The Chinese government’s rapid and decisive response to the Coronavirus is commendable.
I can’t imagine ANY other country of equal size and scale pulling it together nearly “overnight” to stem the tide of an epidemic…and make us feel like they have things well in hand.
But what TRULY impresses me is the Mainland Chinese community. In a time of great crisis, there has been no violence, looting, or social unrest of any sort (except a few old ladies fighting over groceries at Costco.)
Nearly everyone is acting as one by making incredible personal sacrifices to support each other and make sure they are safe.
The living reality for family, friends, teammates, and clients here is suffocation.
It is painful to be stuck inside, for some in cramped spaces and others exposed without proper protection or sanitation.
I’ve had so many clients, colleagues, staff and friends reach out and offer to go way out of their way to help.
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.
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:
1. 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.
2. 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.
What happens in the end?
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.
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.