On the first floor of an old house in Shanghai’s Jing’an district, more than 50 foreign girls are excitedly exchanging clothes, bags and accessories they brought to participate in an offline “Spring Swap” event.
The four-story old townhouse currently belongs to a forty-person entrepreneurial team. They process about 5,000 trade orders per day on Taobao and Tmall, almost all of which come from foreigners living in China.
The group, however, are not employees of Alibaba; they all belong to a startup company called Baopals.
Baopals is an online shopping platform designed to help expats in China shop on Taobao and Tmall in English. Through it, merchants on Taobao and Tmall can also target “foreigners” in China more precisely.
Can’t read Chinese how to live?
Buying online on e-commerce platforms such as Taobao is a rarity for Chinese people today. However, if you are a foreigner who doesn’t understand Chinese, this matter is not so simple.
“Life in China is great, but it can also be very difficult because everything is designed around Chinese,” confesses Jay, an international student from the United States.
Foreigners have a natural language barrier when shopping on Chinese e-commerce platforms such as Taobao and Tmall, and there is no dedicated English e-commerce platform in the Chinese market. China’s e-commerce environment has now entered the era of full competition, and the winner-take-all situation is basically laid. Amazon China just announced the closure of its e-commerce business in China in April 2019, marking a losing battle for the unbeaten e-commerce giant in the global market.
Embarrassingly, Amazon’s China e-commerce business is not retaining either Chinese consumers or Amazon’s once overseas users. Robert, a British man who once lived in China, said, “I never use Amazon China for anything, and neither do most of my friends.”
In their eyes, Amazon China is for Chinese consumers, not the same thing as Amazon Global. “Even if we use English on Amazon China, you’ll still see a lot of Chinese paragraphs on the page,” they said, “For a long time, there was no platform specifically for foreigners to shop online in China.
So there’s no way for foreigners to shop online in China?
Before Baopals was founded, like most foreigners who didn’t understand Chinese, the three founders had their Chinese friends pay for their purchases when they had to shop and then pay them back. But recognizing this gap market and consumer pain point, Jay convinced Charles Erickson and Tyler McNew, also from the US, to start Baopals in March 2016.
Initially, Baopals operated by grabbing information on Taobao and Tmall’s platforms and translating them into English, while Baopals also provided a customer service center to help customers speed up transactions and logistics. For every product purchased, customers are charged a 5% service fee.
In addition, the site charges users a flat fee of $2 to $8 depending on the unit price of the item. Items priced below $30 are charged $2 per item, $30-$60 are charged $4 per item, $60-$90 are charged $6 per item, and $8 per item above $90.
Today, Baopals has 15 foreign and 25 Chinese employees on its team. Beginning with a small apartment, the Baopals also moved their office to this old house with a mix of Eastern and Western culture.
Baopals’ cumulative sales for 2018 were $70 million, about six times higher than three years ago. Entering its fifth year, Baopals now has 45,000 registered users, 600,000 cumulative orders and 2.6 million products sold. That is, on average, 59 items were purchased per registered user.
Baopals has a high level of user activity.
Foreign girls are also keen to buy.
Baopals Swap is a regular offline event held by Baopals for foreign women to exchange clothes. Female consumers are by far the most active consumer group on the platform.
In fact, Baopals has almost 50.5 percent male (49.5 percent) and 50.5 percent female users, but the consumer behavior of the two is completely different. Female users stay on the Baopals platform far longer than male users. They spend more time searching, browsing for goods and are more engaged and active on the platform.
Now, women’s wear has become the largest division on Baopals. Compared to the second-ranked “electronics and office” products, the number of women’s products is more than nearly a third.
But in fact, as planned at the beginning, the Baopals founding team did not intend to focus on sales of women’s products. Charlie, who has been involved in content and marketing since the beginning, says, “We don’t know anything about women’s wear” because all three founders are male and “we only write what we know, like Game of Thrones-related peripherals, alcohol products, electronics, etc.”
As a result, when Baopals hired its first employee, the platform produced content that quickly shifted. Because this employee #1 is a girl.
“It seems like a fixed stereotype that women buy a lot of clothes and shoes, but it’s true,” says the Baopals team.
Content that specifically targets women consumers becomes imperative and critical to Baopals’ growth, and in November 2018, the Baopals Style content blog, which is separate from the main blog and operates independently, went live. The blog is currently updated weekly and content can be read on the Baopals official website and the WeChat public network.
Ginger, head of content at Baopals Style, told us that they capture data on search trends for female users on Baopals and combine it with quarterly trends for women’s clothing, shoes, bags, beauty makeup and other products on foreign social media. They then write seasonal wear recommendations for the platform’s predominantly female users in the 25-34 age group, while recommending quality products on Taobao and Tmall.
Baopals Style is currently launching a series on “Outfits of the Week”. The collection focuses on summarizing and recommending the first women’s clothing, bags and shoes sold on the Baopals platform in the past week.
The website is designed to solve the pain points of foreigners who find it difficult to shop on Chinese e-commerce platforms, and in terms of content, the team is actively recommending the most suitable products for foreigners.
Baopals Fashion once wrote an article recommending “old Beijing cloth shoes” to foreign girls, because Ginger noticed in the background that foreign girls seemed to love old Beijing cloth shoes, “They must find old Beijing cloth shoes comfortable and fashionable.”
Like all e-commerce companies, Baopals has its own product recommendation system, which is designed to score on a scale of 0-5. Unlike Taobao, Baopals has removed complex evaluation criteria such as diamonds and crowns, and instead lowered all items rated 4.5 on Taobao to 2.5, and then scored them on a combination of quality, delivery, service and other factors.
Also, if an item sells for less than 90, the system will automatically mark it in red.
In other words, as long as an item has a trusted seller label, a score greater than or equal to 4.5, and is not marked red, the consumer can buy it with confidence.
Is this a lasting business?
From this, the Baopals’ model relies heavily on the business ecology built by Alibaba, and Jay and Charlie don’t deny that, but strictly speaking, Taobao and Tmall are also their competitors.
According to an employee of Taobao, it is also seen that there are already some foreigners shopping on Taobao and sunshine reviews. “It’s a great potential market as a new growth point for users,” he said, adding that “as more and more foreigners are coming to China, they will slowly move into their hometowns, and Taobao and Tmall will become a way of life for them.”
Baopals understands that in order to retain its target users, it needs to build a community system that matches the language, culture and aesthetic of the foreigner, and use content and socialization to build trust and loyalty.
In addition to running two content projects, “Baopals Style” and the Baopals main blog, the Baopals team has also introduced a “Discover” section on the platform. The three subsections of “Community”, “Events” and “Favorites” under this section allow users to recommend products to each other, join interest groups, open product reviews and other functions.
“These features are user-driven,” says Charlie, “and we’ll give some credit to those who recommend a good product.”
Baopals currently relies on commissions from users for its main revenue; sometimes some Taobao and Tmall sellers automatically pay Baopals a certain amount of commission for each order transaction they complete
Jay stressed that in order to gain control over Baopals’ content and platform tonality, the team has never taken the initiative to negotiate with Taobao merchants and is not currently considering advertising marketing.
“The biggest problem in the 21st century is not the lack of choice, but the abundance of choice,” the Baopals team stresses, “It’s the community and users who decide what products to buy, not the merchants who actively push them.”
Not all gringos who don’t speak Chinese choose to use Baopals.
Jason, from Ireland, is one of them, and says the online translation software is enough to help him with his purchases on Taobao, “I spent a year in China, and when I talked to Taobao customer service, no one suspected I was a foreigner.”
Jason feels that you can’t experience the joys of pure Chinese e-commerce without shopping directly on Taobao, “If you shop on a purely English website, how is it different from living in the West?”
And that awareness can easily grow with time living in China. This goes some way to proving that Baopals also has problems with user retention and conversion, and when old customers leave, such a precisely targeted platform needs to think about how to break through the ceiling of user growth.
Foreigners’ Chinese business is going to overseas too.
This integration is all due to China’s deepening globalization.
Currently, 35% of Baopals users are from Jiangsu, Zhejiang and Shanghai, 19% from Beijing, 15% from the Pearl River Delta region, 3% from Chengdu and 27% from other parts of the country. This is largely consistent with the distribution of the foreign resident population in China.
According to 2019 Census data, the top three countries in terms of the number of expatriates in China are South Korea, the United States and Japan; meanwhile, their places of residence are mainly in Guangdong, Shanghai, Beijing, Jiangsu and Fujian.
Also according to the Annual Report on Chinese International Migration, 2018), the number of foreign permanent residents in China exceeded 980,000 in 2017, 1.02 million in 2018 and is expected to be around 1.07 million in 2019. However, this figure may still be a conservative estimate, and the number of foreign permanent residents in China should be even higher if you take into account the illegal stay of foreign workers.
Serving expatriates in China, Baopals has gained recognition in this niche market. More importantly, Baopals proves the success of ideas and models with annual earnings data.
But the founders of Baopals weren’t content with that. They understand that the market for expats in China is small compared to the huge global market outside the country, and that this segment of users is not the most stable for Baopals.
Foreigners can conveniently make electronic payments at Baopals through three channels: Alipay, WeChat and UnionPay, and they can also enjoy a mature and convenient logistics system for express delivery. However, once they leave China, they do not enjoy these facilities. As a result, “it’s hard for foreigners in China to be our permanent users, and when they leave, they won’t be able to use Baopals,” Charlie confesses.
Wanting to get more foreign users, Baopals now wants to “go outside” too.
On international social media such as Facebook, foreigners are sending private messages to Baopals every day asking if they can take international orders. “We haven’t done any marketing or promotional work, but when they find out from the news or other sources, they come to us,” adds Charlie.
Baopals’ primary goal this year is to create an international version of Baopals, with the three founders revealing, “Let foreigners around the world buy things on Taobao through Baopals; we hope Baopals will cover the global market and let more foreigners know and trust ‘Made in China’.
In order to achieve this, the team had to address the difficult issues of cross-border transactions and international logistics.
Baopals user Kirsty Booth, who is British, said, “I wish they could provide information about international logistics, but I know there’s difficulty in that.”
Currently, after a user purchases a product through Baopals with a Taobao or Tmall merchant, the merchant is still responsible for the logistics of the product, with Baopals playing a communication and coordination role in the middle. But this approach is clearly not feasible in the face of complex international logistics.
Baopals’ current plan is to take over a warehouse in China and centralize the processing and clearance of all goods sent by Taobao merchants for international orders, which will then be shipped abroad by Baopals after they have been tested. Before that, however, they have to fight to make the platform technology and warehouse management system able to service and process orders efficiently.
Jay also revealed that in the current planning, Baopals International would allow overseas users to shop on Alibaba’s overseas e-commerce platform. At that time, overseas consumers will be able to receive goods shipped by courier from Alibaba’s overseas warehouses.
With overseas market expansion plans on the horizon, Jay and Charlie have indicated that there is no need or intention to seek financing at this time.”Financing may accelerate expansion in overseas markets,” but we don’t really need the money too much because Baopals’ model looks successful at the moment, and the entire company has a healthy flow of money. The two founders confessed that they were more interested in partners coming on board if the other could bring substantial advice and help to the development of the firm’s technology and other aspects.
“We want to be closer to the Alibaba ecosystem. We can help them build better brand trust and loyalty among Western consumers.” Charlie concluded.