Tips to Starting a Business on China’s Taobao

Tips to Starting a Business on China’s Taobao
Jun 07, 2013 By eChinacities.com

Tips to Starting a Business on China’s Taobao
Photo: globaltimes.cn

The Chinese economy is very much consumer driven. One of the most popular methods of shopping is online, and while online shopping alternatives continue to mushroom left and right, the most popular, by far, is still Taobao. In light of Taobao's unwavering popularity with Chinese consumers, the question on many foreign businessmen's lips is, "How can I cash in on the online trading industry in China?" While there is a lot of potential business to be done by those who have the patience and savvy to harness the power of Taobao, there remains quite a bit of confusion from foreigners regarding how they can trade on the platform.

According to consumer behaviour data released by Taobao in February 2012, more than 2,300 items of clothing were sold per minute on the website…fficially released figures show that the company also sold 310 million home electronics items, 130 million personal accessory items and 83.64 million toy items in 2011. That is a lot to share from the consumer pie, and when one considers that mobile transactions on Taobao reached 10.8 billion RMB in 2011, it comes as no surprise that more and more foreigners want in on the action!

Trading on Taobao: procedures and limitations

As a potential merchant, it's free to set up shop on Taobao. Unfortunately, those with foreign passports and no Chinese ID will find that the authentication process lacks the ability to verify foreign identification numbers, and thus only accepts Chinese and Hong Kong ID for registration as a trader. As a result, foreigners who wish to do business on Taobao will need to partner with a Chinese national, who will then use their ID details to set up shop.

If you're looking to enter the online trade world in the same league as the big boys, TMall is Taobao's shopping platform that caters to bigger chain stores and brands. Foreigners can register to trade on TMall by first registering a Chinese company, and then using that company to open a TMall store. Additionally, you need to be able to prove that you are legitimately selling the goods that are featured on your TMall store by providing the relevant documents upon registration. For example, you cannot set up a Louis Vuitton store, because chances are, you don't have the necessary license or certificate to do so. There is also a hefty deposit to pay, which is upwards of 80,000 RMB depending on what goods are being sold in your TMall store. As a result, it is a significantly longer process to open a TMall store than a Taobao store.

As far as choosing what to sell on your online store, anything goes. There are no limitations to what one may sell, as long as it is legal in China and is not an imported publication. A possible stumbling block for foreigners who are looking to set up shop on Taobao may be the language factor. Because Taobao.com doesn't have an English website, one will have to conduct all business in Chinese. Thus, your Chinese business partner will need to be easily accessible, or you'll need to have staff on hand to chat to customers using the popular Ali Wang Wang integrated chat system, which allows potential customers to communicate with traders about their merchandise and to index merchandise according to the correct keywords. Ali Wang Wang plays a very important role in the success of any Taobao store, as it allows the trader to fully understand what the customer's needs are. Ali Wang Wang is an important element of the Taobao.com user's shopping experience, and if your staff are not helpful to customers in this regard, their displeasure will definitely be reflected in the feedback for your store.

A dog-eat-dog online world

Like with many industries in China, competition between traders on Taobao is incredibly fierce. Prices are really low – sometimes lower than the original retail price. If an item sells particularly well on Taobao, chances are it will soon be copied by other traders, thus putting the original trader under the pressure of competition. Another thing to keep in mind: as with so many trading platforms and activities in China, Taobao customers will often try to negotiate a better price. As the trader, whether you or not you choose to engage in bargaining is up to you. Some traders prefer not to engage in bargaining, and as such, notices are posted on the store sites.

Alan Shelley, Marketing Director at tradeontaobao.com, a company that offers foreign individuals and companies advice on engaging in e-commerce in China, tells a story that reflects the cutthroat nature of Taobao trade: as a toiletry item became one of the most popular sales items on the website, competition between traders turned more aggressive, as they continued to undercut one another on price. The profit per unit soon dropped to only a few jiao, but because the sales volume was so great, it was still worth it for the traders to sell the item. Eventually, one trader started selling the product at 1 RMB less than the wholesale price. This left the other traders convinced that the store would soon go out of business. But it didn't, and he soon cornered the market by striking a deal with a courier service; due to the volume of business he gave them, he would receive a rebate of 2 RMB for every delivery. This meant that while he lost 1 RMB on the sale, he still made 2 RMB back from the courier service.

With the low overheads and potentially high sales volumes, it's obvious that there is plenty of money to be made from the online trade here in China. The questions to ask oneself  is whether one has the stomach to engage in the fierce competition, whether one has the staying power to keep playing the game and whether they are in it for the long haul. If the answer is yes, it might just be time for you to set up shop on Taobao!

Related links
Do You Dare Start a Business in China?
Risky Business: 4 Hurdles Chinese Start-up Entrepreneurs Have to Clear
3 Things to Expect When Starting Your Own Company in China

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Keywords: online trade China selling on Taobao online business Taobao China Taobao

13 Comments

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1

bettertan
comment|38819|258195

yes,you are right.there are too many barriers into foreigners .communication barriers with taobao sellers,payment methods . they are two main kinds of problems with taobao online shoping.even though taobao is popurlar all over the world but don't worry!you can find a taobao gent help you i know a agent called: taobaobuying agent,they are a experienced, professional and efficient group.taobaobuying help people in overseas to buy goods from China shopping website.10% of service fee,45% off of international shipping cost with high quality service.Don't hesitate any more!To be your taobao agent,enjoy your taobao shopping!

Jul 08, 2013 02:58 Report Abuse

2

vindepan
comment|38227|256278

I know few expats is able to use taobao, which is chinese oriented. But we vinbottle offers fine wine by lightning deal. You can buy leroy bourgogne 2007 at less than 300RMB. Just add vinbottle_com as a friend in your wechat, you'll start receiving our deals vinbottle

Jun 14, 2013 15:42 Report Abuse

3

casual
comment|38171|72683

Does Taobao allow a owner of a store to transfer ownership to someone else? if so, what is the process?

Jun 13, 2013 18:24 Report Abuse

4

cocotan
comment|40070|266363

yes,of course,but i think it is not safe.because all things are dummy except the items on sale.This is related to the safty of account.so i think it's better bulid a shop by yourselve . I am a Taobao buying assistant from China. so if you have any questions with taobao,we can help you. Taobaobuying is a experienced, professional and efficient group.We help people in overseas to buy goods from China shopping website.Low service fee,cheap international shipping cost with high quality service. more information,pls view our web: www.taobaobuying.com pls feel free to ask if you have any question to my Email: taobaobuyingservice@gmail.com

Sep 12, 2013 01:45 Report Abuse

5

katt
comment|38038|111186

It has been ten years since Taobao first appeared into our life, now I am totally a die-hard fun of taobao,you almost can find anything you want on it.Online shopping brings great convenience to me,I have got so much benifits from it .Unfortunately,most of the online shopping sites are more likely to serve chinese customers ,I hope onc day the shopping sites like Taobao or JD can offer a wider servise to foreign customers via breaking the language barrier.As Taobao's former CEO Ma Yun said ,"Tao bao is not only delivering actual products to the buyers but also the trust "

Jun 08, 2013 17:41 Report Abuse

6

Wednesday
comment|38037|253213

I once saw my friend shopped in taobao, she typed in "candle" in chinese and there was a list of sellers selling the same candle with even the same pictures. The only difference I saw was on the right side: the price. That's why unless you're prepared to sell for the cheapest of good with subpar quality, it's really not that great doing business in taobao or china for that matter.

Jun 08, 2013 15:19 Report Abuse

7

bill8899
comment|38007|81937

The first tip should be: Are you Chinese? Foreigners need a Chinese partner to sell on Taobao. I suppose you could form a JV or WOFE but are you ready to invest $10,000 to $15,000 or more in an online business? Taobao does not want foreign vendors.

Jun 07, 2013 18:29 Report Abuse

8

orientexpressguy
comment|30314|0

I advertised two expensive camera items on Taobao, then sporadically for months afterwards I received telephone calls about them. My Chinese wife was able to translate for me, however the callers were trying to buy at a ridiculously low price. Eventually I gave up and sold the items in the UK. Altogether, a disappointing first encounter. Taobao is not at all on par with Ebay. The photos on Taobao, for example, are generally very poor and tiny, whereas on Ebay you can post up to 12 large photos of any one item.

Aug 10, 2012 06:26 Report Abuse

9

Tumi
comment|29704|90262

@Te it's your friend that would have to register as a trader. you wouldn't have to register a company per se. unless you wanted to trade on tmall

Jul 19, 2012 20:34 Report Abuse

10

AJ
comment|29596|0

if China wasnt so up its own backside it would have a decent ebay site like the rest of the world does. the fact that taobao doesnt even have an english translation tool available says it all. and half the stuff on it is fake anyway so who cares. plus also posting things out of china is ludicrously expensive and subject to export 'inspection'.

Jul 15, 2012 19:52 Report Abuse

11

Tony
comment|34074|0

Your comments are just minor. Why should Taobao have an English site? It's you who want to buy or sell something on Taobao, so you should take the time to learn Chinese. Yes, China has lots of fakes, but also they have good products to. You just gotta shop wisely.

Nov 27, 2012 02:36 Report Abuse

12

Te
comment|29586|0

I was wondering, if I chose to start up a Taobao store with a Chinese friend, would I need to register as a business first or anything?

Jul 15, 2012 05:14 Report Abuse

13

Melitta
comment|38170|252508

if you just wanna start up a taobao store it is needn't register business firm.that is only for Tmall store.

Jun 13, 2013 18:03 Report Abuse