The Complete Guide to Tmall Global with Cross-Border E-commerce in China

What is Tmall Global?

Tmall Global is one of the largest B2C Cross-border eCommerce platforms in China. It allows international brands to sell products under the Cross-border Trade policy which can be free from large time and cost consuming to overcome legal regulation barriers. It is a suitable channel for companies to test the brands in the China market and it also offers different business solutions for merchants entering the market with minimum cost and time-consuming.

Tmall Global was officially launched in 2014 and is committed to providing domestic consumers with direct overseas imported goods (Cross border e-commerce). At present, more than 25,000 international brands have settled in 92 countries and regions around the world, covering more than 5,100 categories such as maternal and child care, beauty, health care, and food.

In 2019, cross-border e-commerce ushered in a major outbreak. In response to the country ’s large import strategy and meeting the growing user demand, Tmall Global announced that it will continue to increase investment to achieve import coverage in more than 120 countries and regions within 5 years Commodities expanded from 4000 categories to more than 8000 categories.

What is Cross Border eCommerce (CBEC)?

With the fast growth of e-commerce and digitization payment, China becomes the largest online retail market in the world.  Chinese consumers prefer to spend money on quality and cost-effective products. Therefore, the demand for good quality imported products has resulted in a booming cross border eCommerce (CBEC) market.

To expedite the growth of the cross border eCommerce market and eliminate the traditional trade barriers such as regulation registration, the Chinese government has been consistently working towards making the environment more favorable for cross border eCommerce in the last few years.

In 2018, the first grand opening of China International Import Expo, China government stated that it will be more than US$30 trillion worth of goods and US$10 trillion worth of services imported from oversea in the next 5 years.

Also, the decrease of regulation cost across import taxes, registration, Custom clearance, storage, and increasing the per-order purchase limit/ total purchase limit per year of a consumer is another effort from the Chinese government to boost the CBEC business in China.

Tmall Global with many other CBEC platforms was born under such an environment, the following article will fully explain the details of Tmall Global.

How is Tmall Global Different from Tmall

In general speaking, Tmall Global helps brands enter the Chinese market through cross-border e-commerce channels with limited regulation requirements and a minimum quantity of sales. Tmall Helps brands that are already established in China and looking for large sales to Chinese consumers. Following are listed the main differences:

Merchants Requirements

The Merchants in Tmall Global shall be foreign corporate entities and owns retail qualifications in its located country. The products sold in Tmall Global shall all originated or sold overseas already and entered China through official Chinese customs channels through international logistics. All Tmall Global settled merchants will equip their stores with Chinese consultation and provide domestic after-sales service. Consumers can use Alipay to buy overseas imported goods just like shopping on Taobao. In terms of logistics, Tmall Global requires merchants to send out the orders within 120 hours and arrive in customers within 14 working days, and ensure the logistics information can be tracked.

Business Models

Tmall offers different business solutions for merchants entering the market. You can choose the right cooperation models to start your business. There are mainly three business models to choose from.

1. TMALL Global Store

Tmall Global Store is a self-managed online flagship style business where the brand will use the store to promote new products and drive traffic through existing top sellers. The brand owners can manage the flagship store by themself or through the help of a Tmall store operation Partner(TP).

2. Tmall Direct Import (TDI)

Tmall Global runs its store and capable to direct importing products from brands/suppliers and sold the products to consumers. This model will save the brands to open and operate the stores by themselves.

3. Tmall Overseas Fulfillment

Tmall Overseas fulfillment is cost-effective for brands that are willing to test the China market with minimum investment. It is a new cooperation model to help overseas brands to test their potentials for China markets. It utilizes Alibaba overseas warehouses for direct fulfillment to consumers ensuring inventory flexibility and low logistic and storage costs for suppliers.

TOF applies a consignment model to optimize assortment and facilitate easy exchange of inventory in the home country can use Alibaba’s overseas warehouses to sell through the TOF store on Tmall

Following is the table to compare three business models:

* Tmall Partner (TP) runs the store operations on brand’s behalf on the Tmall Global platform

Store Types and Related Requirements

1. Brand flagship store

Stores opened by brand owners or exclusive dealers directly authorized by trademark owners on Tmall Global.

In principle, the brand flagship store can only sell goods under the corresponding brand. If the store brand is a group brand, it can sell goods under multiple brands of the group. The goods must directly come from the store brand trademark holder.

2. Marketplace flagship store

Stores opened by offline chain supermarkets, marketplaces, online B2C website brand trademark owners, or exclusive entities directly authorized by the trademark owners on Tmall Global. The goods sold by the merchants can be traced back to the class-35 trademark holders of the store brands and the corresponding trademark holders of the goods. This type of store is for invitation only.

3. Industrial marketplace flagship store

Stores opened by offline chain supermarkets and marketplaces that operate product categories of a single industry (such as clothing, maternal and infant supplies, beauty products, personal care products, etc.), online B2C website brand trademark owners, or entities with direct first-level authorization from the trademark owners on Tmall Global. If a store that meets the above conditions needs to sell goods of brands of non-designated industries, it must provide a first-level authorization from the brand side of the store. The goods they sell can be traced back to the class-35 trademark holders of the store brands and the brand owners of the goods. This type of store can be launched through invitation only.

Logistics Solutions

Four logistics solutions are available to help overseas sellers import their products into China, all of which are provided through Cainiao(Alibaba’s data-powered logistics service):

1. Bonded Warehouse

Brands pre-ship goods to Cainiao warehouses in China in anticipation of customer’s orders. This is the fastest and most cost-effective delivery option (max. 7 days).

2. Global Fulfillment Center

Brands ship goods to Cainiao’s overseas warehouses before an order is placed. This is a consignment model where Cainiao picks, packs, labels, and ships the goods once consumers place an order.

3. Consolidated Shipping (Drop Shipping)

Brands pack, label, and ship goods to Cainiao’s warehouses outside of China after a customer places an order. Cainiao consolidates orders from different brands. The consolidated order is air-shipped to China and then delivered to end consumers (max. 14 days).

4. Direct Mail

Brands ship goods directly from country of origin to the consumer. Brands could also use non-Cainiao services such as DHL, FedEx, etc. This method is not usually recommended because delivery times cannot be guaranteed and the cost is high.

Please check the following table to see the major differences:

Payment Solutions

Chinese consumers will make all payments in RMB via Alipay, Alibaba’s payment solutions platform. Alipay will then transfer the amount to the seller’s bank account overseas when sales reach an agreed amount for transferring (account is created with Alipay when the seller onboarded with Tmall Global). A certain percentage will be levied as service charges for the transfer. Click here to learn more about How to Register a Global Alipay Account.

Fees

1. Security Deposit

Any merchant operating on Tmall Global must pay a security deposit. For cosmetics:

 2. Annual Fee

Any Merchant operating on Tmall Global must pay an annual fee. The amount of annual fee is based on A-level categories and it is divided into two rates: RMB 30,000 and RMB 60,000. For cosmetics, the annual fee is RMB 30,000.

3. Real-Time Deduction of Software Service Fee

Any merchant operating on Tmall Global must pay a software service fee based on a certain percentage of their sales (referred to as “rates”).  For the Service fee of cosmetics, the Software service fee is 4%.

Please refer to Tmall Global Fee Standards (2020) for more information.

https://rule.tmall.hk/rule/rule_detail.htm?spm=a2231.7837203.0.0.GaJwnD&id=8942&tag=self

4. Alipay Service Fee

Alipay charges a 1% service fee, applied to each transaction via Tmall.hk. The applicable transaction is the total of the product price and logistics fee:

Alipay Service Fee = ((Product Price) + (Logistics Fee))* 1%

Third Party (TP) Services

Tmall Partners (TP) are Professional Service Company with operations in China that provides merchants with high-quality cross border e-commerce services.

TP’s Services Include:

If a merchant chooses to partner with a TP, the general process would be as follows:

1. Selection– Decide which TP to co-operate with, based on industry experience, region, and support services provided
   2. Co-operation Model– Contact TP to discuss and decide on the Co-operation model (distribution or service), discuss fees.
   3. Sign Contract – Review key points of the contract and obtain all required documents
   4. TP Execution – Prepare operation plan, e-store design, promotion and marketing execution plan, logistics and warehouse, and other related details.
   5. Merchant & Customer Review and TP Reporting – TP will be assessed based on TMG TP assessment rules and overall feedback from customers on a quarterly basis.

Contacting & Interviewing TPs

a) There are two Co-operation models to partner with a TP:

1. Commission Based Model (Operating agent on behalf of the brand): The TP becomes the store operating agency on behalf of the brand. The brand retains ownership of the flagship store and is responsible for paying all platform fees and marketing expenses. The brand also pays the TP to run the store operation. The TP fee normally consists of a fixed monthly cost and a sales-based commission that is agreed in advance between the merchant and TP.
   Considerations:
   • More control of the supply chain and inventory and how the brand is marketed in China
   • Leverage the TP’s knowledge for channel distribution and logistics into China
   • More flexibility in changing the TP after initial contract since the TP is only acting as an operating agent
2. Buy-Sell model (Distributor): An authorized distributor of the brand will buy/own the inventory and then open a brand flagship store on Tmall Global. The distributor can either choose to run the store themselves thus also acting as a TP or the distributor can choose to work with a TP who will run the store operations on their behalf. In both cases, the store entity ownership will belong to the distributor. The distributor will also have to bear the marketing and store operations related expenses.
   Considerations:
   • Inventory is sold to the distributor immediately when the agreement is signed Brands no longer have to bear any risks related to inventory loss
   • Distributor /TP will decide how the product is sold in the market
   • Switching distributor will require a longer process (than Commission Model) due to inventory rights

b) Fees:

TP service fees largely depend on what the Merchant is looking for.

For your convenience, here is an example of a TP that is providing a Commission Model Approach for the Merchant. (This is for reference only.)

c) Metrics on Evaluating TPs

For Commission-Based Model (Operating agent on behalf of a brand) Considerations:
• Store traffic and volumn of purchases and transactions are metrics that should be just as important as sales targets
• Strategies that TPs intend to employ to build a healthy line of SKUs or how to attract customers to the store
• How to increase repurchase rates and conversion rates of sales

It is important to note that each category and industry has different metrics, the following is a listing of some general considerations:
• GMV
• Inventory Turnover Rate
• Sell-Out Rate
• Return of Investment for Paid Traffic
• Consistent increase in unpaid traffic and daily sales
• Develop SKUs to become Hero SKUs
• Increase the long tail product sales (to be x% of total GMV)
• Suggest new product lines that can be introduced on the store
• UV – Brand awareness – User Viewership
• Customer Relationship Membership Loyalty Program / Returning Customers.

For Distributor Model Considerations:
• Minimum purchases that must be met per shipment or month
• Guidelines of various regulatory and compliance standards that need to be met by the distributor for the brand to choose the distributor as their authorized reseller
• Marketing Investment (who bears the expense)– ROI

Source：

Tmall Global Application Form

Tmall Global Merchant channel

Tmall Global Fee Standards（2020）

Tmall Global Merchant Acceptance Standards

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