- For companies serious about China market entry, Tmall is usually the best solution. Your product is in the market and you are reaching Chinese consumers on their terms.
- However, for certain products Tmall Global makes more sense. You are still reaching Chinese consumers, but not exactly on their terms.
(We recently reviewed Tmall and Tmall Global in previous posts. Here, we compare which one of these platforms might be a better fit for your business)
Alibaba owns both Tmall and Tmall Global and Chinese consumers have easy access to both platforms. From the Chinese consumer’s perspective, they are nearly identical. The main difference: Selling on Tmall means the inventory is already in China and the transaction is settled in China. Selling on Tmall Global means there is no inventory stored in China, and each order is filled offshore. These changes can have major implications for brands trying to reach Chinese consumers.
If a consumer goods company or brand can sell on Tmall, it should. Tmall is the world’s largest e-commerce marketplace, with a majority of China’s e-commerce market share. Brands set up highly customizable “Flagship Stores,” allowing them to operate a Tmall store much like they might run their own e-commerce website. Tmall has some requirements products must meet before being listed online, but these quality-control measures are what make Tmall the dominant force in the market.
However, there are several types of companies that are better suited for Tmall Global. First, those that sell regulated products (e.g. certain food products, cosmetics, vitamins and health supplements). Second, companies that have concerns with storing inventory overseas. Similarly, if a company’s inventory has a high number of SKUs and low turnover, they might be better served by keeping their inventory at their domestic warehouse.
The main concern consumers have with Tmall Global is precisely what the appeal may be to many of the brands operating those stores – inventory is not kept in country. When a consumer buys a product from a regular Tmall store, they know that the product is already in a warehouse in China, and they can expect that product to be delivered typically within 1-2 days. When a consumer orders from a Tmall Global store, they might not receive their products for 2 weeks. Additionally, shipping costs can be more than 3 times higher for Chinese consumers. For some cheaper products, this can greatly impact purchasing decisions. Consumers are far less likely to purchase a $10 product if shipping for that product could be an additional $20.
If the barriers to entry for Tmall are too high and a company must use Tmall Global, there are solutions that can help assuage the concerns of Chinese consumers.. In some cases, businesses can create a Tmall Global store, but store their inventory in a warehouse either in Hong Kong or in the Shanghai Free Trade Zone. This allows companies to take advantage of a more open regulatory environment while still ensuring timely delivery to their customers.
If you can operate an e-commerce store in country rather than through a platform like Tmall Global you are probably better off doing so. In the long run, it will help your expansion into the Chinese market. If market entry on that scale is not an option for your brand or company, then Tmall Global can be a reasonable alternative.