For any business hoping to “do” e-commerce in China, understanding the TP ecosystem is essential. A TP (short for “Tmall Partner”, “Taobao Partner” or “Trading Partner”), is a specialised and certified Ecommerce operator that offers brands a one-stop solution to manage their China e-commerce operations.
Hot Pot China has helped a number of international brands select and set up their e-commerce partnerships in China. Following on from “The Ultimate Guide to Selecting a Tmall Partner”, Adam Sandzer, Head of Commercial Strategy, shares his experiences and insights across a diverse mix of sectors and clients.
Would you buy a car without considering and evaluating your needs?
Would you enter a showroom and begin negotiating a deal before doing your research?
Over the years, I have been surprised to see how many brands fall into relationships with TPs without actually knowing what they need or what the options are out there.
Just like buying a car, the basis for a successful TP selection is centred around a good understanding of your own needs and position, as well as a thorough understanding of what might be out there to meet those needs. In practice, this means developing qualification criteria and drawing up a shortlist of possible candidates. Only after this initial scoping has been done is it worth initiating the dialogue.
At Hot Pot, we’ve learnt the importance of taking things slowly with TP selection, not only in terms of conversations with possible partners, but in roadmapping your brand’s journey. TPs are a very important part of your brand’s Ecommerce existence, but they are one component within a much wider strategy. This means understanding how your TP fits into the broader picture is essential.
The best TPs are in demand and are increasingly selective in the brands they want to work with. In some cases, they will refuse to even take an introductory call. Therefore, it’s important to understand your brand’s perceived and potential value in China.
In the initial phase, we encourage clients to create a brand brief to highlight their own credentials and unique value. Consider your global status as well as current China traction and ambition. TPs will be looking at your China search indices and will want to know how much you are willing to invest in the market, especially in marketing. They will also want to know about your product range and pricing. You may not have all the answers at this stage but you should be prepared to provide an indication of your planned direction.
Always remember the selection process is two-way and you need to work just as hard to secure the partner you want.
When selecting a TP look beyond shimmering credentials and shiny client testimonials. The most important thing is to find the right TP match for your unique brand.
At Hot Pot we ensure a TPs suitability has been fully assessed, by analysing them across operational capability, platform expertise and brand relevance. Brand relevance in particular is vital, and encompasses both category experience and brand fit. We’ll find out how motivated the TP is to take on your brand, what their ambition is and whether they are going to provide you with the quality service you need.
Ideally, you’ll want an initial shortlist of 8-10 potential partners, with 4-5 “ideal” partners. These should be the focus for introductory calls, but expect to narrow to 2-3 by time you get to negotiations. Of course, there will always be a preferred partner but having a shortlist is absolutely necessary to getting the best deal as you will only gain full visibility of the true value of the deal and partner once commercial negotiations begin. Be prepared to take things slow and be patient.
As with your assessment criteria, it’s key to keep things straightforward when approaching the commercial negotiation.
It’s easy to get bogged down by a multitude of variables when ultimately you need to align on keystones such as contract length, level of exclusivity, revenue ambition, marketing investment, service fees and commission rates. Of course, you need a detailed breakdown on what’s included and excluded within the service offered but it’s always best to start with a broader China P&L in mind and ensure you are getting the right deal to realise your financial goals.
Create a simple document, outlining your position on the key variables - what you are willing to invest and what you expect in return. Then you have the starting point to ensure the prospective partner responds in kind. If your core vision is aligned it’s easier to iron out smaller points of difference, but even then, don’t over-complicate things.
How does my brand move from planning into execution?
Deep understanding of your brand’s needs and strong project management are essential. Appoint one centralised resource to liaise between you and your e-commerce partner. We recommend that the relevant departments of both entities communicate directly e.g. legal to legal, operations to operations, product to product - this ensures mutual understanding across all key stakeholders with the centralised resource pulling everything together.
Aligning on ways of working and allocation of responsibilities up front is crucial. Brands cannot play a passive role and in particular, you will need to take responsibility for brand guardianship. An extensive training program and input and sign-off on all marketing activities is encouraged. If feasible, we suggest getting key personnel to visit your HQ prior to launch.
Getting things off on the wrong foot can fundamentally undermine the partnership, so do put effort into the setup and continue to work collaboratively throughout.
China is complex but TP selection and setup doesn’t have to be. Be prepared, take your time and keep things simple and you’ll give yourself the best chance of choosing the right partner for long term success.
At Hot Pot we have a wealth of experience supporting global brands with selection and setup of China TPs. If you would like to discuss how we can help please get in touch.