In Going Local, Global Brands Turn to E-Commerce Sites for Access

E-commerce marketplaces like China’s Tmall.com or Japan’s Rakuten are quickly becoming the new normal for multinational brands looking for a low-cost and low-risk entry into countries where they do not have an established presence, said a recently released Forrester report.

With more than a hundred million users shopping on eBay, Amazon, MercadoLibre, Rakuten and Tmall.com, the Forrester report looked at the five platforms and concluded that global brands, not just small businesses, are increasingly opening virtual stores as a way to expand their businesses outside their home markets. This is because the e-commerce platforms give brands easy access to a massive local customer base without the high costs and risks involved in opening brick and mortar stores. The e-commerce platforms also make it easy for brands to manage their virtual stores by offering them localized services, such as e-payment.

For example, brands opening virtual stores on Alibaba Group’s business-to-consumer platform Tmall.com can get access to local third-party service providers that can help with logistics and warehousing. Brands on Tmall.com are also able to offer Alipay, an Alibaba Group related e-payment company, as a payment option for Chinese consumers. Tmall.com’s dominating reach in China’s e-commerce landscape meant that most global brands looking to enter China’s e-commerce space have considered opening stores on Tmall.com, Forrester said.

Tmall.com, which has over 500 million registered users, hosts over 100,000 brands on its platform, of which 2,000 of them are foreign brands like GAP or Nike. While some foreign brands like British apparel firm, ASOS and Apple operate their own flagship e-commerce stores in China as well as a Tmall.com store, other brands like jeans-maker Levis only has a Tmall.com store as its main e-commerce presence in the country. According to Forrester, “many brands see far more revenues driven by Tmall than on their direct-to-consumer sites”.

Over the past year, Tmall.com has courted foreign brands and governments to make a wider variety of imported goods available to the Chinese consumer. Although opening stores on e-commerce platforms may have notable benefits for brands, the platforms could do more to help brands vary the look and feel of their virtual stores and give them greater and more detailed access to customer data, Forrester said. Extensive discounting is also a problem that some e-commerce sites face and that could be a barrier for brands looking to sell products online close to their retail price.

China’s business-to-consumer e-commerce market rose 65 percent in 2013 over the previous year to reach RMB 66.6 billion ($10.7 billion) in term of value of goods transacted, according to iResearch data.