Photo Gallery 050: Five Years Of A Chinese Taobao E-Commerce Store s Ups And Downs

(Chinese Version)

Editor’s Note:

After graduation, Stone and his college roommate Big Feng invested RMB 500 each and opened their own online store on Taobao. Three days after their stores opened, they received the first order. At that time, they would purchase goods from Beijing Zoo Clothes Retailing Market and sell products to customers across China. From 2012 to 2015, their peak time daily turnover once reached 7,000. However, after the retailing market was moved away, the shortcomings of their family-style came to light. Coupled with the constant change of requirements on Taobao, their online store went through all kinds of ups and downs amidst the Chinese e-commerce wave. In TMTpost Photo Gallery 050, we turned our lens on this five-year-old Taobao store and shared with our readers the stories behind it.

It was March 9th, 2017, STHOME’s storage in Stone’s house, Beijing. He started the men’s clothing business when he graduated from college five years ago.

“I love freedom and don’t want any kind of restriction, so I decided to start my own business after graduation. At that time, I didn’t have much money, so I thought it might be a good idea to just run an online shop on Taobao, since the threshold is low and the not much cost is needed. All I need to do is buy and sell and pocket the difference. So I just got started,” he told TMTpost.

Five years later, he and his three partners have opened two men’s clothing stores on Taobao, selling mainly American street style clothes. There was a time when a store’s monthly turnover at peak time reached RMB 800,000.

His partner Big Feng was his college roommate. After graduation, Big Feng went to an IT company. Big Stone approached him and asked if he’d like to join and start their own business. Their cooperation model was quite simple: everybody invested RMB 500 to the business and accounted for half the share. After their negotiation, Big Feng was responsible for marketing, operation, design and photography sector of the online Taobao store.

Little Song was also Stone and Big Feng’s college roommate. After graduation, he became a white-collar worker for a while. Later, he quitted the job, joined a tiny startup and became head of the customer service division.

Yang, the fourth member of Stone’s startup, was in charge of storage management and package delivering business. He used to do clothes retailing business at Beijing Zoo Clothes Retailing Market for a while together with his parents, so he was quite familiar with the storage management and package delivering. Before the retailing market was moved away, Yang’s family store was the major supplier of Stone’s online store; however, the retailing market was later moved away, so Yang’s parents had no choice but to move outside Beijing and continue to do clothes retailing business.

It was March 8th, 2017. Yang and Little Song were preparing the parcels to be delivered. Before 2015, they had to use the apartment Stone rented as their workplace. Their business boomed in 2015, and they even considered the possibility to enlarge their team for a while. So they rented three rooms as office and storage in a business building near Guangming Bridge, Beijing.

Their store’s business peaked in 2015. For a while, their monthly turnover reached 6,000 to 7,000 per store. “2015 is a threshold year. We could have turned from a family store into a large-scale retailing company and built our own brand. However, as we began to enlarge out business, our sales slumped,” Stone recalled, attributing the dropping sales to his failure, “although out sales roared in 2015, our operation model was actually very weak.”

Little Song and Yang were sorting out a new consignment of goods sent from the Guangdong factory. Since 2015, lots of clothes store business owners at Beijing Zoo Clothes Retailing Market gradually moved out of Beijing. Therefore, many online clothes stores lost their suppliers and had to compete with their rivals for local factories in Hangzhou and Guangzhou. There was a time when they could easily sell clothes without putting too much effort on design and promotion pictures. However, after they lost the major supplier, their turnover dropped accordingly.

“Factories in South China will certainly meet the needs of local customers first, so we can hardly compete with them,” Stone complained.

Since Beijing municipal government began to withdraw its support for low-end industry such as retailing and gave up functions that aren’t suitable for the capital, almost no retailing markets were left in Beijing, even in the suburban areas.

Big Feng was responsible for taking pictures for products and update products info pictures, while Stone acted as the model. On February 25th, Taobao adjusted its regulations and requirements for product info pictures and store design and would distribute traffic based on these new requirements. Since Stone’s stores didn’t fit the new set of requirements, they had to re-decorate their stores.

“Out traffic dropped by a half during this period. It took us a long time to figure out why,” Stone said.

To win back the half traffic, we had to pay RMB 2,000 per day. According to the new set of requirements, Taobao preferred to recommend online stores with distinctive styles. Online stores whose decoration style may undermine the overall brand image of Taobao will be distributed to less traffic. However, based on Stone’s years of online store management experience, there was something paradoxical in Taobao’s new set of requirements.

“On the one hand, Taobao seems to encourage online shop owners to figure out their own style and improve user purchase experience; on the other hand, stores that sell inexpensive products still grab the biggest share of traffic,” he explained.

Online stores on Taobao are often divided into seven layers based on their turnover. Stores that have the highest turnover often fall in the fifth to seventh layer.

“These online stores account for 15 per cent of all stores, but grab 70 per cent of all the traffic. Of course, owners of these stores often have strong business operation capability,” he added.

STHOME was their online store’s American street style clothing brand name. However, they failed to make it as popular as expected. When they decided to build their brand in 2015, their sales dropped, so they had no choice but give up the idea. For a small online shop on Taobao, it takes a solid customer base, strong design, storage management and digestion capability as well as strong cash support to experiment original brands and succeed. Only then can you find appropriate upstream factories and carry on experimenting new products.

At the end of every month, they would sell the rest products on a clearance sale via Stone’s WeChat friends circle. He left his WeChat ID on the homepage of their Taobao store, and around 3,000 customers have already added his WeChat account. In fact, this also serves as a precautionary measure for Stone in case of any abrupt change on Taobao.

“The policies are constantly changing. If all my customers are from Taobao, I will end up nothing if my store was banned one day,” Stone explained.

Since I’ve already accumulated a group of loyal customers on WeChat, I may be able to rise up again one day.

As a matter of fact, Stone could sell 27 pairs of pants within a few minutes with free shipping via WeChat friends circle. Stone’s concern didn’t come out of thin air. Before Alibaba went public, Stone only had one store. However, after Alibaba’s IPO, Stone’s store was reported for “clothes style piracy” and suspended for a month. Although his store reopened a month later, customers couldn’t find it through internal search engine. Nevertheless, Stone managed to regain the store’s popularity, though at first the ads fee could reach as high as RMB 60,000 per month.

“Fortunately, we could earn at least RMB 200,000 every month. However, ads fee was getting increasingly expensive, especially after Alibaba’s IPO. In our peak time, ads fee only accounted for 5 per cent of our expenditure; at present, however, this figure already rose to 20 per cent,” he explained.

A customer service card is included in every package to encourage customers to leave positive comments in exchange for subsidies and warn customers of the potential impact of negative comments.

“Our sales could even be reduced by a half due to a piece of negative comment,” he told TMTpost.

They often encounter customers who blackmailed them by threatening to leave negative comments. “For example, there was a customer who bought our products for several times within two years. However, he would apply for ‘no return of goods & refund’ every time, complaining whether the product doesn’t have any lable or is counterfeit,” he said, “we can do nothing but refund the money. We don’t bother to argue with such customers. After all, we would be overwhelmed by negative feelings if we do so, and as long as such customers don’t leave any negative comment, we can bear the cost.”

The deliverymen would pick up parcels at six o’clock PM every day. When our sales dropped and the number of parcels also dropped, the express company would raise the price per parcel, which would further add the operation cost. Although they also participate in various kinds of discount campaigns as well as Double Eleven shopping festival, their sales remain stable. In fact, there won’t much traffic a month before and after the Double Eleven shopping festival, which was quite annoying for them.

Dropping sales were actually depleting the store’s accumulated resources. In 2015, Stone thought their business growth could catch up with the rise of real estate price in Beijing and he could buy a suite in a nice neighborhood in Beijing with money he earned himself for two years also.

“At that time, I though I was still young, so I didn’t want to buy a house with all the money I’ve earned. Instead, I thought I should focus more attention on my career. So I put all the money in my startup business,” he explained, “However, I felt as if I worked for nothing for the past two years. I should have borrowed some money and bought a suite in 2015.”

Still, Stone was confident that his team could get over with the current crisis. “As long as I have my partners, seize the opportunity, keep up with Taobao’s trend, diversify our store decoration style, improve our operation capability and brand image as well as add our investment in ads, there’s still good chance for success,” he said at last.

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[The article is published and edited with authorization from the author @flybutchery, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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