Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Western retailers hear much about the gray market and copycats on Tmall, but not enough about why Tmall came to dominate business-to-consumer online retail in China, says Ernie Diaz of Beijing-based digital marketing firm Web Presence in China.
Despite Tmall’s 50% share of China’s world-leading, $300 billion dollar B2C e-commerce market, Western brands are still understandably leery about setting up shop on the platform, as opposed to creating their own Chinese stand-alone site. However, the logic of the latter option is becoming increasingly shaky in light of numerous factors.
First, the consolidation of China’s Internet giants—Baidu, Alibaba (Tmall’s parent company) and Tencent, makes buying traffic to such a stand-alone site increasingly expensive, in comparison to using a third-party Chinese e-commerce platform. Also, a Western e-commerce site cannot hope for the Chinese shopper trust that Tmall enjoys, resulting in far more lost sales and other conversions. A stand-alone site means much higher cost per customer.
Western retailers hear much about the gray market and copycats on Tmall, but very little about why Tmall came to dominate China’s B2C market. In a country without small claims courts or better business bureaus, Alibaba founder Jack Ma brought law and order to the Wild East with indelible customer comments, incorruptible ratings, and rock-solid return policies. The resulting mushroom-quick growth in Taobao and then Tmall’s market share forced other Chinese e-commerce sites to comply.
Ma also made an early commitment to creating a platform where individual vendors could compete with each other by providing the best experience for customers. Online customer service reps are only the start of it. Tmall store fronts can now be tabbed out to include About Us, Brand Story, and Resource pages, rather than just different product categories. Take a look at how Tmall’s Van’s store uses its About Us page to communicate its identification with punk rock.
The sales on Pantone’s flagship Tmall store were sluggish. Distributors were price-cutting on the same platform. A store redesign, much closer to the original site’s branding, helped, as did increased product variety and more information assets associated with each product. However, implementation of the interactive tool was instrumental in helping the store’s sales take off.
Crucial, Micron Technology Inc.’s official memory maker, provides another outstanding example of Tmall’s enhanced interactivity, and thus enhanced experience. Buying the correct memory upgrade for one’s computer is intuitive only for geeks. Crucial became a global online memory leader with its trademarked Crucial Advisor tool.
Implementation of the tool on its new Tmall store is already drawing users, earned media, and robust sales for the fledgling online shop.
So much for the misconception that Tmall is nothing more than a chop-socky Amazon clone with a captive audience. The fact that Burberry finally established a Tmall store last month should finish the job of convincing that brand equity is by no means diluted with a presence on the platform. In fact, most companies that insist on a rigid replication of their user journey in global markets are not starting with the customer. The Chinese online user sees the Tmall experience as the e-commerce paradigm. A look at the home pages of the top ten Chinese e-commerce platforms behind Tmall should convince of that, as almost everyone has scrambled to mimic Tmall’s functionality as slavishly as possible.
In fact, hind-runners such as JD.com and Walmart’s 1mall [Yihaodian] are now implementing vendor-run stores, veering from their traditional retail stances as they realize in hindsight the growth potential for a platform that empowers rather than enmeshes the seller.
Too little too late, from your author’s perspective. For Alibaba has integrated its ecosystem into the social sphere brilliantly. Tech-focused Western media is breathless over the quick growth of Tencent’s social app WeChat and its nascent e-commerce capabilities. They gloss over its intimate sharing functionality, and that the only case studies of moving product have to do with giveaways, sweepstakes, and O2O offers. Meanwhile, Alibaba’s Weitao is China’s social shopping app, with Facebook/Twitter-like functionality and easy buying options right from the Tmall or Taobao store. With Weitao, western Tmall operators can share media, coupons, and other branded messaging to an audience engaged at the right time, in the right place.
Alibaba has dozens of properties, from browsers to flash-sale sites, with which to bolster its upcoming IPO. However, the other Alibaba platform besides Weitao that Western retailers should most be aware of is Meilishuo, where Pinterest meets e-commerce. Those laboring under the delusion that Chinese online shoppers are less than Western-brand-savvy should enter Stuart Weitzman in Meilishuo’s search bar. Scores of users have pinned Stuart Weitzman shoes, with no interaction from any official source. When contacted, Stuart Weitzman’s marketing department was mulling over options for an event to “introduce themselves to China.”
In conclusion, those who eschew Tmall as their China e-commerce platform should be advised of its enhanced ecosystem. They had also best carefully mull the much higher costs of building their own e-commerce site, not just costs of implementation—hosting, e-commerce software and the like—but also in cost per customer.
Web Presence in China is a Beijing-based digital marketing firm that specializes in helping Western companies enter China.