Royal Mail 'shop' brings British brands to China

Brompton, the British fold-up bike manufacturer, recently put the finishing touches to five customised designs to be sold in China - one sporting the colours of the Union Jack; another traditional English racing green, complete with a Brooks leather saddle.

The bikes, along with about 40 other British brands including Clarks shoes, Austin Reed clothing and Cow & Gate baby formula, will be promoted and sold through a Royal Mail online "shop front" on Tmall, a website operated by Chinese ecommerce company, Alibaba.

For Britain's recently privatised mail operator, which is under pressure from stiff competition in the parcels market, and an irreversible decline in letters volumes, the tie-up with Tmall is an ambitious move to capture the delivery market to China, already the biggest international buyer of British products online.

Postal operators are scrambling to adapt to the rise of ecommerce and China, with a 25 per cent share of overseas purchases bought over the internet from the UK, looks a prize market.

Other overseas operators have also struck deals with Tmall, including Australia Post, Singapore Post, the Brazilian Post and the French La Poste.

"Everyone wants to sell to the Chinese and Alibaba's Tmall gives them an opportunity," says Cathy Robertson, an analyst at Transport Intelligence, a consultancy.

For Royal Mail, the partnership with Brompton could be lucrative. The postal group will take 15-20 per cent of the retail price of each bike from Brompton - a price the bike maker believes is worth paying for low-risk exposure to China. Royal Mail will also receive shipping costs, paid by the customer.

Its service will go beyond traditional shipping and delivery - Royal Mail has a trained network of staff in China to help with customer questions, such as how to unfold the Brompton bikes and handle repairs. The group has struck a deal with national carrier, China Post, which will use its network of distributors to deliver goods to customers' homes once they arrive in China.

Royal Mail declined to forecast revenues from the tie-up but described the move as "significant".

Ms Robertson at Transport Intelligence expects the partnership with Tmall to increase the number of parcels distributed by Royal Mail. She says it also provides an opportunity for Alibaba to expand globally and help Chinese small businesses move into new markets.

Other global retail brands, such as Zara, Microsoft, Nike, Under Armour, Estee Lauder, Calvin Klein, Godiva and Burberry, which are keen to grow in China, without investing too much in bricks-and-mortar stores, have launched similar partnerships.

Even Amazon, which has had trouble cracking the China market, has opened a store on Tmall, its direct competitor.

Alibaba, which dominates Chinese ecommerce, runs a number of different online market places each with a different model. The largest is Taobao, the eBay-like platform for consumer-to-consumer sales, which handled 70 per cent of the $300bn of total sales by Alibaba in the 12 months to June 2014. Tmall, the Amazon-like platform focusing on direct sales by branded sellers, accounts for the other 30 per cent.

Will Butler-Adams, chief executive of Brompton Bikes, describes the Royal Mail deal with Tmall as a "fantastic opportunity" for smaller British businesses looking to sell to Chinese consumers.

"This opportunity has got to be worth a punt as it's very low risk for manufacturers and it has got real support from the enormous Alibaba machine to promote British brands," he says.

With three stores open in China, he says Brompton is already ahead of most ventures but he admits the group "can't go from three to 300 stores in China in a hurry."

"China is a tremendous market and the trick is to take it slowly," he adds. "Getting product into China isn't straightforward and if you don't do it right it gets stuck for three months while they argue over something like import duty."

Additional reporting by Charles Clover in Beijing

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