Is Franchising Still Feasible in China?
Recently, we’ve been working with one of our clients on how to make licensing and franchising sexy again in China. We are fundamentally reimagining what licensing & franchising means today.
The original models of licensing, franchising & distribution don’t work anymore. Often, people end up unhappy because they enter into a fixed structure & when you let someone squat on your IP in China it’s very hard to get out from under that. I don’t recommend it.
But, when you look at newer models they’re much more open and flexible. They might be exclusive, but they allow ways to get out of the situation if it goes awry, or if you simply outgrow the partner. You must be adaptive so that you can constantly absorb change. This is obviously easier said than done. Most companies have rigid legal structures, contract systems, etc. And I think for China most of those don’t work. The market is way too fluid.
Bottom line…don’t ever authorize anyone in China to control your company through a restrictive exclusive or semi-exclusive deal. Why do a margin share when you could do a service agreement? Why do either of those when you could do a joint venture and get them to put in half the money? Think creatively, protect your interests, and plan for flexibility.
#Licensing #Franchising #China #Flexibility #Adapt #Partner
Four reasons why you get discrepancies between Tmall sales data and Alipay cashflow data
If you run a store and try to match Tmall’s sales data with cashflow data in Alipay, you’ll find that the numbers will never match perfectly. Double-entry book keeping should be something pretty straight forward. Why is this always so complicated with Tmall?
“Confirmation of receipt” dictates when funds arrive in Alipay
The concept of “confirmation of receipt” creates quite a mess for accounting and it’s mandatory to first understand how this fits into the timeline of a Tmall order.
This is what a Tmall order’s status can look like. At any point in time, the order can be cancelled or refunded, which complicates things a bit.
The money only arrives at the store’s Alipay account after the customer “confirms” that they received the product. This can happen in one of two ways:
Customer manually enters payment password to tell the Taobao app that they successfully received the product.
Why do this?
It’s a necessary step before being able to leave a review. Leaving reviews is a huge part of the Taobao social experience. A shopper awaiting 20 packages at any given day will also likely do this to keep better track of her items.
If the customer doesn’t manually indicate they received the product, by default the order will automatically change to “confirmed” status 14 days after the item arrives.
Therefore, there’s no exact time for when the funds will be released by Alipay. You only know that it’s within 14 days of the package’s arrival.
The numbers can change at any time.
Based on when you look at the data, the numbers can change. Orders can get cancelled or put through a refund process at any point along the order’s lifetime. The thing is that it can happen even after the order is marked as completed. This will cause discrepancies as “total” sales can be defined differently. Should it include orders pending payment or shipment? What about refunds?
Different analytics apps will interpret the same data differently
Tmall’s store backend lets you see every single order. It also lets you see summaries through multiple analytics apps like SYCM ( the most-used analytics app) and SEJ. Alipay also has its own summary dashboard. The problem is that these different tools will show you different sales totals. One may have a delay in processing returns data. Another may define a ‘valid sale’ differently. The way they define valid sales may differ from what you have in mind.
Trying to compare two different data sources will often lead to numbers not matching.
There’s always an outlier
Something unexpected will always happen when running a Tmall store, often outside of your own control. But Taobao is set up in a way that makes 99% of those problems the store’s responsibility. As a result, your customer service will have to do some workarounds to deal with unusual situations every month. This will cause discrepancies in numbers that need an appendix of explanations outside the system.
In the end, nothing happens. As mentioned in the post about APIs
, developers can’t just simply create a tool that can consolidate orders and cashflow data accurately in real time. There’s currently no alternative to existing tools.
With the effects of all these combined, companies trying to get an exact number on a daily basis end up spending countless man-hours just trying to put some numbers into the company database.That’s precious time taken away from activities that actually boost sales.
What can stores do about this?
Despite all this, we’ve never encountered a case where Alipay was overcharging. It’s just that little discrepancies here and there drive some accounting departments or employees crazy when they “need” to put numbers into their system.
Here are some ways to save time on this issue:
Record cashflow and sales separately. Because of the “confirmation of receipt”, those two will never align perfectly due to variable escrow time periods.
Leave some room for small discrepancies. Trying to balance debit and credit down to the penny creates a huge time sink for employees due to the various factors above. The only way to resolve this is by manually looking up orders.
Avoid real-time tracking of orders and sales for record keeping purposes. It is time consuming, expensive and far from being robust due to the way the API platform and app marketplace are set up. Most stores survive or thrive with weekly or monthly records.
Most importantly, don’t try to fit a square peg into a round hole. Make sure the way you record numbers is a good representation of reality. Companies often have a specific way they need to record data in their system and further complicate the data to fulfill that need. They just need to ensure the data they record is an accurate representation of what’s happening in Tmall. If your systems are designed for B2B and cannot accommodate frequent updates for a large number of orders, then it probably doesn’t make sense for it to try to track individual orders.
Cashflow isn’t the only area where interpreting data can be so confusing. Performance, traffic, ad spend all have countless data points that can be overwhelming and hard to interpret. They often produce more chaos than actionable insight, especially when they are all delivered through old school excel and powerpoint reports.
That’s why we finally decided to move away from such excel reports to using power BI. Data is so spread out that it’s hard for any manager to get an accurate birds-eye view without being overwhelmed, especially if they don’t speak Chinese. Click here for a sneak peek.
Q: What do super fun brands, daily mentorship, freedom to create, personal growth and a flexible work environment have in common?
A: KFD’s Shanghai Incubation Team
We’re looking for:
If you are a bilingual A player, please message me privately or forward to a friend like you 🙂
#Tmall #TmallPartner #Brands #Success #Alibaba #Management #China #HiringTalent
Do Chinese consumers trust online-only brands?
As with most things when it comes to China, the answer is “yes, but…”
Direct to consumer brands have been very successful in China. A recent example that comes to mind is an online-only brand specializing in shaving razors and accessories that we evaluated. They were EXTREMELY successful in China (I was even a bit shocked at their monthly sales numbers), but this was no coincidence. They had great brand awareness, were fully activated, owned their own IP, had excellent customer service, etc.
So just to give you an idea, the way you want to look at it is not online vs. offline. I want you to look strictly at point of interest and brand readiness. Do you own it? Do the consumers engage with you now? Are your current customers Chinese or do they have ties to China in some way? Do you have the brand assets and ability to provide the instant customer service that Chinese consumers expect? These things are the basis for the whether or not you can expect success in China.
#China #eCommerce #OnlineOnly #DirectToConsumer #Brand #Tmall #Alibaba #CustomerService #Taobao #ChineseConsumers
Taobao…The Land of Self-Trained Experts
The Chinese consumer is the smartest consumer I know. They know the global price point for all of their favorite brands and are very sophisticated in their research. The consumer often starts researching their purchases months before they’re ready to buy.
We recently launched an international baby brand, and we found that the average journey before purchase started 12 to 15 months BEFORE the child was even BORN! When we launch a brand that isn’t already activated in China, we have to adjust expectations because we’re essentially going to lose a year. But if you know that in advance, you can plan accordingly.
Another complaint we hear from global executives and is that they can’t tie their social media investments and all their activation work directly to sales, and it’s because the journeys are much longer and more drawn out. So do the research. Find out what the “experts” who are buying your products are doing before they buy. What does their consumer journey look like? I really encourage you to do this. Understanding the expert nature of Taobao shoppers and their extensive research cycle is key to understanding how to succeed online in China.
#China #Taobao #Tmall #ConsumerJourney #Research #Experts
How To Fight Image Theft Online In China
The easiest way to avoid hard work is to steal someone else’s. While designs may be tempting, most shops will have their own look and feel…at least merchants try to give the “appearance” of originality in their offers.
Not so in JD…
One of our flagships has to compete with semi-authorized dealerships who play dirty. Image and status hijacking causes extreme friction in the brand’s ecosystem. Dealers “fake” their authority by co-opting our designs and images.
To stop this, we complained to the platform and category manager to no end. But the most effective tactic of all was to bring hard evidence to the brand…with a clear indication of LEGAL leverage if they didn’t comply with our request.
I don’t like using such methods and I find it highly ironic that the brand’s GM was the real culprit, in cahoots with the bad guys. But when things aren’t right (and hurting sales), you have no choice but to do whatever you can.
Curious to hear if anyone has had similar experiences…and what worked (or didn’t.) Thoughts?
#China #eCommerce #Tmall #JD #Taobao #ImageTheft #InternationalBusiness