The e-commerce sector plays a crucial role in China's economy. If you're an entrepreneur looking to establish an e-commerce company in the online retail industry, it's worth exploring some of the popular online e-commerce platforms in China, as they are considered market leaders.
According to Statista, the sector is expected to generate an impressive revenue of USD $7,598 million in 2021, encompassing both e-commerce and other online shopping platforms. Moreover, there is an anticipated annual growth rate (CAGR 2021-2025) of 10.5%, leading to a projected market volume of USD $11,308 million by 2025. These statistics underscore the remarkable potential and numerous opportunities within the online shopping e-commerce industry in China.
Tmall
Alibaba introduced Tmall in 2008 as a spin-off of Taobao, targeting sellers offering premium products. Over time, Tmall has experienced substantial growth and now stands as the largest e-commerce company following Taobao.
What distinguishes Tmall's online shop platform from Taobao is its wider array of foreign and high-end brands. It primarily facilitates Business to Consumer (B2C) and Business to Business (B2B) transactions, while Taobao is predominantly known for Consumer to Consumer (C2C) sellers.
The expenses associated with selling on Tmall
To become a Tmall merchant, there are costs involved, including a security deposit of approximately USD $25,000, sales commissions, and an annual service fee for using their online shop platform. Additionally, many opt to hire a Tmall Partner, incurring significant expenses at the outset.
For those seeking serious market entry into mainland China, with a long-term perspective and sufficient financial resources, Tmall can be one of the best websites and e-commerce companies to launch and grow your e-commerce business.
Taobao
If your aim is to directly sell to consumers, Taobao presents an excellent online store platform for you. Operating on a consumer-to-consumer (C2C) model, Taobao enables individuals and smaller businesses to establish their own stores and sell products online. With its user base known for being price-sensitive, Taobao becomes the go-to platform for low to medium-end consumer goods of various types.
Compared to selling on TMall or JD's e-commerce websites, setting up your own Taobao store is relatively less expensive. This grants you the opportunity to test your products in the market with minimal financial risk. Additionally, the process of creating a Taobao account and selling products is relatively straightforward, even for small businesses.
As the saying goes, "If you can imagine it, you can probably find it on Taobao." The platform is particularly renowned for its diverse offerings in clothing, jewelry, accessories, and computer hardware.
The expenses associated with selling on Taobao
Regarding the costs of selling on Taobao, it involves establishing a company in Mainland China since operating with a Hong Kong company is not permitted. Agencies typically charge around RMB 20,000 to 30,000 to assist with business registration in China, and the process can take up to 6 months.
Furthermore, to sell on Taobao, merchants are required to pay a guarantee fee to Alipay, which holds the money for at least 15 days. Alipay also levies fees on sellers who withdraw more than 20,000 yuan. Additionally, Taobao charges for ads, photo storage, and plugins.
JD
Presently commanding a 25% market share in the B2C e-commerce market, JD.com stands as the second-largest e-commerce company in China, specializing in B2C online retail. JD.com places significant emphasis on selling home appliances and electronic equipment.
Much like TMall, the process of establishing a presence on JD.com can be intricate, demanding companies to adhere to stringent regulations and secure approval to sell their products. In reality, over half of the brands attempting to register for JD sales face rejection during the application phase, primarily due to the rigorous process aimed at guaranteeing the sale of only top-quality products on their platform.
The expenses associated with selling on JD
Just like TMall, gaining approval to sell on JD.com entails a relatively high initial investment cost. Here are the associated charges:
Initial deposit: USD $15,000 (refundable deposit)
Annual fee: USD $1,000 per store
Commission per sale: Approximately 2-8%
WeChat Store
Tencent's WeChat messaging app, boasting over 1 billion daily active users, has evolved into a thriving online sales platform. In January 2021, WeChat reported a significant surge in Gross Merchandise Volume (GMV) for businesses utilizing mini-programs within the app, reaching an undisclosed amount, with a remarkable 255% increase from the previous year. Additionally, GMV for physical goods sold through these e-commerce solutions programs saw a notable rise of 154%.
With a staggering user base of over 889 million monthly active users, including 200 million linking their WeChat accounts to bank cards, WeChat undeniably holds a dominant position in Chinese social media and e-commerce.
WeChat Pay has transformed this online sales platform into more than just an instant messaging app, now serving as a fully-fledged e-commerce solution in Hong Kong. Users are now able to purchase movie tickets, book restaurants or hotels, and make small payments using the app instead of cash or credit cards. This shift is profoundly impacting the lifestyle and consumer behaviors of the Chinese population, while also opening up new avenues for brands to explore within the online market.
Moreover, beyond its role as a sales platform, WeChat offers a direct channel for brands to receive valuable feedback from customers. Especially for foreign companies, it provides an opportunity to test the waters in the Chinese market before making further investments.
The expenses associated with selling on WeChat Store
Foreign companies often rely on third-party services to establish their presence in China's e-commerce market. These services may include creating WeChat stores and marketing their products. While this approach may be more cost-effective than selling on platforms like Tmall, it still entails substantial monthly fees, often amounting to thousands or even tens of thousands of US dollars.
Similar to Tmall and JD, hosted e-commerce platforms are selective in accepting sellers. To qualify, companies typically need to demonstrate some level of brand presence in China, adequate financial resources, and a well-defined business plan. These requirements serve as a baseline for companies seeking to enter and thrive in the Chinese e-commerce landscape.