Taobao.com, founded by Alibaba in 2003, has become the single most popular e-retailer in China with 423 million active registered shoppers by the end of March 2016. The figure has also far surpassed American e-commerce giants Amazon and eBay. Taobao has not only transformed China’s retail marketplace by providing products and online convenience to rural customers, but it has also created millions of jobs and alternate sources of income for private entrepreneurs, many of whom have become millionaires thanks to the country’s booming e-commerce phenomenon. Foreigners living and working in China are now hoping to get in on the action by opening their own Taobao shops, but are the cultural challenges and business hurdles facing them worth the payout?
To glean some insight into expatriate e-retailing, the Global Times recently reached out to two foreign Taobao shop owners about their experiences and successes (or lack thereof).
Kaikai, the Chinese name of a 29-year-old American, became a Taobao shop owner in 2012. He said that his first visit to China was in 2007, when he studied Putonghua at Peking University and National Taiwan University.
“I can say everything in Chinese, I can also read and type the words on computers and mobile phones,” he said. “However, I didn’t dedicate my Chinese studies to handwriting as there is not much practicality for it in this day and age.”
His excellent command of Putonghua laid a solid foundation for his future Taobao career. In 2012, Kaikai began selling household kitchen appliances, electronic devices and travel accessories on Taobao.
He said he was inspired by Chinese friends who kept asking him to buy iPhone 4S from the US for them.
“At that time, I had a need to convert my salary (paid in dollars) into yuan, so it was a win-win for both sides,” he said.
Realizing the viability of this new trade, Kaikai decided to quit his job and begin selling products on Taobao full time.
In terms of procedure, he said foreigners without Chinese partners need only a passport and the completion of a simple Chinese-language test. Like many budding entrepreneurs, Kaikai didn’t have any help at the beginning of his business.
“I first started the business by myself, living and operating out of a youth hostel in Shanghai. From product procurement overseas, to logistics, importing, sales and final fulfillment, I controlled every step of the process,” he said. “I didn’t have anyone to hold my hand, so I had to learn everything on the fly.”
Authentic American
Even though he is not a native Chinese speaker, Kaikai conducted all his customer service interactions himself. “I would often send messages using Taobao’s voice function, which made the sales experience with customers a lot more intimate and congenial, because Chinese are happy to know that it’s really a foreigner communicating with them,” he added.
Kaikai admits that his identity as an American guy selling American products in China is his biggest competitive advantage on Taobao.
“In most of my listings, I take all the product photos and videos myself to differentiate my store from other sellers,” he said. “It’s an effective strategy to give my customers peace-of-mind knowing that they are buying authentic American products from an authentic American.”
Fortunately, Kaikai’s efforts eventually became profitable. According to him, his store’s sales volume has increased exponentially through a combination of positive feedback, solid reputation and product expansion.
He also attributes persistence to his success. “I see many small stores come and go because they quickly give up. But if you’re willing to dedicate yourself by putting immense focus and effort into your business, then the possibilities are limitless,” he said.
Profiting from pollution
Thomas Talhelm is an assistant professor of behavioral science at the University of Chicago. During his stay in China in 2013, he noticed smog becoming a crucial environmental issue and thus founded the social enterprise Smart Air Filters to promote DIY air filters as cheaper alternatives to expensive air purifiers.
These DIY purifiers primarily consist of a fan and a high-efficiency particulate air (HEPA) filter, which are the major components of any standard air filter. To ship them to and sell them in China, Talhelm and his team set up their own Taobao store in 2013.
“We started simple, but since then we’ve expanded to other products that we’ve personally tested and published results for, such as carbon filters for formaldehyde, pollution masks and particle counters,” he said, adding that their customer base is comprised of both expats and locals concerned about China’s worsening air pollution.
“Opening a Taobao store allowed us to get affordable clean air options to more people in China,” he said. “Taobao is clearly the major online commerce platform in China. The choice is a no-brainer. Now there are more options with Weidian and JD, but Taobao is still huge.”
When asked about the logistics of opening a Taobao store, Talhelm said that he registered Smart Air Filters as a Chinese company under the name of his Chinese partner, so the registration process was quite simple.
According to Talhelm, his shop currently has five full-time employees, three part-time employees and several volunteers, most of them foreigners from different cultural backgrounds. All have good command of Putonghua, so language and culture are not barriers for their business.
“Knowing Chinese is essential, but it’s not enough,” Kaikai countered. “Knowing what to sell, how to buy, how to arrange logistics and how to cope with customer and product issues are equally vital.”
Talhelm himself designed his Taobao home page and wrote all the Chinese descriptions of their products. He concedes that the business didn’t take off at first, selling less than 10 purifiers in the first week.
But with China’s “airpocalypse” making domestic and international headlines in recent years, their most popular purifier has now sold over 2,000 units.
“Over time our open data and tests have reached more and more people, so our sales volume has also gradually increased,” Talhelm said. “Smart Air’s core idea has always been that if people just see the data, most people wouldn’t spend so much money on the expensive purifiers.”
Trial and error
Despite such achievements, both foreign shop owners said that they have also encountered numerous challenges and obstacles along the way.
Kaikai explained that at the beginning he was unsure how to export products from the US into China, which required plenty of logistical research and trial-and-error attempts. “We are now shipping about 12 metric tons of goods each month via air and sea,” he said.
Kaikai pointed out that learning how to delegate tasks to increase scalability is essential. “Initially, I was a bit of a control freak, as I wanted to control all aspects of the business to ensure the best quality service,” he said.
“However, I realized that I had to delegate tasks, such as customer service, which is why I now have about five employees just in customer service.”
Talhelm believes that evaluating customer feedback is extremely helpful, especially negative comments.
“First we try to figure out what the customer is talking about. Is it true? Where was the problem? If it’s a scientific or technical question, I send data (or even run a new test if it’s something we haven’t tested),” he said.
He added that the most common negative comment about his product is noise, which is a fundamental problem with almost all air purifiers.
“Any machine that is pushing out air will create noise, but people want less noise. There are quiet purifiers out there, but they don’t push out enough clean air. We’re working on radical new designs for quiet yet clean filters,” Talhelm said.
“The reality of day-to-day operations are the less glorious part of my work,” Kaikai said. “Those who can’t handle this will give up and close shop, but if you persevere and are willing to go to battle every day, then you can be a winner.”
In terms of what administrative or promotional support he expects from Taobao, Kaikai said that he doesn’t expect Jack Ma to just hand over to foreign shop owners a magical key to the castle.
Thus, his only expectations are for Alibaba to continue maintaining a fair, reliable – and, most importantly, trustworthy – marketplace for both buyers and sellers.
“There are hundreds of thousands of Taobao shops; my store is just a number in the system. That’s one of the reasons why I love e-commerce in China, though, because I don’t have to deal with guanxi (connections with influential people)” Kaikai said.
“For the most part, e-commerce in China is very transparent and a level playing field for sellers,” he said. “My success is achieved strictly through hard work and merit, not through relationships with insiders (like bricks-and-mortar stores).”