Taobao | Strategies for Selling Your Products Online
Taobao is one of the biggest consumer-to-consumer platforms on the internet. In this article we will look at 1) what is Taobao?, 2) selling successfully on Taobao, 3) advantages of selling on Taobao, 4) precautions, and 5) Taobao Success Stories.
WHAT IS TAOBAO?
Taobao is a Chinese e-commerce website that was founded by the Alibaba Group in 2003. It is a customer-to-customer platform that allows individual sellers and small business owners to sell their products to different buyers. It is similar in operation to eBay and Amazon. Sellers can create and operate virtual storefronts. The website caters primarily to buyers and sellers in China, Hong Kong, Macau and Taiwan.
Both fixed price sales and auction formats are available to sellers. Most items are sold through a fixed price model with a very small percentage of auction sales. Buyers can judge a seller’s credibility by looking at the provided information on the site which includes other user ratings, comments and complaints.
The website is very popular with as many as 760 million products listed by March 2013. It is one of the top 10 most visited websites in the world according to data gathered by Alexa Internet.
Rise to Success
To compete with an expanding eBay, Taobao allows sellers to list their products at no cost and provides special features on the website such as instant messaging between buyers and sellers and an escrow based payment solution called Alipay. These features are consumer focused and have allowed Taobao to become the leading C2C platform in mainland China. Growth has been rapid with market share moving from 8 percent in 2003 to 67 percent in 2006. Concurrently, eBay’s share fell from 79 percent to 29 percent and the website closed down operations in China by 2006.
In 2008, the website expanded to include a business to consumer addition called the Taobao Mall. With its own web domain, aims to provide quality brand name products to the Chinese buyers. By 2011, Tmall became an independent business and by 2013 it was the 8th most visited website in China.
The business has also expanded to include an independent search engine called etao which provides product and seller information across many e-commerce websites. In 2011, the parent company Alibaba also launched a physical Taobao mall in Beijing.
The Business Model
The Taobao business model has been successful where others have failed. The website differs from similarly structured eBay in two major regards. First, the items sold on it are predominantly new and not used. Secondly, there is no setup fee or per transaction fee charged. This fee-free model has made it immensely popular among users in China. The website generates revenue by offering advertising and other services that help the seller stand out from a crowd of other sellers. Merchant advertisements appear with product search results.
To add to this, when Tmall was launched there was a change in the revenue model. Targeted towards bigger sellers, there are several fees charged including a deposit, an annual fee and a per transaction commission.
HOW TO SELL SUCCESSFULLY ON TAOBAO
Tips for Selling on Taobao
As with all e-commerce platforms, there needs to be concentrated effort to launch a successful business and generate revenues. Some tips for achieving this on Taobao are:
- Be Innovative: With hundreds of vendors vying for a buyer’s attention, it is a good idea to identify a niche or a unique selling proposition to help stand out from the crowd. This should be used together with a sound marketing plan to make your product stand apart and generate interest.
- Be Patient: With stiff competition, it can take some time to build up a strong business. It is important to have a long term plan with specific goals and targets to achieve. Learn from your mistakes and work towards building a sustainable and scalable business.
- Focus on Keywords: When a buyer is out to find a specific item, they will enter specific keywords into the search function. Identifying the right keywords that will direct these buyers to your product and using them effectively are a key to successful online selling. Keywords can relate to the brand, model, any product features or benefits, store name, common adjectives used to define the product etc. Any combination of these keywords may be used to search for the item. Often, similar products or products that fulfill the same need can also be used as keywords to direct buyers to a product.
- Use the Community: The Taobao community is a place where buyers and sellers can interact. This interaction can lead to familiarity and increased sales as well as repeat customers. A successful seller may be able to animate her community and increase networking. Discussion topics can create awareness and help extend business. These topics can become viral both within the community and even more widespread over the internet. Regular posts on relevant topics will continue to engage buyers and build up credibility as a serious seller.
- Offer Promotions: Despite interest, most buyers are looking for a good deal and a great price. Offering promotions on products is a good way to attract buyers and generate excitement about your product. The best promotions offered are showcased by Taobao which increases the probability of being seen by the buyers. In addition, it is a good idea to identify popular holidays and events and build promotional activities around them. Valentine’s Day, Chinese New Year and other festivals are popular times for shopping.
- Build Credibility: Gaining consumer confidence is vital for online success. An attractive price point and strong communication activities will bring in a buyer but poor quality of items or misleading the customer will only mean lost consumers. Providing a realistic view of items and providing the best quality of goods and services will mean good reviews and repeat customers.
- Build Supportive Social Media Presence: Buyers will often use social media to share their shopping experience and product likes or dislikes. It is important to establish presence on the social media outlets frequented by your target market and use these to reach out to these consumers. This can help understand market trends, consumer behavior as well as to bring in new customers as well as repeat ones.
- Provide Excellent Customer Service: Customers often want to get an idea of who the seller is and what the product is before actually making a purchase. For this, Taobao offers a chat feature which is extremely popular with the Chinese audience. A successful seller is one who makes use of this channel and ensures that all customer queries are addressed and responded to in a timely and friendly manner.
- Provide Reliable Delivery: Chinese consumers expect quick deliveries for their online purchases and it is a good idea to offer quick and reliable delivery.
- Work with Popular Payment Solutions: Alipay, a local escrow based payment system and cash on delivery are two methods that are popular in China. Alipay is secure and reliable. These methods should be understood and used.
ADVANTAGES & DISADVANTAGES OF SELLING ON TAOBAO
Selling your products on this popular website comes with advantages and disadvantages.
Some of the advantages are:
- Large Chinese Market: Online shopping is very popular in China and Taobao is larger than any physical retail location. According to the China Internet Network Information Center, there were 618 million internet users in China in 2013. Of these, online buyers show a phenomenal growth with shoppers spending $213 billion online. The internet retail market has shown a 70 percent annual growth since 2009.
- Low Risk and Low Cost: The Taobao business model has no fees attached to merely listing and selling products. In addition, an online business has less inventory pressure, storage issues or management risks. There is less investment as there is no need to establish a physical store presence. The overall cost for a seller is reduced and this can be passed on to the consumer in the form of lower priced items and benefits the seller by increasing profit margins.
- Built-In Secure Payment System: Alibaba, the Taobao parent company also owns the most popular online payment system in China called Alipay. This escrow based system is widely trusted and a reliable way to safely and quickly make online payments. It is a very simple method where a buyer sends money to Alipay on purchasing an item. Alipay then passed on the payment when the product is received by the buyer. The system offers both the buyer and the seller a guarantee of payment and a good product.
There are two major disadvantages of selling on Taobao. These are:
- Language Barrier: The biggest users on Taobao remain the residents of China. This means that to sell to them effectively, one must be fluent in their language. A way around this is to hire a Chinese speaker to handle communication, but this may not be an option for smaller sellers.
- Counterfeits: There is a huge counterfeit market on Taobao as well as Tmall. This means that people have cheaper alternatives to any products being sold or are wary of trusting any seller because there is not clear way to tell counterfeits apart online.
Those of our readers who have had experience buying or selling on Taobao are welcome to add their experiences in the comments section.
It is usually safe to conduct transactions on Taobao. There is a high degree of reliability on the website. But there are always cases on a bad experience or a bad seller or buyer. It is a good idea to be attempt to identify possible trouble sellers or buyers before getting into business with them. A robust feedback system allows buyers to assess a seller and make an informed decision about buying products from them. Buyers can select sellers with high ratings and good reviews. Similarly, sellers can take a look at any buyer ratings if available and avoid any that spell potential trouble.
- Look for sellers with high transactions and 99 percent feedback.
- See if the prospective buyer is listed and has a buyer feedback
- Read through bad feedback and try to understand what could have caused it. A good seller may have had bad luck with a troublesome buyer.
- Look at seller speed, accuracy and attitude ratings
- Be sure to try to fix any problems and discuss issues before leaving a negative rating for a buyer or a seller.
TAOBAO SUCCESS STORIES
There are many examples of successful businesses on Taobao and Tmall. Some of these are:
Cocokaka is a Taobao store that stocks items reminiscent of an urban Outfitters store. Products listed include things like a headless cat backpack, quirky iPhone cases and a teapot hat. One of the most popular items is a giant tiger head backpack. The store is owned and operated by Luojun Xu, who is a student at the Shanghai Academy for Visual Arts. Only 19, she plans to continue further studies abroad in England. Unlike others, who mostly resell wholesale bought items, Xu creates her own accessories to sell. She transforms cheap, plain accessories into original products to sell in her store.
Through her store on Taobao she earns as much as $9,800 a year and attracts 400,000 visitors. She was attracted by the low barriers to entry, access to thousands of users and the opportunity to make good profits on the e-commerce website. According to Xu, good products, good packaging, an interesting storefront, excellent customer service and timely service make the difference between a successful Taobao store and a failed one. Some promotion and marketing also go a long way. Her method for handling competition is to continue to launch newer and more innovative products while maintaining quality of product and service.
Puppy Mischief on Taobao
A successful Taobao based online business, PuppY Mischief sells unique pet products online. Products listed include items as diverse as lace trimmed tutus for dogs to specialty puppy shampoos. The store was created by Yao Zhen and his wife in 2009. They eventually settled on Taobao as a platform after exploring different retail options and strategies.
The inspiration for the business came from Yao’s long standing affection for dogs. He often rescued dogs and kept them in his own house. As a dog owner, he identified a need for dog related products and a lack of easy availability and access to these items. This encouraged him to attempt to start his own business. Taobao was the eventual choice as there was very little effort or investment required to set up the shop. There was also no need to stock a lot of inventory or offer a variety of product choices. To begin with, Yao sold as much as he could and still managed to make money.
Kumeijiao on Taobao
Another successful Taobao store, Kumeijiao, has been selling wool yarn online since 2007. The business was founded by Liu Yuguo who was encouraged by his uncle to explore the platform because others were making profits on it. He discovered that opening the online store was much easier than he had expected. There was no need for investment or capital and money can be made immediately. Liu experienced this when his items sold out on the first day he listed them on Taobao. Over the years, Liu has added other products and items such as wool and cashmere finished products, but his best-selling item remains what he started with, the spools of yarn.
Liu now has a team of 40 workers and has expanded to open a store on Tmall. He pays for listing on Tmall and a commission but can afford to make that investment to compete in a different marketplace.
ODM on Tmall
ODM is a watchmaker that created its store on Tmall in 2012. The aim was to reach customers who lived outside of Major Chinese cities. The ODM watches were already sold within their stores, but the company was interested in using the online platform to sell anywhere.
Within a few years, the company has managed to grown its online business exponentially and now sells around 60,000 watches a year through its online retail website.