What You Need to Know About the Chinese Consumer: Understanding Taobao

September 12, 2014

Marketplaces ChannelAdvisor By ChannelAdvisor

Think purchasing via marketplaces like Amazon and eBay is common in the US? It is. But marketplaces are even more popular in China. There, 90% of e-commerce transactions are completed via marketplaces — a significant difference from most countries.1 To put that into perspective, marketplace sales in the US make up roughly one-third of the total e-commerce pie.2

US e-commerce

US E-Commerce Breakdown (above)

China e-commerce

 China E-Commerce Breakdown (above)

So what does China have that makes online marketplaces so appealing? Alibaba.

The Alibaba Group is an e-commerce behemoth. The company is composed of dozens of business entities that, together, dominate China’s e-commerce space. Its primary marketplaces include Taobao, Tmall and Tmall Global. Estimates put Tmall’s market share at approximately 50% of business-to-consumer (B2C) e-commerce in China, while estimates of Taobao’s share of the consumer-to-consumer (C2C) e-commerce market are often upward of 90%.

Chinese Marketplaces

Below, we break down a few of Alibaba’s marketplaces.

Taobao

With its B2B portal Alibaba.com up and running, Alibaba decided to branch out to a more consumer-focused realm, launching Taobao in 2003. This was Alibaba’s first attempt at a large marketplace — and, boy, did it succeed. As of June 2014, Taobao is home to 8.5 million active sellers.

Taobao is often thought of as China’s version of eBay — without the bidding concept. It’s primarily a C2C site, an online hub that Chinese merchants and consumers flock to to buy and sell goods. The marketplace is made up of many independent stores that list their products at fixed prices, much like eBay’s “Buy It Now” feature.

Products in China are often more expensive in brick-and-mortar stores, and the retail selection is slim — another reason Taobao’s popularity has soared with consumers. With millions of sellers, Taobao offers a wider array of products, compared to physical stores in China. Plus, Taobao displays the products via a robust search feature that lists price options for the same product side by side.

And like eBay, Taobao has its fair selection of quirky goods from independent sellers. We’ll let you browse the luffa water and live scorpions on your own time.

Taobao Mall (Tmall)

Taobao’s success led to a surge of counterfeit products, so Alibaba launched a B2C-focused spinoff marketplace for authorised sellers with legitimate products. Taobao Mall, mainly referred to as Tmall, is a B2C marketplace founded in 2010. It currently houses 50,000 storefronts and 70,000 brands.

In an effort to build consumer trust, Tmall permits only verified stores to sell via the marketplace. Alibaba also charges a commission for third-party retailers to sell products on Tmall.

Tmall Global

Tmall Global, the international division of Tmall, allows foreign brands to take part in the massively growing Chinese e-commerce landscape without having an actual presence in China.

Access to the world’s fastest growing e-commerce market offers distinct advantages for international sellers trying to reach Chinese consumers. Likewise, Chinese consumers are able to purchase high-quality products from outside China. Logistics are handled by international Tmall cross-border drop-shipping specialists, allowing delivery to Chinese consumers within five to eight business days.

Global brands such as the National Football League, Apple, Nike and Gap have launched on Tmall. A storefront on Tmall allows foreign brands to easily tap into China’s quickly growing population of online shoppers.

As the e-commerce hype continues to spread from China to the rest of the world, it’s important that Western retailers are able to take advantage of the growing market. Tmall Global helps dissolve yet another international barrier and opens up opportunities for both e-commerce consumers and merchants.

Tune back next week as we dive into Alibaba-run payment methods: AliPay and AliExpress.

McKinsey & Co.

Based on public reports from eBay, Amazon, Google, Shopping.com and ChannelAdvisor estimates based on our transactional data.

 

Blog post by Jordan Nowlin, social media and blog manager, ChannelAdvisor


Understanding-cn-consumer-LP

Want to learn about additional online marketplaces in China? Check out our free eBook Understanding the Chinese Consumer.