In general, those costs fall into five categories: Deposit, Technology and Service Fees, Sales commission, Customer Loyalty Program fee and Alipay service fee.
Flagship Store, Flagship Store (Marketplace), Authorized Store and Specialty Store must submit a security deposit (from 10,000RMB to 300,000RMB depending on the category).
This fee is payable to yearly for services rendered and dependent upon the merchant’s registered primary categories (generally 30,000 RMB or 60,000 RMB for Tmall.com). This annual fee can sometimes be refunded if the store reaches Tmall.com a certain amount of sales.
REAL TIME TRANSACTION FEE (FOR TMALL GLOBAL)
Tmall Global charges a commission fee based on the category of the product sold. It is calculated using the product price and the logistics cost.
This accumulation of fees and commissions can be unsustainable for some brands, this is thus a first reason for them to leave Tmall.
This is partly because search results for brand names are sorted by bestsellers. Which means counterfeit sellers who are present for a long time on Tmall can be much more visible than the official store.
Thus, if brands must pay high fees and don’t appear on the first page on Tmall, they can barely make profit and have a bad ROI.
They are also more and more educated and demanding customers. The Chinese spend a lot of time on forums to get information about specific products and look for the cheapest product.
E-reputation is then a key factor of a successful digital strategy in China. A brand must have good reviews on forums… Viral marketing campaigns on social media (WeChat, Weibo) can also attract new customers. Some agencies are not good at it and keep spending huge amounts of money on street commercials or other “classic” marketing campaigns they use in the West. Those are not as efficient as digital campaigns tailored to the Chinese market.
The result of such inadequate campaigns is a low reputation on Chinese social media and low sales and Tmall.
Coach opted for a different way to be present on the Chinese market: WeChat. Cartier, Longchamp, and Montblanc all have WeChat shops with WeChat Pay. Some companies believe that WeChat offers a more personalized shopping experience, as well as greater control over their brand.