A new crop of B2B e-marketplaces lure manufacturers, wholesalers and distributors with promises of new markets and growth—but they can also represent tough new ...
Totes-Isotoner could benefit from competition between Alibaba’s Tmall and Amazon China.
For the past 18 months, U.S.-based Totes-Isotoner Corp. has been introducing Asian consumers to its umbrellas, shoes, bags, hats and other weather-related accessories. The effort could take a big step forward in the next couple of months as the brand steps up its online marketing in China and takes advantage of developing competition between two e-retail giants: Alibaba Group, China’s dominant e-commerce player, and the China unit of Amazon.com Inc.
Totes-Isotoner two months ago launched its storefront on Alibaba’s Tmall marketplace, which is designed for larger brands, at Totes.Tmall.com. That reflected its strategy of promoting the Totes brand in Asia. Traffic is starting to increase as the U.S. company begins to market it more aggressively, and vice president of marketing Nancy Koglmeier says she’s excited about the prospects for selling online in China. “It’s clear to me that the way to put Totes on the map is through the Internet,” she says.
Totes-Isotoner began ramping up its search marketing program two weeks ago, and traffic to the Totes storefront on Tmall has grown from a few hundred visitors a day to nearly 10,000 per day, says Joseph Ranieri, CEO of 101Elements Private Ltd., a Singapore-based company that is working with Totes-Isotoner to introduce its products to Asia. That could increase to hundreds of thousands per day once Totes-Isotoner launches a full-scale online marketing campaign, Ranieri says. He says the company is holding off doing that for about a month while it stocks up on inventory in preparation for higher sales.
Even as traffic has increased, the conversion rate also has gone up, from 1.8% to 2.5%, and the goal is to reach 3-3.5%, Ranieri says. Sales are still modest, but the aim is to sell $2-2.5 million this year on Tmall, Ranieri says.
Tmall offers brands like Totes-Isotoner attractive home pages with room for large fashion shots, which fits with the Totes-Isotoner strategy of positioning itself to Asian consumers as a high-end, fashionable line of weather-related apparel and accessories, Ranieri says. Alibaba launched Tmall in 2008 to give brands a more appealing alternative to the bigger Taobao bazaar where 6.6 million merchants compete for the attention of some 500 million registered shoppers. There are some 70,000 storefronts on Tmall operated by about 50,000 merchants.
Between Taobao and Tmall, Alibaba accounts for well over half of Chinese online retail sales by most accounts, and Alibaba is No. 1 in Internet Retailer’s Asia 500, which ranks e-commerce companies by their online sales in the region. Alibaba’s estimated $170 billion in 2012 online sales in China dwarfs all competitors, including Amazon, which booked $1 billion in online sales in China in 2012, by Internet Retailer’s estimates. But Amazon is launching a new initiative that Ranieri says will challenge Tmall and give Totes-Isotoner another opportunity to reach Chinese web shoppers.
According to Ranieri, Totes-Isotoner will be one of the first companies in what Amazon is calling its “concept store,” which will offer participating retailers broad freedom to design brand-friendly storefronts—much as Tmall does in the premium brand section of its site. “Amazon and Tmall will be fighting it out for brand attention through these premium brand platforms,” Ranieri says.
Amazon did not immediately respond to a request for comment.
While Amazon doesn’t sell nearly as much as Alibaba’s marketplaces, it attracts a lot of Chinese visitors: about 105 million monthly unique visitors in 2012 compared to 200 million for Alibaba’s sites, according to traffic data from comScore Inc. reported in Internet Retailer’s Asia 500 guide. Many Chinese consumers distrust Chinese companies and go to Amazon to check prices and to buy, Ranieri says.
Amazon already sells Totes products on its site, taking 25-40% of the purchase price. When Totes sets up its own store on Amazon, the marketplace will take about 20-25%, Ranieri says. Tmall’s commission is 5% of the sale price, plus another half a percent for stores in the premium mall section, for a total of 5.5%.
In exchange, Tmall works hard to market brands like Totes to the 250 million consumers who shop on Tmall, Ranieri says. Tmall puts new brands on its home page to give them visibility and has invited Totes to participate in a monthly promotion in which Tmall features about 20 brands. In addition, Tmall will work with Totes to target its paid search spending, for example showing ads for Totes umbrellas to shoppers in southern China during the wet winter months and to those in northern China when the rainy season hits that region. “It’s hugely effective marketing spend,” says Ranieri, who previously worked with U.S. footwear manufacturer Crocs Inc. to introduce its brand in Asia.
But Ranieri notes Western brands like Totes-Isotoner and Crocs entering China must understand that the Chinese online shopper asks a lot of questions via telephone, e-mail, text message and live chat. “They really delve into what the product is,” he says. “How big is the opening of the arm, how long from neck to the end of the tail of the coat? Every measurement and material is asked about before or as they make this purchase decision.”
There are also logistics and payment challenges that may take U.S. companies by surprise. Same-day delivery is expected in major cities, and many consumers pay in cash on delivery. It’s not uncommon, Ranieri says, for a consumer to order three pairs of shoes in different sizes, try them on while the courier waits, and send back two, paying in cash or with a credit card for the one pair she keeps.
To help handle such issues as customer service, web site design and delivery, Ranieri and Totes-Isotoner have engaged Export Now, a company that specializes in helping Western brands sell online in China, particularly on Tmall. Export Now created the Totes site on Tmall in 45 days, Ranieri says. “We were leveraging off an existing team that knew what they needed to do, that helped us prepare FAQs and put together a really robust site with lots of information to provide to the consumer,” he says. He says intermediaries like Export Now typically take a cut of 15-30% of online sales they help facilitate.