More foreign brands like Adidas and Gap are expanding their reach into China’s market by tapping the user base of the country’s largest online retailer Taobao.com, according to an IDG News Service report.
Taobao, launched in 2003, has risen to dominate China’s online retail market, with more than 370 million users, according to the Chinese company. The site’s vast customer base has made it a far-reaching marketplace for Western brands wanting to sell to Chinese consumers.
“We’ve definitely seen increasingly more interest from overseas companies exploring Taobao Mall as an avenue to reach Chinese consumers, particularly those residing beyond Beijing and Shanghai,” said Taobao spokeswoman Justine Chao. About half of all transactions on Taobao come from areas outside of China’s major cities.
Taobao Mall, the company’s business-to-consumer platform, currently has more than 70,000 brands. While a majority of the brands are domestic, some well-known international brands have decided to set up their own online stores on Taobao Mall.
One of the latest foreign brands to have a store in Taobao mall is U.S. clothing retailer Gap. It decided to do so, even as it had already launched its own Chinese e-commerce site.
“We are launching on Taobao to expand our reach to Chinese consumers given Taobao is the most visited e-commerce site in China,” Gap said in an e-mailed statement. “Our presence on Taobao is complementary to our own e-commerce site, which is doing well, along with our stores.”
A few other major brands with online stores on Taobao Mall include Levi’s, Samsung and Uniqlo. In August 2010, sportswear manufacturer Adidas also established an online store on Taobao Mall, making it the company’s sole e-commerce provider in China.
Adidas said while most of its sales still come from its storefronts in China, the company’s online sales in the country has seen “rapid growth.”
“Taobao allows us to reach millions of consumers in a very direct way, many of whom we could have difficulty reaching through brick-andmortar storefronts,” Adidas said. “The decision was also an acknowledgement that Chinese consumers are increasingly turning to the Internet to do their shopping.”
Taobao, which started as a consumer-to-consumer platform, rose to the top of the China’s online retail market after beating out e-commerce rivals like eBay in the country. The company launched its Taobao Mall platform in 2008 as a way to expand into China’s growing business-to-consumer (B2C) market.
While partnering with Taobao can come with opportunities, launching a store on the site can also present challenges, according to Bestseller, a Danish clothing company that owns brands such as Vero Moda and Jack & Jones. Bestseller currently has 4,000 stores in 300 cities in China, but has also set up an online store on Taobao Mall.
The company said that part of the motivation to launch a store on Taobao was to stop the selling of counterfeit goods on the site, according to Dan Friis, Co-CEO of Bestseller.
Bestseller hasn’t been the only one to point out the problem. A U.S. government report recently called Taobao a “notorious market” for allowing its merchants to sell counterfeit goods. The report, however, noted that Taobao was making “significant efforts” to stop the illegal activities.
Taobao responded by saying that it had stepped up its efforts to stop the sale of counterfeit products on the site. The company has removed a great number of counterfeited product listings. It has also launched a “covert buying operation” to purchase and examine suspected counterfeit products to check if they are genuine. Hundreds of sellers have been penalized in the operation, Chao said.
Besides Taotao, foreign companies are entering the Chinese e-commerce market through Amazon and by investing in local B2C websites. As the Wallstreet Journal reported, Macy’s Inc. has invested $15 million in Chinese online retail company VIPStore. The deal will allow Macy’s to sell merchandise through a dedicated section on the website, Omei.com, in spring 2013, a luxury site operated by VIPStore.
Macy’s move comes after Neiman Marcus Group Inc. invested $28 million for a stake in Chinese site Glamour Sales Holdings Ltd., allowing the company to tap Chinese demand for luxury goods without having to invest in bricks and mortar stores.
Wal-Mart has recently received conditional approval from Beijing to acquire a 51% majority stake in e-commerce merchant Yihaodian, which sells more than 180,000 products ranging from groceries and electronics to clothing.