A GUIDE FOR NEWCOMERS IN THE E-COMMERCE MARKET IN CHINA
Taobao or Tmall Partner, also abbreviated as TP; in Chinese 淘拍档, is another familiar term among international brands that want to enter the e-commerce market in China. However, for international brands, there are quite a few questions about TPs: What is a TP? How can I choose an appropriate TP? Is my brand suitable for a TP? In this insight report, Daxue Consulting will provide you with the most recent facts about a TP together with a list of takeaways.
Overview of the e-commerce market in China
The E-commerce market in China is the biggest one in the world. It is expected that in 2019, the gross merchandise volume of the e-commerce market in China will reach 32.7 trillion (yuan). Alibaba Group owns two leading e-commerce platforms in China—Taobao, and Tmall. According to a survey, Taobao and Tmall are the most used online stores, with more than 50% of participants reported that they had used them in the previous 12 months.
|N = 2,092 [Data Source: Statista.com]|
What is a Taobao or Tmall Partner?
Launched in 2009, Taobao or Tmall Partner (TP) refers to the third-party companies that provide one-stop services to onboard to and operate businesses on Alibaba’s e-commerce platforms in China. Having more experience, a TP can offer personalized products and services for brands and companies, ensuring effective operation and faster development of the online store.
Functions of Taobao or Tmall Partner
The functions of a TP can be categorized into seven categories:
- IT infrastructure
- Customer services
- Warehousing and storage
- Digital marketing and design
- Logistics services
- Web store maintenance
- Webstore analytics
Compensation of Taobao or Tmall Partner
The price of a TP depends on the extent and the quality of the services.
Companies can seek for help at Service Market (TPs at Service Market usually cooperate with Taobao vendors), the price is affordable (e.g., webpage template: 7 yuan per month; mobile marketing: 15 yuan per month).
[Homepage of Taobao’s Service Market source: fuwu.taobao.com]
However, most of the international brands would like to launch their business on more professional e-commerce platforms in China and to have a higher quality cross border e-commerce service. Tmall Global partnerss are helpful. Some of Tmall Partners also provide services at Alibaba’s Service Market.
[Homepage of Tmall Global TP source: IP address]
typically charge a fixed fee monthly retainer, a certain rate of commission of
sales, or a combination of both (in most cases). For instance, a Tmall Partner named ExportNow has three different types of costs:
Price list of the ExportNow
|Service||Price (estimation is a ballpark range)|
|Set up||US$15,000-US$100,000 |
Depends on different factors (registration of a trademark, the number of products, etc.)
|Marketing and Communication||12% of the annual gross |
e.g., if the gross is US$1,000,000, marketing and communication costs US$10,000 per month
|Tmall Partner Fees||Pure Agent: 10-12% |
Wholesaler or distributor: margin is 50% (including the Tmall fees, marketing expenses, and Chinese taxes)
Where can I get access to a Taobao or Tmall Partner?
- Taobao: Alibaba’s Service Market provides different kinds of services provided by a Taobao Partner. According to the development stage of a store (the startups, the developing stores, the mature stores), the website also provides different combinations of services.
- Tmall: the Taobao partners website has sufficient information for companies to find a partner. For instance, companies can send an email to an official email address listed on the website: firstname.lastname@example.org.
[Example of TP recommendations on TP Global source: TP Global]
How to Choose Your Partner
Understand the pros and cons
It is hard for international brands to create online stores on their own, especially on Tmall because it needs much investment. For example, companies need to hire people, deliver the products, check the inventory.On top of this, international brands usually lack the knowledge and experience in the e-commerce market in China. Hence, cooperating with a Taobao or Tmall Partner is a good choice. Companies need not worry about online store operations or IT solutions. Sometimes, the companies even need not have an inventory because TPs get the products from different brands. Besides, TPs concern about customer satisfaction. They have a team to analyze customers’ purchasing behavior and product preferences. They can come up with creative marketing strategies to improve customers’ shopping experiences.
However, TPs also have disadvantages. Chinese brands and companies start to pay attention to O2O marketing (the cooperation of online and offline stores), which means that international brands need to balance their online and offline stores. Cooperating with a TP may make communication difficult. Besides, some famous global brands such as Zara and Eland have decided to have their own online platform. The leaving of big names may reflect that tying up with TPs is not beneficial in the long run.
Tips for choosing the right Partner
To partner up with a TP goes beyond a mere business relationship.
Certified Taobao or Tmall Partners
First of all, it is important to choose and only work with certified TPs. Make sure to ask potential agency partners for their certificate, online TP profiles, and further credentials such as awards.
Each year, Alibaba holds an international conference and announces Taobao Partner Honor List, while Tmall Partners have star partners based on performance assessments–two-star TPs offer services to mid-sized brands; four-star TPs offer services to large brands; five-star TPs offer services to the most notable brands.
[News of Bi Cheng e-commerce won Taobao Partner Honor List in 2019 Source: Janshu]
Local vs. International Taobao or Tmall Partners
TPs can be divided into three different categories based on the internationalism—local TPs (e.g., U1baby e-commerce), international TPs with local offices (e.g., ExportNow), international TPs without local offices (e.g., Accommate). It is not essential to look at TPs’ nationality; however, companies need to make sure that their potential TPs have multilingual stalls.
Picking up a TP that has experience in the company’s industry is essential. TPs should understand the Chinese market of the target industry as well as the rules that concern the Chinese government certification of the company’s products. For instance, if the company sells cosmetics and skin care, its TP should have broad experience in that industry and help the company enter the e-commerce market in China smoothly. TP listing on TP Global website lists the recommended category for all listed Tmall Partners.
[Part of TP listing source: TP Global]
Is Your Brand Ready for a Taobao or Tmall Partner?
Daxue Consulting insight for international brands:
- Are Chinese customers interested in your products? Before entering the market, it is important to understand the Chinese customers’ preferences. If your company already has offline stores, it is easy to check the trend of your sales; if your company has not entered the Chinese market yet, market analysis is vital. Checking the websites and applications such as Haitao and Xiaohongshu can help you understand Chinese customers’ evaluation and enthusiasm for your products.
- Do a competition analysis on the Chinese market. A competitive map will help you understand how your competitors perform. These indicators will give an insight into whether the Chinese market of your products has a considerable potential or not.
- Home market performance. Chinese customers like international brands that are the market leaders in their home countries. Therefore, Tmall Partners that offer high-quality services may also only want to work with these target brands.