January 2022 | by Lili & Oliver
Tmall and Taobao, two of China’s most prominent e-Commerce platforms will merge into one, as announced by Trudy Shan Day, the head of China digital commerce unit of Alibaba. As both marketplaces are owned by Alibaba, the merger may not sound like a big step in an entirely different direction.
And yet it may be just that.
Talking about a merger of giants is not an exaggeration here. Taobao currently has a whopping 15% share in the entire global e-Commerce, while Tmall is a close second with its 14%. In comparison, Amazon only comes in third with 13% in this particular ranking.
But even though both Tmall and Taobao are owned by Alibaba, their business model and profile is completely different from each other. In fact, Tmall was actually separated from Taobao (and used to be called Taobao Mall) back in 2008 to cater to the needs and tastes of a different demographic.
As we reported in our article about interesting marketplaces around the world, Taobao is the most popular e-Commerce platform in China with an annual sales value of 5.7 trillion RMB ($853 billion) and 710 million monthly active users.
Screenshot of world.taobao.com
Using a rather unique business model, the platform doesn’t charge its users (neither sellers nor buyers) any transaction or registration fees. Instead of those, Taobao earns its revenue via a platform-based advertising option comparable to SEO that pushes the products of certain vendors in front of customers.
While this model encourages competition between sellers, it also creates an advantage for the cheapest products with lower quality, which are often counterfeits. With this in mind, it’s easy to see why the platform has been featured for years on the USTR’s annual Review of Notorious Markets for Counterfeiting and Piracy.
Tmall, on the other hand, levies registration and annual fees on its sellers and featured brands. The profile of this marketplace is more upscale, offering trusted brand-name products at a higher price to consumers.
Screenshot of tmall.com
According to the announcement made in early January, the merger of these platforms is motivated by three main reasons:
➀ platform strategies
➁ user expansion
➂ industrial development for merchants.
From certain points of view, the move makes a lot of sense. After all, combining these platforms will certainly help with streamlining Alibaba’s retail operations and optimizing its services.
In addition, integrating Tmall and Taobao’s customer bases will enable the company to reach a larger audience with smaller and more unified efforts. It may be also helpful for customers who won’t have to switch back and forth between the platforms and keep their separate ways of operation in mind when ordering products.
We’ve seen that from a purely business point of view, the move makes sense for Alibaba and it probably would’ve made sense to reintegrate Tmall and Taobao for a long time. However, the e-Commerce giant decided to take this step right now. Why could that be?
Analysts believe that the answer to that question lies in the rapid evolving of Chinese e-Commerce. Back in 2008 when the platforms were first separated, the industry was just beginning to take momentum in China, while nowadays it definitely can be considered as mature and booming.
The number of internet users was “only” 298 million, whereas today that number is around 989 million. Consequently, the number of online shoppers has increased from less than 34 million in 2006 to 782.41 million in 2020. No wonder that the GMV (gross merchandise value) of Chinese e-Commerce is currently a whopping 11.3 trillion RMB.
With changes that enormous, it’s easy to see that e-Commerce platforms need to make shifts to better adjust to rapidly evolving market trends.
The news was received with mixed feelings. As you can see from this comments thread attached to a LinkedIn post discussing the issue, some people are enthusiastic about the opportunities the merger means and provides.
Screenshot of https://www.linkedin.com/feed/update/urn:li:share:6886269316929515520/?actorCompanyId=1199304
In contrast to that, others have a more cautious approach. As the platforms have such very distinct reputations (with Tmall offering quality brand products and Taobao cheap, often fake goods), consumers are worried what happens with the two getting mixed.
Will Tmall lose its authentic products and be flooded with fakes and cheap goods from Taobao? Or will Tmall “purge” the counterfeits from Taobao?
That is certainly a question online brand protection experts would like to know too. So far, we’ve encountered numerous counterfeit products of our various clients on Taobao but didn’t face as many issues on Tmall. How will that change after the merger?
One of our fears is that with the integration of the platforms, consumers will have a harder time telling apart fake products from real ones. This will certainly drive up the sales of counterfeits and cause even more harm to brands.
Luckily, from an online brand protection point of view, the merger doesn’t bring about a lot of change. After all, globaleyez’s marketplace monitoring and test purchase services will run uninterrupted and with the same level of success, regardless of the number, name and customer base of e-Commerce platforms in China or any other country in the world.
We’ll continue to find counterfeit, grey market, and other IP-infringing products of our clients on marketplaces worldwide, including the merged Tmall-Taobao platform as well.
If you want to protect your brand from the impact of this merger and any other IP-infringements on- and offline, contact us at globaleyez.