By Kathy Van Wilgenburg
First, a quick primer Alibaba is China’s—and, by many measures, the world’s—biggest online commerce company. It has three main internet sites (Taobao, Tmall, and Alibaba.com) and is headquartered in Hangzhou, China.
Taobao is a Chinese language website for consumer-to-consumer online retail sales, providing a platform for small businesses and individual entrepreneurs. It is Alibaba’s biggest shopping site with more than 580 million active users, and one of the world’s top 10 most visited websites.
Tmall (short for Taobao Mall and a spin-off of Taobao) is a Chinese language website for business-to-consumer online retail sales. It has over 500 million active users and is one of the world’s top 20 most visited websites. It is different from Taobao in that it sells brand names like Nike, while Taobao mainly serves small businesses.
Alibaba, the holding company of Taobao and Tmall, has been posting ever-increasing sales volumes since 2014, with projected revenue for 2018 to be well over 35 billion USD.
BENEFITS OF TAOBAO AND TMALL
Pricing: Because merchants sell directly to consumers, they can afford much lower prices than retail stores. There is also tremendous competition among the over 1 billion merchants. Auctions also make up a small percentage of the transactions.
Quality: Taobao has improved the marketplace due to a quality rating system, which helps eliminate fake products and drives overall quality. Once a customer receives a product, they are asked to rate that product. Alibaba says it is investing heavily in battling fakes.
Payment: Alibaba uses an online payment system, Alipay, which is linked to a user’s bank account. The system holds money in escrow until the package is received.
Logistics: China is challenged with no nationwide delivery company like Federal Express, UPS or DHL. However, Alibaba has worked to create a reliable consortium of service providers in order to offer excellence in delivery.
CHALLENGES
Quantity and diversity of products: With more than 1 billion products listed for sale on Taobao and Tmall, finding specific products can be difficult. Merchants can pay Alibaba for better placement in search results.
Quality rating system: Quality ratings are confusing if you are not an experienced purchaser. Various rating systems are used, complicating the comparison process.
Language: For non-Chinese-speaking customers, navigating the websites is difficult. Using Google Translate can be helpful to find the products, but pop-ups don’t translate, and mistakes can be made in the course of ordering. Shanghai Community Services Center (communitycenter.cn) offers a class to help foreigners navigate shopping on a Chinese website.
THE SOLUTION: Baopals.com
Three expats in China examined these shopping challenges and developed a solution: Baopals.com. The Courier had the chance to interview two of the three entrepreneurs: Jay Thornhill and Charlie Erickson. The third founder, coding expert Tyler McNew waved happily from his busy workstation in the midst of a large group of Baopals employees.
Baopals was founded in July 2015 and launched in February 2016. It is a Wholly Owned Foreign Enterprise (WOFE) headquartered in Shanghai. Its core business is an online English-language shopping platform that automatically facilitates shopping on Taobao and Tmall. It acts as a technical “bridge” to the merchant site, while bringing additional consumer benefits previously unavailable to the user who is not Chinese-language-literate.
Added Value
The founders knew that the online website needed to be in clear English and, at a minimum, mirror the high level online experience that customers had come to expect in their home countries. The site also needed to be profit-making without compromising on quality or values. Other key value drivers involved shipping, returns, product quality, and easier searches.
Shipping: Baopals’ customer service team tracks orders to verify that a seller ships within 48 hours. If not, the team will independently investigate the delay and proactively notify customers of delivery problems. For instance, maybe the delivery of a large item was attempted but the customer was not home. Baopals customer service will contact the customer (in English) to reschedule a more convenient delivery.
Returns: The biggest nightmare of online shopping involves returns. Baopals employs a large team to review orders for a top-quality experience. One aspect of a quality order is the ability to return a product to the seller. After an order is received, if a customer wishes to make a return, the Baopals team will assist in every aspect. Per Jay Thornhill, “Anytime there has been a mistake on the seller’s part, we do everything we can to make sure our customers have a good experience. We arrange a pickup of the item and take care of the return shipping fee. This is a higher standard than Taobao and Tmall. The Golden Rule is that you get what you wanted, or you get your money back—fast. When things go poorly, we make sure the customer does not suffer. We have their backs.”
Quality: Says Charlie Erickson: “News of our high-quality customer service spread by word of mouth—it is how our company grew.”
There is another aspect to quality and that is the product quality. Both Taobao and Tmall use quality-ranking systems. The quality level can be indicated by diamonds, crowns, or hearts. One dress on Taobao can have a quality ranking of 4 diamonds, another has 3 crowns, and a third has a series of hearts. What does all this mean? These rankings are made up of product ratings, seller feedback, quantity sold, shipping speed, and service quality. While a seller on Taobao may have a score of 4.6 out of 5, on Baopals, that same seller could get a 3/5 score. The advice of both Jay and Charlie is to always choose a seller with a 4/5 score, unless it is a novelty/gag gift.
On Tmall, there are additional requirements. For a brand seller, the Tmall vendor must have a license to sell that brand. There are flagship Tmall stores like Forever 21 and H&M. A Tmall seller badge indicates a “licensed seller” and they will have better return policies, for example 7-day, no questions asked policy.
Charlie also explains that there are a lot fewer fraudulent items for sale than people may think, possibly due to stricter enforcement or more competition. There may be knock-offs available, but these tend to be obvious given their too-low prices. Baopals has never received any complaints about fake food or fake alcohol.
How does Baopals.com make money?
Baopals does not sell ads. The founders believe that selling advertising on their website could be a slippery slope, appearing to show preference for some products or sellers. They do highlight special sales of quality items, but only to make customers aware of the good deals.
Baopals charges a service fee of 5% on each item, plus a small fixed fee based on the item price. The fixed fees are as follows:
· Items below CNY 30: CNY 2
· Items from CNY 30-60: CNY 4
· Items from CNY 60-90: CNY 6
· Items above CNY 90: CNY 8
The fees are automatically included in the pricing of all the products on the site, resulting in no surprise additional fees at check out. Also, purchasing multiple items from the same seller incurs only a single shipping charge.
How is it that, even with these fees, shopping on Baopals is economically attractive?
· There is no retail markup. Brick and mortar stores have overhead that must be compensated. Online shopping bypasses these costs and saves money.
· Numerous sellers compete with each other for your business. This natural competition may offer very attractive pricing.
· Personally, I often worry that prices offered to foreigners are higher than locals. But the prices on these sites are made primarily for the locals, so that’s reassuring.
Cool facts and helpful hints about Baopals.com
The website operates best on either a laptop or a smart phone. The laptop version optimizes the most search features. The site is also available via WeChat by scanning the icon.
There are no apps (yet) and no VPN is needed.
As of June 1st, 2018, Baopals has sold 1.5 million items worth more than 12.5 million USD. The users are 49% female and 51% male with 56% of the users being between the ages of 25 and 44 years old. However, the stats clearly show customers from every age group. 35% of the orders originate in Shanghai and 16% in Beijing. The remaining orders come from areas all over China. The top search is women’s clothing followed closely by household essentials, electronics, food and grocery, home improvement, and men’s and children’s clothing.
What’s Next?
Baopals.com has more exciting plans for the future.
The first is a virtual supermarket. Customers will be able to pick items from a supermarket and have them delivered all at one time, the next day. Most of the items are already available on Baopals.com, but are not delivered together. Watch for the release in the Fall of 2018.
The second innovation will be Baopals.com sites in Russian, and in Korean.
Lastly, they hope to facilitate person-to-person recommendations, similar to building a music playlist. A person can browse someone else’s recommendations and find a community of people recommending great items that a person may have not otherwise known about. This will help to give insight and validation to products they have found in China. The goal is to form a fairly large and tight-knit community of shoppers collecting and sharing great finds with each other, creating more trust to shop in China.
Awards and Accomplishments
In October 2017, Baopals was the first foreign team to receive honors and win the “Top 10 Up and Coming Entrepreneurs in Shanghai” award. They have also been honored with an invitation to tour the Alibaba operation. Baopals employs many local Chinese citizens in various capacities, including several on the management team. It serves the citizens of China well by selling products to the many foreigners who might otherwise have trouble connecting with small business owners. There is little doubt that Baopals is well embraced by Chinese business leaders and will continue to grow.
*Statistical information from Baopals, and Wall Street Journal current market quotes, recent articles.
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About the author: Kathy van Wilgenburg is an American expat from the deep south. She is married to a Dutch guy and they love to mix those two diverse lifestyles with their six years living in Taipei and Shanghai. Having a finance background, Kathy hopes to help foreigners find ways to live a high quality life with smart economic choices. Reach her at kathy.vw@hushmail.com.
Original Courier publish date: September, 2018