An e-commerce guide to Tmall Global vs. Tmall Local and the partners that help you succeed in the market

The key differences between Tmall Global and Tmall Local

Tmall Global, which launched in February of 2014, is designed to make cross border e-commerce easier for global brands. The portal allows foreign companies to sell their products directly to Chinese consumers without having a dedicated e-commerce presence inside Mainland China (which the Local portal requires).

The global portal can be like a terrific proposition for foreign companies who want to sell to Chinese consumers and avoid a significant amount of the legal and logistical requirements associated with a true web presence in China (as Tmall Local would require). These requirements include elements like a warehouse on mainland Chinese soil, a government-issued business license, a Chinese bank account, and Chinese trademarks inside the market (which, in reality, are well worth a company’s cost and time, regardless of what sort of presence they are undertaking).

Brands initiating their presence on Tmall Global will typically pay a deposit fee of roughly $25,000 USD, on top of an annual fee ranging from $5,000-10,000 USD depending on the products being sold.

Tmall Local, on the other hand, also requires a deposit and annual fee, which runs higher than that of the Global portal due to the more significant set-up on Alibaba’s end.

But the differences don’t stop there. The two portals offer different commission fee structures: 3-6% compared for Tmall Global, compared to Local’s 2-5% (the ranges are a function of different categories of products being sold). The reality is that as business begins to flourish with Chinese customers (potentially, upwards of $2-5 million USD in annual revenue in the first 2-3 years), that extra point devoted to Tmall Global’s commission fee can eat away at a brand’s profit margins.

So why don’t all brands automatically set up Tmall Local accounts then?

A big reason is that the physical presence required to take advantage of Tmall Local does bring with it some administrative hurdles to overcome.

A company must become a recognized legal entity and register a Chinese trademark; it must also obtain a Chinese merchant trading license. Moreover, shipping logistics within China must comply with China Inspection and Quarantine (CIQ) requirements. And perhaps most daunting, to the untrained eye, is the requirement of having a physical presence in the country, meaning storefronts where products are put on display or a warehouse on Chinese soil where products are stored.

Additionally, due to compliance issues inside China’s regulatory system, certain products will be, by their nature, ineligible for Tmall Local, and will have to be sold via Tmall Global (for instance, cruelty-free cosmetics in country that requires proof of animal testing for domestically warehoused products).

In the end, decision-makers who are feeling hesitant about the time and resources they would need to commit to a Tmall Local presence may opt (or be required) to take the path laid out by Tmall Global.Ultimately, a lack of knowledge and a fear of the unknown requirements and expenses associated with doing business in China can make Tmall’s two portals seem like something of a black box.

However, if a business is serious about penetrating the Chinese market and setting up shop for the long term, identifying the right partner to help  decide between Tmall Global or Tmall Local will be key to that brand’s success.

Support beyond the Global v. Local question

A prime example of the additional complexities involved in selling to Chinese consumers is the process around obtaining an Internet Content Provider (ICP) license. An ICP is required by the Chinese National Ministry of Industry and Information Technology to allow brands to sell products directly to consumers online.

Fortunately for brands, there do exist intermediaries between companies and the fairly complicated Chinese regulatory landscape. Besides getting a company established on Alibaba’s platform, their services go well beyond platform entry. Those consultancies handle issues like logistics, repatriation of capital, licenses, and more, to allow companies to sell to Chinese consumers.

A full-service China e-commerce consulting firm will typically do the heavy lifting to ensure that the ICP and other relevant licenses are obtained quickly and without delay by filling out the application form and other required documentation on a company’s behalf (full transparency- this is something we at WPIC handle for our clients). If they have experience in dealing with the regulatory components of market entry for brands, the process should be relatively painless.

Certain consultancies inside the market take it even one step further by integrating e-commerce sales and warehousing capabilities. This allows brands to avoid having to establish their own warehouses inside the market. Organizations who offer warehousing capabilities should help facilitate all relevant elements in the transaction, including:

• The coordination of product imports
• Registry at the border
• Duties and payment of taxes
• The storage, security and unpacking of goods at the warehouse
• Shipment to customers across China.

Thanks to this element of warehousing and logistics services offered, small, medium and enterprise companies can be one step closer to solidifying the presence they need to do business on Tmall, by far, the most popular marketplace in the world’s biggest e-commerce market.