Alibaba’s Tmall Global Proves Disappointing

Much of the world’s attention is focused on Alibaba, one of China’s biggest Internet companies—actually one of the Internet’s biggest companies—as it recently came off of its initial public offering.

But with all this attention, all of Alibaba’s moves are suddenly under greater scrutiny than ever, and one of Alibaba’s latest, Tmall Global, has proven surprisingly less than effective.

Tmall Global is the property that Alibaba is calling the “fast track into China” for new brands, but so far, this track has largely derailed.

It’s a long way behind the various other marketplaces under Alibaba’s control, and even the Wall Street Journal is reportedly calling it, potentially, “a black eye” for Alibaba.

By way of comparison, out of the 3,500 most popular websites in China, it ranks number 311, as compared to Alibaba’s Tmall site at number five, and Alibaba’s Taobao, the second most popular site in China according to Alexa Internet.

The word from the Wall Street Journal suggests that 70 percent of stores on the site aren’t seeing big numbers in sales volume, and foreign brands are having a tough time getting involved in the first place.

Reports suggest that said foreign brands are having a tough time buying ads, and some shops are planning to pull out of their Tmall Global presence altogether.

One firm, a healthcare product provider from New Zealand, reports only doing about a tenth of the business that it expected to do. Alibaba, meanwhile, seems to be urging patience, noting that it takes time for sites to grow into powerful business tools, but seemed less than eager to attach an actual time frame onto just how long that growth would take.

Worse, the prices involved are proving prohibitive. Merchants are paying a $25,000 refundable deposit and between $5,000 and $10,000 annually, so there’s some clear potential for backlash here from disgruntled merchants.

But those aren’t the only potential losses for Alibaba; aside from the outright annual payment and deposit, as well as the potential loss of face Alibaba stands to suffer if businesses flee Tmall Global; Alibaba also collects a commission of three to five percent for every sale made.

The combination of factors presents clear problems for Alibaba; if it doesn’t offer the value, then the businesses pull out. If the businesses pull out, this whole chunk of the operation goes up in smoke and that could mean very unpleasant things for the company’s balance sheet. But that by itself isn’t the end of the problem, but rather, just the beginning.

A sudden crater on Alibaba’s 2014 / 2015 balance sheets wouldn’t go well at all given the company’s recent IPO. With the stock still young and its value still somewhat in question, the end result likely wouldn’t bode well for the company’s market capitalization. The loss of that kind of income might well hurt future expansion plans, and drive down the amount of capital on hand for future development.

While there’s still plenty of potential for Alibaba to turn it around—why not just open up Tmall to Tmall Global subscribers?—the potential for loss here is substantial to say the least. Alibaba’s got to shore up the numbers and get its clients’ sales efforts going, lest it find itself dealing with an abandoned Internet mall.