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Prediction: Tmall will Overtake Amazon by 2015 to become the Largest Internet Retailer in the World

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Having overtaken eBay to become the world's second largest internet retailer, Tmall appears to be on an unstoppable trajectory to the top. The most astonishing fact? It is has managed to achieve all this growth from one single market: China. Amazon and eBay, on the other hand, have built up their businesses predominantly in the US and have managed to push their brands globally through localised sites. With the Chinese market still booming and the possibility of Alibaba taking Tmall to international markets, things look good for China's leading internet retailer – so good, in fact, that if Tmall maintains its current market share in China (and Amazon maintains its current market share globally), the prospect of a new leader in the internet retailing channel is not only realistic but highly likely by 2015. So what exactly are the company's plans for the future?

World: A Look at the Top Three Internet Retailers by Sales, 2010-2017

ScreenHunter_39 Nov. 27 11.07

Source: Euromonitor International

Note:  Forecast company shares are not published figures. They have been created for the purpose of this article. 

Tmall breaks the world record for single day sales

In what is perhaps a sign of things to come, Tmall broke all single day sales records on 11 November 2012, when it processed a staggering US$2.1 billion in a single day. This record was previously held by Amazon in the US on “Cyber Monday” in 2011. In a highly anticipated event, over 10 million consumers visited Tmall in the first minute of the sale, with a total of 213 million users logging in during the day. Despite China having lower penetration rates, smartphones played a vital role in boosting traffic and sales to the site, with 39% of sales being placed over Tmall's mobile interface. Going forward, it is highly likely that mobile sites and apps will feature at the centre of Tmall's strategy, in addition to single day sales.

Coming to a 7 Eleven near you?

In November 2012, Alibaba and 7-Eleven forged a new partnership which will see 7-Eleven stores in Hong Kong sell Alipay vouchers. The vouchers are available in denominations of between RMB100 and RMB1,000 and will allow Hong Kong consumers to purchase items on the Tmall site without a mainland bank account. This potentially opens up a very lucrative market to Tmall through placing its vouchers in 900 stores across the tiny island market. If the model works out to be profitable, it could prove to be an inexpensive way to boost brand recognition in new markets among consumers without access to Chinese bank accounts, such as Taiwan.

Whilst the agreement itself is an interesting development, the possibility that this agreement will spread to 7-Eleven stores in China is the real game changer here. One of the major barriers to future growth for all of China's internet retailers is the fact that 43% of its 15+ population is unbanked. This means that even if these consumers have access to a computer (most likely in an internet café), they are typically unable to pay for items online. Enabling these consumers to buy vouchers in a convenience store will open up a entirely new and untapped segment within the Chinese internet retailing market.

Alibaba to take the platform day

With Tmall now responsible for half of internet retailing value in China, and the Chinese market forecast to grow by an attractive CAGR of 29% between 2012 and 2017, the company is under no pressure to move outside of a market it practically created. Having said that, expanding abroad does offer some advantages. Growing its business outside of China helps mitigate the risk of being too reliant on a single market. China also only represents 12% of global internet retail sales, and with Tmall making most of its money as a platform provider, it will be interested in large developed markets such as the US (34%), Japan (10%) and the UK (9%).

The problem, as with any retail concept, is transitioning from a domestically successful model to a profitable global retail platform. Tmall had a significant advantage in the Chinese market due to the user base from its Taobao C2C platform and Alipay merchant transaction system. In Asia Pacific and the wider world, the company will not have these advantages and so building a strong presence abroad will be far more problematic. The other option is to buy itself a piece of another market, and with so many internet retailers struggling in highly fragmented markets, there are options aplenty, although Alibaba is a company that focuses on growth through organic means.



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