by Ker Zheng
On March 20th Tmall Global announced two initiatives for foreign merchants exporting goods to China.
This comes just a few months after it announced a plan to import $200bn worth of foreign goods across Alibaba's entire ecosystem over the next five years.
Tmall Global is currently the largest cross-border e-commerce platform in China with 32% market share, according to market data provider Analysys International.
Alibaba's campus in Hangzhou. Source: Wikimedia
The two initiatives announced were the Centralized Import Procurement (CIP) and Tmall Overseas Fulfillment (TOF) solutions.
The Centralized Import Procurement solution aggregates goods in Alibaba's six global procurement centers, and enables brands to sell through both online and offline channels.
This includes Alibaba's smart grocery chain Freshippo, Tmall Supermarket, and Intime Department stores. In total, Alibaba has nearly 700 million active users on its various platforms.
A Freshippo supermarket. Source: Technode
Tmall Overseas Fulfillment solutions allow brands to store their goods in TOF warehouses on a consignment basis, while they wait to be shipped to Chinese consumers buying on Tmall Global.
This solution is akin to a reverse Amazon FBA solution where Tmall has more control over the supply chain and fulfillment process.
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In fact, Alibaba's Cainiao logistics network plans to expand its network of warehouses worldwide.
Alibaba operates Tmall Overseas Fulfillment centers in Japan, South Korea, and the US, though it plans to expand into Europe this year.
In China, its bonded warehousing space will be tripled to three million square meters within three years.
Why is Tmall Developing these Cross-Border Initiatives?
According to the Chinese government, retail imports of cross-border e-commmerce items jumped 39.8% YoY to reach 11.7 billion USD in 2018. Popular categories include health, cosmetics, and mom & baby, as China's growing middle class looks to purchase more premium products.
2. All the major platforms are intensifying their scrutiny of the cross-border supply chain
In January a quality control incident erupted over Netease Kaola's sale of a potentially fake Canada Goose jacket to a customer in Beijing.
The incident went viral on Chinese social media and in the months since then the different platforms have been raising the bar for new merchants.
Some require retailers to obtain explicit brand authorization for selling in China. Others require them to trace the origins of certain products to their manufacturers and confirm their authenticity.
Kaola is Tmall Global's number one competitor in the cross-border space, holding a 24.5% share of the market.
A Cainiao warehouse. Source: CNBC
3. Tmall Global needs to provide a better logistics solution for smaller merchants selling more niche, long-tail products
The TOF solution allows for quicker fulfillment and reduces shipping costs as the goods can be packaged with other merchants' goods in bulk, instead of being shipped over to China one by one.
In this sense, it is more similar to Amazon's FBA solution in the US where sellers stock their goods in FBA warehouses on a consignment basis.
The solution involves less risk than stocking goods in a warehouse in Hong Kong or a China free trade zone.
Additionally, many merchants have issues with supplying enough inventory for the large China market, where demand can spike and fall very quickly.
Aggregating supply in one location helps Tmall Global forecast demand and ensure that supply doesn't run out - this improves the customer experience in the long run.