China offers a huge market of over a billion eager consumers that foreign companies are increasingly planning to sell their products to.
If that sounds like you, you may be wondering which of the many Chinese online malls to choose from and if you're able to set up a store and take payments in China as a foreign company.
In this post, we're going to examine how to set up a Taobao store and an Alipay account so you can receive payments.
Why Taobao?
Easy, it's BIG.
Taobao is a wildly popular online marketplace from business giant the Alibaba group (China's Amazon equivalent) that is well-known for consumer goods, electronics, clothing, jewelry, and more. It's China's largest C2C e-commerce site and is populated by all sizes of vendors who host online stores on the platform. To give you some idea of its popularity let's look at the number, and they are large:
The annual active consumers on Alibaba's online shopping properties in China, including Taobao, reached 828 million by the end of June, increasing from 811 million at the first quarter of 2021. It also gained a net income of over 143 billion yuan (USD$22,232,067,000.00 or over 22 billion USD) in its fiscal year ending on March 31, 2021, showing an increase from 140.35 billion yuan in the previous year. (Source)
Taobao just might be one of the internet's best-kept secrets to non-Chinese users, as it is one of the 4 Chinese titans who account for almost half of ALL global e-commerce sales and has the largest share of them all according to this article and chart from Forbes:
One of the things that has cemented Taobao's success is that they cater for middle-class shoppers from all over China, not just from the most affluent few Tier 1 cities such as Beijing, Shanghai, Shenzhen, etc. The many hundreds of millions of people in smaller cities find the plentiful choice of medium/low-cost items perfect for their budget. If you are selling premium brands, Tmall may be a better choice (read more about Tmall here).
To make the platform more accessible to vendors all over China, one of the benefits of Taobao for companies who're starting out with Chinese e-commerce (foreign or domestic) is that it's relatively cheap to get started in comparison to its competitors.
Can we sell on Taobao if we're not Chinese?
Yes, you can, and here's how...
Cross-border sales aren't permitted, therefore you need to set up a Chinese company, a WFOE, in order to be able to sell on Taobao (or some of the other e-commerce platforms, too).
As mentioned in this earlier post we wrote, you need to do the following:
Foreign companies need this one thing to set up Chinese online stores
Any foreign company looking to start doing business in China online can do so by registering a China WFOE with a trading business scope for their physical store, otherwise known as a Foreign Invested Commercial-Enterprise (FICE).
A note for FICE owners:
- We recommend that one invest capital of 100,000rmb (this is only a recommendation, there is no minimum registered capital required). This is to ensure that the business and its operations run smoothly and so that it doesn't run out of money before it has even begun to take off
- Owners that are looking to set up from where they are will be required to register a virtual office as proof of an office address. It does, however, only cost 5000rmb per year
- Owners will have to declare 3% of sales as tax to the government
Once a FICE has been registered owners can establish their Chinese online stores with their products. Owners will also need to go to the telecommunications administration authorities for ICP (Internet Content Provider) filing.
Assisting foreign companies to set up a WFOE in China is one of our core services, and we've also written numerous blog posts about doing so. Here are a few that you might find useful at this point:
- Setting Up A WFOE In China: The Process Explained [2021]
- "Which Type Of China WFOE To Open?"
- How Much Does It Cost To Open A WFOE In China?
- 2021 WFOE In China Checklist [Free Download] - download this to get an understanding of the information you need to prepare to open a WFOE and the process you'll navigate.
It's worth remembering that the WFOE registration process takes time, so if selling online in China is a key company goal it's best to start the ball rolling on the WFOE ASAP as you can't open your e-commerce storefronts here independently without it.
The Taobao registration process
Now you have a WFOE you're able to register your very own Taobao store because you are a 'Chinese company' and therefore qualify!
Navigate to the Taobao account registration page then you'll go through these steps:
- Set up your Taobao account and register as seller
- Connect your new account to Alipay (the payment service provided by the Alibaba group) in order to take payments (this will be connected to your company's business bank account that will have been set up during the WFOE registration process)
- Taobao will request your ID and authenticate it
- Set up your storefront, connect necessary plugins, and set up 'Ali Wang Wang' (this provides customer support for buyers and is important for good user experience in China)
- Get your store designed
- Start uploading products (it may sound odd, but these are known as 'babies' on Taobao)
- Promote the store and products. Some companies choose to do this by paying KOLs (Key Opinion Leaders or Influencers) to promote their wares or by showcasing their product on Taobao live (their native live-streaming platform that has been incredibly successful)
Note, you need to be able to read and write Chinese to open a Taobao account, store, and Alipay account.
Setting up Alipay if you have a WFOE & Chinese bank account
If you have an e-commerce store in China you need to have a way for local customers to pay. In China, there are two ubiquitous mobile payment providers: Alibaba group's Alipay and Tencent Tenpay's WeChat Pay and QQ Wallet. Between them, they have over 93% of the mobile payment market share in China, with Alipay being around 55% and Wechat Pay/QQ Wallet being 38+%.
Here's an Alipay QR code being used by a customer to pay for something:
Given that you're opening a Taobao store it makes sense to set up Alipay which is also from the same company and is also the most popular payment app.
Remember your Chinese company (WFOE) has a local bank account and Alipay connects straight to it so payments from your new customers are deposited directly minus the transaction fee (this is up to 3%). There is also a US$1,000 setup fee for Alipay to budget for.
Here are some key points to get you started on becoming a domestic Alipay partner (again, fluency in Chinese is recommended) which is split into 3 sections: registration, activation, and authentication - follow this helpful guide to creating a business merchant partner account from Alipay itself:
- Go to the Alipay site and select 'I am a business user' [我是商家用户].
- Select 'free registration' to go into the account registration process.
- To sign up, you will need to prepare the following documents and actions:
- Company business license: original or clear photo, the expiration time must be 3 months later than the application time.
- Legal representative's ID card: the original ID card of the legal representative of the enterprise/individual industrial and commercial business operator (or a complete and clear front and back photo), the expiration time must be 3 months less than the application time.
- Legal representative's Alipay account or public account (choose one):
If you are a corporate legal person/operator, and your personal Alipay has completed real-name authentication, you need to authorize yourself to scan your face for authentication;
If you are an employee of an enterprise, and the personal Alipay account of the legal person/operator has completed the real-name authentication, you can invite the legal person/operator to perform face-scan authentication.
- An email that has not been used to open an Alipay account before: this will be used as your login once the account has been setup
- Prepare a bank-to-public account opened by the company (the name of the account must be consistent with the name of the business license), and you need to make payments through this account.
The remainder of the process consists of registering a new account, activating it and setting passwords for login, and uploading the required documentation for checking. Alipay advises that great care is taken when filling in the business information, such as business name and bank details in order for the process to run smoothly.
If you have already set up a functioning WFOE and Chinese business bank account, you will have all of the information required to set up your Alipay account. Again, please refer to Alipay's guide to creating a business merchant partner account to guide you through the process, although be aware that this is in Chinese.
Can international companies use Alipay, too?
Yes, it's possible!
If you do not have a Chinese bank account you can still set up Alipay and work with a verified Alipay acquirer who is a middleman in your country that can accept Alipay payments from customers on your behalf and then transfer them to you. Their fees may vary. Once you have an agreement with an acquirer, you will register for an Alipay merchant account including your acquirer's details as well as your own (with payments going to your acquirer first and then passed on to you), but in this case, you will be using the global Alipay site for international partners.
On the global site here's the rough process:
- Go to the merchant tab
- Select that you want to set up online or in-store payments
- Hit 'get started' to begin registration and fill the registration form. Questions will include your region, that you're a merchant, if you have an acquirer partner, your company name and industry, web address, and contact details.
- Alipay will contact you to request authentication information once they've received your request to become a merchant partner. This information will include company registration information, management ID, company bank account, financial records, and more. It can be provided via the internet.
- Once authenticated you will be an Alipay partner and can incorporate the payment software in your website or physical store and payments will be sent to your local bank account by your acquirer (or directly to your Chinese bank account if you do have one).
However, international companies probably won't be able to set up their own storefront on Taobao, remember, so they'd be using Alipay elsewhere (which is still a great idea if you believe that you will have Chinese customers on your website or coming into your physical store).
Is opening an e-commerce storefront in China on your company's agenda soon?
You may have questions about opening a WFOE in order to trade online in China easily, or maybe you are interested in how to remit your profits out of China once you have started taking payments via Alipay? Either way, our team of China business experts and accountants can help you achieve those goals, so contact us to discuss your needs!
