E-Commerce Leaders Converge: Amazon Launches on Tmall

19/03/2015

That’s right — your eyes aren’t deceiving you. Last week, Amazon opened a new store on Chinese e-commerce giant Alibaba’s Tmall marketplace.

The Details

Initially planned for an April launch, Amazon’s storefront has already gone live. Amazon plans to offer more than 1,000 imported products, including selected items sold exclusively in China, like clothing brand Panama Jack.

Product categories currently listed include food, beverages, toys, kitchenware and women’s shoes. During its initial soft launch, Amazon will also offer free shipping and discounts on certain products.

While news of Amazon’s venture with its biggest competitor has the e-commerce world buzzing, Amazon, in fact, already launched a store on Tmall for its Kindle eBook reader last year.

Why Alibaba?

Surpassing the US in 2013, China is the world’s largest retail e-commerce market and shows no signs of waning. According to eMarketer, the region is set to generate approximately USD $563 billion this year, with that figure expected to rise to more than USD $1 trillion in 2018. The Alibaba Group, which owns both the Tmall (business-to-consumer) and Taobao (consumer-to-consumer) marketplaces — among many other sites — controls more than 80% of e-commerce transactions in China. Listing on these marketplaces gives Amazon access to approximately 334 million active buyers.

Is It a Good Move for Amazon?

While we’d need to get that Magic 8 Ball out to know for sure, there are a number of details that suggest that this unorthodox strategy could work in Amazon’s favour.

  1. The Difference Between Amazon and Tmall

Tmall acts only as a third-party marketplace, facilitating the sales made by retailers that list on its platform. Although Amazon is likewise a third-party marketplace, it’s also a first-party seller. While the two do compete for market share in China, Amazon can take advantage of this key difference by listing on Tmall to gain some extra revenue.

  1. Infrastructure

Retailers listing on Tmall must organise the storing and shipping of their products, which is often an immediate difficulty for international sellers. Because of its local marketplace in China, Amazon.cn, Amazon has an already-established infrastructure in the country. With a network of warehouses and pickup locations — in addition to the well-known same-day and next-day delivery options — Amazon won’t need to invest heavily to expand its presence in China.

  1. Chinese Consumers

The average Chinese consumer now has more expendable income than in years past, and more and more Chinese consumers are willing to spend their extra earnings online. There’s now greater demand for overseas goods, with many younger consumers fascinated with Western brand names and willing to shell out for higher-price, higher-quality items. Amazon is poised to capitalise on this trend with an offering that already includes Blue Diamond almonds, California wine and brands such as Lego and Crayola.

  1. Diversity

Considering the huge volume of shoppers on Tmall, listing on the marketplace will no doubt boost Amazon’s exposure in the region. By getting its brand in front of more consumers, Amazon.cn may come to see a rise in traffic. At ChannelAdvisor, we help online retailers implement multichannel strategies and meet consumers where they’re already shopping. By diversifying its offering, Amazon will most likely increase revenue from Amazon.cn, as well as gain access to a massive pool of previously untapped customers.

Marketplaces are eating the e-commerce world, so much so that even competing marketplaces can’t ignore the opportunities other marketplaces offer. Some may consider Amazon’s new Tmall store a raised white flag, but on closer inspection, adding additional sales and marketing channels could prove the beginning of a reinvigorated presence in the region.

Blog post by Shani Flynn, marketing copywriter, ChannelAdvisor