Taking Your Business Global With Chinese Marketplaces

5/19/2014
Clothing and apparel is one of the fastest-growing e-commerce verticals in the world. Business Intelligence estimates that 15 percent of all clothing and accessories sales in the United States are made online, and that number will increase to 20 percent by 2017. As consumers shift to shopping online and spend less time visiting brick-and-mortar stores, apparel merchants have to make their items appeal to an international audience.

The world is flattening, borders are blurring and e-commerce has revolutionized the apparel world by providing retailers of all sizes the potential to reach consumers in various countries. Expanding into new regions can provide a strong revenue stream for apparel merchants. According to PayPal, by 2018 cross-border online shopping will increase 200 percent to be worth $307 billion, with 130 million cross-border online shoppers. To take advantage of the next big e-commerce opportunity, apparel retailers must first determine the most strategic path to international expansion.

Where do the international opportunities exist for U.S. retailers?
More U.S. retailers are starting to sell globally, especially to countries in Asia-Pacific, European and Latin American regions. Brands in the Western part of the world are growing in popularity and rising in demand across the globe. International sales from U.S. online retailers will jump from $11 billion in 2014 to almost $50 billion by 2020, according to a report released in February 2014 by OC&C Strategy Consultants.

U.S.-based apparel merchants that are looking to stay ahead of the curve and take their business global undoubtedly need to put China at the top of the list. China is leading the way for online cross-border trade. According to eMarketer, the Chinese market had the largest number of digital buyers (269.4 million) in 2013, and 84 percent of Chinese cross-border shoppers bought from U.S. websites, according to PayPal. 

What challenges occur when retailers sell to China?
When selling internationally, retailers face many complexities, including language barriers, payment methods, legislation, taxes, fulfillment, culture and returns. The apparel industry is particularly complicated because Chinese sizes are smaller than those in the Western part of the world. Before investing millions of dollars upfront to create a new website, translate materials or open a local entity, it's important for retailers to explore the easy and inexpensive selling options available through marketplaces.

Where are Chinese consumers buying online?
For retailers to find success in China and take advantage of the many opportunities that exist, it's important to know which Chinese marketplaces consumers are visiting to do their shopping. Marketplaces are eating the e-commerce world, and that's especially true in China. According to McKinsey & Company, marketplaces account for 90 percent of e-commerce sales in China. The e-commerce market is much different in China. In the U.S., Amazon is known as the online retail giant, but in China, Tmall.com takes the cake. Of the several Chinese marketplaces, Tmall.com is a primary site for retailers to find success in China.

Many Chinese marketplaces exist, but below are the main business-to-consumer websites by gross merchandise volume (GMV) in Q3 of 2013, according to iResearch Global: With more than 70,000 sellers that offer a wide selection of products, Tmall.com has become a convenient place for Chinese consumers to shop. The site is based on Alibaba Group's Taobao Marketplace infrastructure, using Alipay as its payment system.

Through Alibaba Group's Tmall Global Solution, foreign businesses can use Tmall.com to more easily sell directly to Chinese consumers. Previously, retailers were required to have a Chinese business entity to sell in the region, but Tmall.com offers a freight-forwarding option that allows retailers to ship their orders directly to China.

What should retailers know before selling on Tmall.com?
  • Apparel companies with China in-country business operations can apply to Tmall.com to start selling on the marketplace, and companies with overseas business licenses are eligible to join via Tmall Global.
  • Tmall.com provides a global logistics infrastructure that allows U.S. merchants to conveniently fulfill Chinese orders from the United States. (There's actually a warehouse in Los Angeles for merchants to ship to.)
  • Tmall.com is an open-platform marketplace, which means fashion companies can build their own brand and have access to hundreds of millions of shoppers.
  • Tmall.com translates product information for the retailer.
  • Retailers can take advantage of Tmall.com's digital marketing programs to drive traffic within the marketplace.
  • All customer service takes place via Tmall.com's built-in chat function.
Selling apparel in a new market is a big commitment, and retailers can expect some bumps in the road at first. Merchants should start small and recognize that it's going to take time to build momentum. To learn more about cross-border trade best practices, download ChannelAdvisor's Guide to Smarter Cross-Border Trade webinar series.


James Huang is vice president and managing director of ChannelAdvisor Greater China.
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