Ask Veronica Pedersen, cofounder of California-based natural cosmetics company Timeless Skin Care, when she realized she had “made it,” and the answer comes quickly: when she saw her products listed on Alibaba Group’s Taobao Global, a shopping site dedicated to small businesses selling into China.
“Oh my God, I think we just became a brand,” she says she told her husband fellow cofounder, Alex Pedersen, at the time. “We’re in a whole different country.”
Launched in 2007, Taobao Global has become a destination for increasingly sophisticated Chinese consumers looking for high-quality foreign goods. And not those from household brands. For that, there is Alibaba’s B2C marketplace Tmall Global, a separate cross-border platform that caters to multinational companies such Macy’s, Gerber and GNC. Instead, Taobao Global focuses on niche products from what are typically small and medium-sized enterprises in overseas markets. In addition to the U.S, other markets that have proved popular with Chinese consumers are Europe, Japan, Korea and Australia.
Small businesses can list their products directly on Taobao Global if they choose, but the path Timeless Skin Care took—through distributors—is the most common. That’s because the size and sheer complexity of the Chinese market is more than most fledgling outfits can handle on their own. The distributors play a critical role for foreign merchants looking to take advantage of an opportunity already being enjoyed by much bigger companies, even going as far as handling the marketing for all of a brand’s products on Taobao Global.
“If it wasn’t for the distributors, we wouldn’t have made that jump,” Pedersen says. “It’s just the fear of not knowing. We don’t have those type of resources as a small company.”
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About 45,000 of these distributors are qualified to sell through the site, pitching everything from cosmetics and food to apparel and baby products. Because Taobao Global is, like all of Alibaba’s e-commerce platforms, a marketplace, the site serves only as a shopping hub. Therefore, merchants and distributors often connect and always strike deals independent of Alibaba. But the companydoes enforce strict rules for distributors in the areas of customer service, logistics and product authenticity in order to maintain the integrity of the site.
Zhong Jianguo, Timeless Skin Care’s main distributor in China, says he is constantly on the lookout for items that will do well in his home market. Timeless Skin Care stood out because of its positive reviews in the U.S., its niche-product segment and emphasis on quality. The latter two attributes typically mean a product will draw attention in China, Zhong says, while resisting the fierce pricing competition that’s a hallmark of Chinese e-commerce.
“I talked with Jay about the philosophy and he agreed with me,” Zhong says. “And I think that’s why he trusted me.”
Taobao Global’s target consumers are young people, between the ages of 20 and 35, who live in big cities, such as Beijing, Shanghai and Guangzhou. The spending power of this growing demographic is greater than any other age group in China, and they do the bulk of their shopping online. Moreover, these customers have matured far beyond the most obvious brand-name purchases, preferring instead specialty goods that better reflect their increasingly sophisticated lifestyles.
“The group is more willing than the generation that came before them to try new things,” said Zhou Nan, a Hangzhou-based director for Taobao Global. “That makes them good potential customers for these smaller international brands.”
That has been the case for Timeless Skin Care. According to Pedersen, Taobao Global has altered both the future and the fortunes of her company, which has grown from a 2,000-square-foot warehouse to one that is 39,000 square feet and 25 employees. And Timeless Skin Care products can now be found in the UK, Canada and Australia. Still, with 40 percent of its wholesale business going to China and large orders being sent there every week by the pallet, the success seen through Taobao Global has trumped those other markets.
“We’ve never sent a pallet to Canada,” Pedersen says.
The Taobao Global team has taken steps to better connect distributors and overseas merchants. The team has launched live-streamed events where small businesses pitch their wares to potential sellers watching online in China. So far, these sessions have linked distributors to merchants in the U.S., Australia, New Zealand, Japan, South Korea, Taiwan and Hong Kong, while another event is planned for Italy in June. There have been offline meet-ups as well, bringing merchants and distributors face to face in Seoul, Osaka and Shanghai, as well as Hangzhou.
Austin’s Midnight Pitch to China
Already the locations of the pitch sessions are seeing the opportunity that Taobao Global holds as much as the small businesses themselves. Earlier in May, Austin, Texas, held the first-ever U.S. event. According to Kevin Johns, director of Austin’s Economic Development Department, the city’s rising popularity has made the cost of doing business climb as well, so small businesses need to find a way to keep pace. He says Taobao Global may offer them that chance.
“We think this can be a good stepping stone for us to reach into the Chinese market and let people know Austin exists,” Johns says.