To make inroads in China, many retailers have chosen Tmall, including Eram, Kroger and Costco. Tmall is the biggest e-commerce platform in China with an ultra-dominant position, accounting for 58% of the Chinese B-to-C online retail market (Source: e-Marketer). Second rank is JD, with a 16% share. “Bringing your brand to Tmall is a true guarantee of traffic,” said Victoria Glanz, Director of the Full Jet agency, which partners retailers and brands to efficiently manage Tmall business. “On Tmall, 200 million users connect daily, calculated as 699 million every month. These see your offer and your brands. Europeans may find the conversion rate of about 0.5% too small, but it is massive within the level of traffic and value generated”.
Retailers working in China often create their own e-commerce site to broadcast their image and brand positiond. But the activity of such websites remains very small. The Chinese Nike site is among the best, with its own website generating 13% of total sales in China. Adidas reports only 7% and 3% at Decathlon. Overall for Decathlon, e-commerce generates 15% of Chinese sales and grew by 35% last year. Tmall dominates, with 80% of online sales, against only 20% for the site’s own brand. At Decathlon, the average basket is lower than in store, at 210 yuan or €27.5, with delivery free for a spend of more than 99 yuan or €12.9.
In terms of commercial plans, brands have strong obligations to Tmall. Where promotions are carried directly by Tmall, brands have to make their own regular campaigns. This dual mechanism is cumulative, which is not the case for Amazon. “Overall, Tmall sets the rules of the game and either you respect them, either you leave” added Glanz. “During the focus on 11/11/2018, Dr. Martens was forced to suspend their core permanent range for a few days because they did not want to run special promotions for these products. It’s crazy!”. Some brands say that Tmall has threatened to delist items due to insufficient promotions. This may be due to the rewards of a category manager at Alibaba being highly dependent on the turnover of their brand portfolio. “The more a brand sells on Tmall, the more money category managers earn”, commented Glanz. “If you do not invest regularly, your business will be at the bottom of a priority list, phones will not be answered and your products will be removed after 12 to 18 months”. Proving a fast delivery time is also essential. Outside peak periods such as 11/11, brands have 3 days to ship and must offer a return period of 7 days. As Tmall does not operate warehouses, many new entrants to China are partnering with TPs (Tmall Partners), with their own warehouses and logistics solutions to control shipping and delivery.
According to Arnaud Fallevoz, Director of ID Kids in China, Tmall’s teams are true strategic allies. “I was blown away 2 years ago, just before our launch on Tmall. The Alibaba team came to see us and told us that based on an Internet profile, they understood where we fitted with regards our price positioning against competitors like Gap and Balabala, who are China’s n°1 fashion retailer for children with 2,500 stores and a 3% market share. Since late 2017, our brands Okaidi and Obaibi (fashion and toys) are selling on Tmall. I meet Alibaba every month. It is not always the same team, but they follow a strategic line. Whilst I had imagined that commercially sensitive information would be protected, they give us a detailed access to extremely rich data. For example, they can tell us: “Regarding your customers who bought these Obaibi trousers, here is what they bought just before or next on Tmall. They bought Massimo Dutti, The North Face and Sergio Tacchini. It’s very interesting in terms of brand targeting. Currently, we are building our Tmall range for the next quarter and with all this shared data, we are creating a dedicated marketing plan. This is great support for the right questions. Is my brand too expensive? Is my promotion efficient enough? Is my range too focused on sportswear? We try to link the Tmall marketing plan to the offline plan, but if it is not the case, it is not a big deal”. The vision is the same for a Head of a fashion retailer, positioned on the mass market. “Tmall truly shares loads of data. For the moment, they are pushing us to open stores in cities 3, 4 and 5 because they say our brand is not recognised there.”
For Western retailers operating in China, internal resistance is one of the biggest challenges. “When we talked about going on Tmall or not, it raised endless discussions with our European headquarters”, adds the C.E.O. of a specialised retailer. “All Western retailers will tell you the same about how we spend an infinity of time to convince our own people. It’s a shame because it’s a waste of time. For a European HQ team, selling via Tmall means that they have to take a step back in terms of control of the brand image, as it is big cultural, operational and structural change. As long we continue to debate, it cannot work. In the end, management agreed to work via Tmall, but only in China. There was no question of duplication with anywhere else. Little by little, immersion moves on. But when Amazon came to us for a potential listing, we said no”.