An internal Alibaba letter issued by Trudy Dai announces the integration of the two platforms TaoBao and Tmall.

The former TaoBao Business Group and Tmall Business Group were reorganised into three new operational centres for both TaoBao and Tmall, focusing on platform strategy, user development and industry development for merchants respectively.

This will mark the unification of users, merchants and platforms. According to the internal letter, the changes aim to update the user experience, improve customer values and encourage innovation.

TaoBao and Tmall are separate because of the way TaoBao has evolved: Tmall has always been seen as the official sales channel and consumers trust it to ensure that the products are real and not fake.

Although Tmall has its own APP separate from Taobao, most consumers only use the Taobao app as they can still access anything through it. 90% of Tmall's traffic goes through Taobao.

When consumers look for a branded product or shop, they are clearly marked as 'Tmall' or 'Tmall global' or if not, everyone knows they are a TaoBao shop.

The integration of the two platforms has been positioned as a way to support small and medium-sized enterprises that in the past have had few opportunities to open a Tmall shop, reducing the barriers between this two-tier system.

TaoBao and Tmall, the two main leaders in Chinese e-commerce

The Chinese e-commerce market, identified as the largest in the world since 2013, is continuing its massive growth. The export of European goods to the country of the dragon has also grown compared to previous years, making this country the largest import partner for Europe.

According to a report on e-commerce by the Chinese Ministry of Commerce, domestic online retail sales reached 11.76 trillion yuan in 2020, an increase of 10.9% on the previous year, and when talking about e-commerce in China it is worth mentioning the two largest platforms in the country: TaoBao and Tmall.

Alibaba is the largest online trading company in China and, to some extent, the world. Its three main sites - Taobao, Tmall and Alibaba.com - have hundreds of millions of users and are home to millions of merchants and companies.

From an external perspective, one might think that the two companies TaoBao and Tmall are interchangeable, but this is not the case at all because the two platforms operate in a completely different way.

For companies that decide to approach this huge market in the future, it remains important to understand how these two giants operate differently and what will change with the merger between TaoBao and Tmall.

Tmall and TaoBao are two shops that have been 'virtualised' with Chinese consumer habits in mind. Taobao allows people to shop by connecting directly with micro-sellers via chat, and is a free digital marketplace for both buyers and sellers.

Made by Chinese people for Chinese people, and that is why it outperformed its then rival eBay. It is the success of C2C that fits well with Alibaba's B2B model.

TaoBao, unlike Amazon for example, does not take commissions on sales made, sellers buy advertising banners and keywords to appear in a good position on the site.

Compensation comes from complementary revenues: the cloud and audience usage. Tmall, on the other hand, was launched by TaoBao in 2010 and brings together flagship stores, authorised retailers and multi-brand retailers, and is the largest B2C (business-to-consumer) platform in China.

Thanks to its commercial policy, it enables brands to sell their products and services directly to consumers in China and guarantees its customers authentic, high-quality products.

What do companies need to know about the unification of Taobao and Tmall?

Taobao and Tmall are still the main players in the Chinese e-commerce market. Ads in Taobao or Tmall will enjoy a wider reach, thanks to the joint back-end mechanism.

The unification of Taobao and Tmall will enhance the user experience by presenting common ground for listings and promotion. An update on merchant service support through the establishment of the new operation centres.

In the past, the differentiation strategy of the two platforms has accumulated various service capabilities in front of different merchants to provide long-term support. Merchant services such as Taobao Partner and Tmall Partner are now open to merchants of all sizes.

The growth space for new brands will also be expanded, and Tmall's ability to serve large branded merchants is shared with small and medium-sized merchants.

What will change from the union of the two platforms?

A rationale behind the overhaul of back-end operations is to break down the boundaries between Taobao and Tmall, which could lead to better services for merchants and a superior shopping experience and consequently an enhanced user experience.

The unification of Taobao and Tmall will be followed by the integration of a number of sub-platforms on Taobao and Tmall, including Juhuasuan and Taobao Deals.

Juhuasuan calls itself a group marketing and buying platform that helps brands selling in China on Tmall and Taobao achieve better results. It provides daily offers in the form of flash sales promoting heavily discounted products.

Since 2019, Alibaba Group has sought to brand Juhuasuan as a major destination for consumers in fast-growing lower-tier cities.

The company announced that it would inject 10 billion yuan into the platform to compete with Pinduoduo in lower-tier cities and across China. TaoBao Deals, on the other hand, is a central business matching platform launched by Taobao Company.

It was launched in March 2020 and the number of annual active shoppers exceeded 100 million as of November 2020. The online shopping journey will be well-connected and fluid within Alibaba's e-commerce ecosystem.

Taobao and Tmall will also share the same ground for promotional campaigns. The annual shopping festival, Single's Day, run by Taobao and Tmall, generates a huge number of sales every year.

Alibaba recorded a total gross merchandise value (GMV) of $84.54 billion in 2021. Therefore, thanks to the upcoming joint back-end, promotional activities such as pre-sales and coupons will apply equally to both Taobao and Tmall.

In addition, the establishment of the user development and operations centre will link the retailer's tools; such as the subscription system, logistics and shop products, forming a closed and complete loop around the user experience.

At the user level, a consumer development and operations centre has been set up, managed by Xuan De. This centre will develop consumer-oriented products, including subscription products such as 88VIP, virtual monthly money-saving cards and virtual red pockets, as well as business tools that can help user growth and shop product management.

At platform level, a platform operations and strategy centre will be launched, managed by Si Han.

The centre is responsible for developing and managing tools and solutions for business operations, marketing and research such as Qianniu (千牛), a mobile app for e-commerce sellers to organise online shops. The centre will also train a team responsible for the growth of small and medium-sized enterprises.

The Chinese tech giant has also decided to create a new division called International Digital Commerce that will bring together foreign wholesale and consumer businesses, including AliExpress and the international Core Business Unit (ICBU), as well as Lazada, a Singaporean e-commerce firm founded by Germany's Rocket Internet in 2011 and controlled by Alibaba Group since 2016, and other foreign units under the leadership of Jiang Fan, the former chairman of Taobao and Tmall.

According to a letter from Alibaba Group chairman and CEO Daniel Zhang to his employees in December, the new organisational structure will be more agile and the reshuffling of senior management will enable accelerated domestic and international growth.

In order to be successful in China, tools such as Noziroh Hub are essential for companies that are entering the Chinese market for the first time and want to sell their products in China and be accompanied on this journey. The risks of failure are just around the corner and only through in-depth market research is it possible to verify the feasibility of a project and avoid unforeseen events.

Relying on professionals such as Noziroh Hub, who know the buying habits of Chinese consumers and with whom you can manage all the marketing stages counting on a single reference: market research, opening/managing stores on the main Chinese e-commerce platforms, stocking goods, processing orders, opening/managing Chinese social profiles, packaging and private labels, is essential for success in the Dragon Country market.

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Author: Lorenzo Spaterna