Setting up a TMall shop without understanding the Chinese language or having a trusted local partner can be challenging. Here's a breakdown of the main facts.
In my previous piece on TMall - Gateway to China's Growing E-Commerce Market, we looked at why TMall is becoming a force to be reckoned with on the global digital stage; one that can't - and shouldn't - be ignored.
Besides having impressive sales figures, TMall is a straightforward way to reach out to consumers living remote from tier one cities where foreign brands usually establish a physical presence on entering the market. However, setting up a TMall shop without understanding the Chinese language or having a trusted local partner can be challenging. Here's a breakdown of the main facts.
TMall has three different store formats:
1. Flagship store: Only brands with a trademark (either ® or ™) can open flagship stores. The owner of the store must be formal representative of the brand or hold exclusive authorization documents for setting up a TMall flagship store provided by the formal representative of the brand.
2. Specialty store: Merchants with brand authorization documents giving them distribution rights to sell products without geographical restrictions in the Greater China region are eligible to open this store format.
3. "Monopolized" store: Merchants with two or more brands within one of TMall's product categories can open this type of store. Only one "monopolized" store can be held per merchant in one product category.
For smaller brands and those wishing to test the water with TMall before committing to their own store, there's also the option to set up shop in the virtual equivalent of a department store. This has the dual benefit of allowing retailers to promote their products in the same space as other respected brands, while keeping costs and potential risks to a minimum.
Costs depend on the type of shop you opt for, but within this there are other factors that define the cost structure. In general, TMall costs can be broken down in three categories:
1. Deposit: This is for reimbursing consumers if a TMall shop breaches the "Taobao Mall Service Agreement" and has sold counterfeit products. The deposit is based on the chosen store format and the trademark status.
2. Technical service fee: This is an annual fee that varies according to product category. The merchant has the chance to redeem either half or the full service fee, if they reach TMall's predefined sales targets for the product.
3. Sales commission: For every transaction made, TMall keeps a percentage of the sales value as commission.
These key considerations should provide a good starting point for brands planning to take their place on the TMall sales platform. However, the dozens of product categories and sub-categories will require more in-depth planning to accurately assess the costs.
Long-term planning over short-term testing
TMall has quickly developed to become the sales platform of choice for people in China when researching and buying branded products online. It provides a strong sales channel for brands that want to target consumers outside of the cities where they have a physical presence. With nationwide broadband coverage still developing and an official commitment to improvement (the number of broadband users in China is currently around 159 million, or 11.7 percent penetration, and the Chinese government has said that it aims to increase broadband coverage to 95 percent by 2015), TMall should not be seen as a temporary addition, but rather as a long-term channel that needs a strategic approach to meet consumer demand and build a successful, stable brand presence in the territory.
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Elisa Harca is a digital retail and engagement expert with more than 13 years' experience working with some of the world's leading brands, including Swatch, MAC Cosmetics, Samsung, and Ericsson. She has worked with clients extensively in North America, Europe, and most recently Asia, and at Red Ant she is responsible for leading teams of digital specialists in Hong Kong and China in bringing its award-winning mobile retail technology to businesses across the territory. Recommended as an expert digital and mobile consultant by market leaders, she is a regular speaker at industry events including The HUB and UKTI's GREAT Weeks, and also hosts workshops for high-profile industry executives. Elisa is recognized worldwide for her professionalism, integrity, and her ability to help retailers navigate the increasingly complex global digital landscape.
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