibaba.
  • While Taobao offers both C2C and B2C sales, Tmall is exclusively focused on B2C.
  • For that reason, brands usually have their official stores on Tmall.
  • Even though they are two separate entities, the Taobao app features both Taobao and Tmall stores. This means that companies selling on Tmall are not missing out on the huge traffic from Taobao.

Takeaways on setting up a store on Taobao as a foreign company

  • Thanks to Tmall Global, setting up a store on Taobao is now easier than ever and avoid the resource and time-consuming process of setting a business to sell goods in China.
  • Regardless of if a business is already implemented in China, having a Taobao front store still gives access to millions of potential online shoppers.
  • With low cost, low maintenance and low risks thanks to secure payments, there is almost no downside to maintain a store on Taobao.
  • As there is fierce competition to sell goods on the platform, community and brand awareness must be at the core of vendors’ marketing strategies.

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