Brands and retailers like Fenty Beauty, Chanel, Tory Burch and H&M are selling goods via Tmall, the online marketplace owned by e-commerce giant Alibaba. Even Amazon closed down its Amazon China marketplace in April but has maintained its presence in Tmall.
Despite the ongoing trade dispute between the United States and China, experts say that the Chinese market will be necessary for brands and retailers in the long term. However, to be successful there, Western companies need to rethink the way in which they market to and service Chinese shoppers. And that begins with reaching Chinese consumers through trusted platforms like Tmall.
Tmall's value proposition
Tmall, founded in 2008 and headquartered in Hangzhou, China, says it is the largest business to consumer retail platform in Asia. More than 500 million Chinese consumers shop across Alibaba's suite of online commerce platforms, according to a 2018 Retail Dive op-ed from Jack Ma, former executive chairman of Alibaba Group.
For Chinese consumers, Tmall offers a reliable marketplace where shoppers can purchase authentic goods, which is essential in a market where shoppers can unwittingly buy fake eggs, milk and fish, said AKQA Managing Director of Greater China and Japan Sam Sterling.
Beyond providing literal authenticity for Chinese shoppers, the site also acts as a conduit between foreign brands and Chinese shoppers. Before these platforms existed, Chinese shoppers had to travel or pay a premium to have foreign merchandise they purchased sent to them as part of a practice called daigou, said Allen Adamson, co-founder of Metaforce and New York University adjunct associate professor.
Before allowing merchants into the marketplace, Tmall evaluates retailers based on multiple factors such as business volume, existing distribution, presence on other online marketplaces and licensing and authorization to sell in the Chinese market, said Syama Meagher, CEO of retail consultancy firm Scaling Retail.
"Tmall is doing kind of a thorough analysis of the brands that they are expecting onto the platform. So I think that because this kind of new upper-middle-class consumer is primarily shopping on these marketplaces, aligning with a company like Tmall adds that brand validation," Meagher said.
Though Alibaba has had a problem with fake items in the past, the company is using new tech to find and crackdown on counterfeit goods and also sues sellers with counterfeit issues, Charlie Poon, a Hong Kong-based analyst at Coresight Research, a global research and advisory firm, wrote in an email to Retail Dive. The company's practice of authenticating merchants before adding them to the platform has been a critical strategy for addressing the problem, Poon added.
Meeting Chinese consumer expectations
Though Western brands once set the standard for quality products, it's important for outsiders to market to Chinese consumers in a way that resonates with them, multiple experts said in interviews with Retail Dive.
"Historically ... China was still very much in the position where it looked to the Western world for a barometer of what extraordinary was. ... Increasingly, though, we're ending up in a position where China has a national pride that's coming back to the forefront."
Managing Director, Greater China and Japan, AKQA
Simply arriving in China and translating marketing copy to Chinese and not bothering to change the imagery for the local market will no longer work, AKQA's Sterling said. Chinese consumers want to see themselves reflected in brands' marketing efforts. Now she sees foreign brands creating more of their campaigns, content materials and products within the Chinese market.
"Historically ... China was still very much in the position where it looked to the Western world for a barometer of what extraordinary was," Sterling said. "We saw this massive period when foreign luxury brands and foreign brands generally were considered in very high regard. ... Increasingly, though, we're ending up in a position where China has a national pride that's coming back to the forefront."
Sterling said brands and retailers should work to understand how the subsets of Chinese consumers shop and whether the successful strategies used where they are based will yield the same results in China.
For example, while foreign retailers may be interested in reaching 1.5 billion people, they should note that only about half of China's population has internet access. They also need to understand Chinese consumers' income and where they live, Sterling said.
"The shape of our population and the shape of our market is very different from the rest of the world," Sterling said. "Really taking the time to understand the difference between an upwardly mobile consumer in the middle of a tier-one city versus someone in a tier-three city is wildly different."
Tailoring marketing aesthetics to fit Chinese consumer tastes is also a smart move in an era when brands have repeatedly made culturally inappropriate product and marketing decisions in recent years, said Meagher of Scaling Retail. She cited Burberry and Dolce & Gabbana as brands that have drawn criticism for controversial Chinese marketing campaigns.
When it comes to deliveries and payments, Chinese consumer expectations differ vastly from those in the U.S. Payments platforms like American Express, Visa and Mastercard are not the primary payments tools for Chinese consumers; instead, consumers typically use Alipay, Unipay or WeChatPay, she said.
Chinese consumers are accustomed to one-touch payments, tracking their deliveries and receiving deliveries within an hour. Sterling, who spoke to Retail Dive from China, said that she could order her groceries and have them delivered to her within 30 minutes.
U.S. consumers will probably have to wait for a few years before they get faster shipping. A 2018 survey conducted by Zebra Technologies found that 40% of logistics, retail and transportation professionals anticipate offering two-hour delivery by 2028.
Looking beyond trade tensions
While the U.S. and China continue to be in a high tension situation regarding tariffs, American consumers and the financial sector are watching for signs of another economic recession. Brands that want to be successful in the long term know that they'll have to do business in China and that the economy will always fluctuate, Meagher said, adding that brands will likely need to adjust their pricing and resource allocation.
Unfortunately, consumers will bear the brunt of any increased costs brought on by the tariffs, not the companies, Meagher added. On the other hand, there could be opportunities for brands who already produce and sell their merchandise in China, but that may require a change in distribution strategy, she said.
Just as forward-thinking American brands are looking beyond the current trade dispute between the U.S. and China political leaders, Alibaba has shown signs of its openness to doing business with American companies. In June, Alibaba launched an English-language portal in hopes of attracting more global merchants to the platform. In his 2018 op-ed for Retail Dive, Ma wrote that the trade tensions between the two countries would hurt millions of American small businesses.
Ma ended his op-ed by saying, "If we encounter trade barriers, we will have to work harder. While we may face setbacks in the current protectionist environment, I remain confident and look forward to the next 20 years."
Both countries have enough demand for each other‘s products that the trade dispute won't dissuade American retailers and brands from entering the Chinese market, Adamson said.
"It's such a huge market that ... I think they're petrified that they won't be able to access the Chinese market. Because if you can't, many companies are going to be in far worse shape tomorrow than they are today."