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E-Commerce will grow by far the most in Asia in the coming decade where China will lead the way, backed by ASEAN. Numerous foreign companies are aware of this and want a piece of these lucrative markets.
Yet, before you go into detailed planning, it’s important that you understand the requirements, costs, and opportunities for each country or region.
Today, you’ll learn about the differences between the biggest E-Commerce website in ASEAN, Lazada, and one of the biggest cross-border websites in China, Tmall Global.
First, let me give you a brief explanation about the websites before we get started.
What is Lazada?
Rocket Internet, a German incubator, founded Lazada in Singapore in 2012 and it has grown fast since.
Back then, Southeast Asia lacked online marketplaces like Amazon and Tmall that can be found in China and in the West. Thus, Rocket Internet saw a great opportunity.
Today, Lazada is the to-go website in Southeast Asia and the entry requirements are surprisingly low compared to the major marketplaces in China (more about that below).
Even with the creation of Lazada, and other marketplaces like Shopee, the E-Commerce market is still in an infant stage and similar to that of China’s a decade back.
Here, the online penetration is set to grow, well… a lot in the coming decade.
Countries like Vietnam, Indonesia, and the Philippines are some of the fastest growing in the world, with young populations, and surging middle classes.
Alibaba has invested billions of dollars in Lazada just recently and is ready to not only conquer the E-Commerce market in China, but also in Southeast Asia.
What is Tmall Global?
Tmall (Tmall.com) was launched in 2012 by Alibaba Group, its majority shareholder. In 2015, Alibaba started Tmall Global (Tmall.hk) to attract foreign companies to sell cross-border in China.
Thanks to Tmall Global, you can (often) avoid registrations and filing with Chinese authorities, like the China Food and Drug Administration (CFDA), when selling cross-border.
It allows you to simply have a company registration, warehouse, and bank account overseas prior to registration, which is not the case for the regular Tmall website (Tmall.com).
Even if the Southeast Asian E-Commerce market grows fast, the total sales value is, and will continue to be, overshadowed by that in China in the coming decade.
Tmall Global is one of the major players in China’s cross-border market and offers great opportunities for overseas sellers indeed.
What are the benefits of selling on Lazada compared to Tmall Global?
1. Lower initial requirements
The first clear benefit of selling on Lazada is the significantly lower upfront requirements.
While Tmall Global requires that you have a strong brand recognition in your home market and/or in China, Lazada allows any cross-border seller to join if they have a company registered outside of ASEAN.
Setting up an account, your seller center, and listing products on Lazada can be done within days.
2. Lower setup fees and operational fees
Tmall Global is notorious for charging high fees as can be seen below:
- Deposit: USD 25,000
- Commission: 1-5%
- Yearly service fee: USD 1,000 – 5,000
- Alipay service fee: 1-2%
Lazada, on the other hand, charges no upfront or yearly fees:
- Deposit: None
- Commission: 1-4%
- Yearly service fee: None
- Payment fee: 1-2%
3. No need to hire Tmall Partners (TPs)
In addition to the fees listed above, sellers often need to seek help from 3rd parties referred to as Tmall Partners (TPs), before they can start selling on Tmall Global.
In fact, at the moment, Tmall Global requires that sellers work with selected and reputable Tmall Partners, to assure that the stores are run in a professional way.
Not to forget, foreign sellers often need help from Tmall Partners to “sell in” their brands to Tmall, which can be a daunting task itself.
These Tmall Partners can be very picky and often require that you have an excellent sales record and sales turnovers in the millions of dollars.
Because they pocket a commission of the sales you make. Thus, they want to make sure that your products are highly accepted in the Chinese market.
So, on top of the costs charged by Tmall Global, you should be prepared to set aside the following costs for a Tmall Partner:
- Initial fee: USD 15,000 – 50,000
- Monthly running cost: USD 5,000 – 10,000
- Commission on sales: 10-20%
4. Lower competition
The Chinese E-Commerce landscape has become very competitive over the years, a reason why many marketplaces and Tmall Partners only accept bigger brands.
Companies like Asos and Marks & Spencer have pulled out from marketplaces like Tmall as the competition is too fierce and the Chinese market is hard to navigate.
Taking the step to enter the Chinese market should be done with high caution, long preparations, financial backing, and a decent marketing budget.
5. More educational material available and easier communication with service teams
I prefer to call you a customer if you sell (or intend to sell) products on Tmall Global or Lazada. At the end of the day, they earn money from the sales you make and from the yearly service fees.
It’s well-known that it’s hard to communicate and get the support requested from Tmall Global. First of all, they’re based in China so communicating in English can be a problem.
Second, Tmall Global mainly works with bigger brands, if you’re not one of the big players, you should be prepared to wait last in the line.
Lazada, on the other hand, is based in Singapore where English is a first language. And you can find plenty of educational material related to shipping, fulfillment, payments, returns, and more online.
My personal experience is that it’s easier to get support from Lazada in comparison to Tmall Global.
What are the benefits of selling on Tmall Global compared to Lazada?
1. A bigger and more mature E-Commerce market
China’s E-Commerce market is big. Very big.
While it’s projected that Southeast Asia’s E-Commerce market will reach USD 88 billion (some claim USD 200 billion) in value until 2025, China’s E-Commerce market will reach the USD 1 trillion mark around 2021.
So, there’s a reason why many foreign companies want to enter the Chinese market to massively increase sales.
The Chinese E-Commerce market is more mature and Chinese consumers are used to buying online, while this is currently becoming an upcoming trend in Southeast Asia.
2. Instant high sales with the right products and sufficient financial backing
If you’re a medium- or large sized company and feel that you’ve outgrown your home market, then it can be worthwhile trying to enter the Chinese market.
Tmall Global screen foreign markets trying to find brands that are high in demand among Chinese consumers, thus, product fit is a must.
As mentioned above, just be sure to allocate a sufficient budget (often in the hundreds of thousands dollars) for your store setup, monthly running costs, marketing costs, and more.
3. A bigger market for luxury products and high-end brands
Lazada is still mainly a marketplace for products in the low and the medium price segment.
Popular products include service parts for cars and motorcycles, clothes, cosmetics, gadgets, mobile phones, and more.
Even if it’s possible to sell luxury products like wines, olive oils, watches, and to succeed on Lazada, the demand is not as high as in China.
This will inevitably change in the coming years. In fact, Lazada Malaysia has partnered up with local developers to sell real estate, which kind of speaks for itself…
4. Direct procurement in the US, Europe, Korea, and Japan
Tmall Global and many other Chinese marketplaces have opened up overseas procurement centres as late as 2018. Here, they care of the complete supply chain.
Websites like Kaola, JD, Tmall, and Vipshop have vast plans to further expand their direct purchasing operations.
This can benefit small- and medium sized foreign companies that don’t have the financial backing to set up stores on any of these marketplaces.