Tesla in Alibaba tie-up to test mainland market

Carmaker Tesla became the third major company in recent weeks to set up an online-only business in China by announcing Tuesday it is partnering solely with Alibaba for its first foray into the mainland market.

Tesla follows Costco and Miss Selfridge in having no physical presence and bucking the traditional mindset of opening a large flagship store in a tier-one city like Shanghai to create awareness and buzz, followed quickly by an e-commerce launch and the rolling out of a few smaller stores in other locations.

It is a tried-and-tested method that's worked well for companies from luxury fashion houses to fast fashion success Zara but a number of brands are throwing out that rulebook.

Tesla is selling its luxury electric cars on Tmall, allowing consumers to place a 50,000 yuan (HK$63,200) deposit and order the electric car through the internet. It's a smart way for Tesla to save on upfront investment in a market that behaves very differently, according to Seton Vermaak, head of strategy for digital marketing agency Razorfish.

"It's very expensive to open a store. There's a lot of investment," Vermaak said. "E-commerce has reached a point now that it's good enough to use it as a test ground. Why not be first do the online shop, research, test it out, get a better feeling for the marketplace and then follow it up with a physical store down the road?"

Also newly launched on Tmall is warehouse-club chain Costco, which delivers to mainland consumers directly from the US within five to 20 days.

In September, Sir Phillip Green, the Arcadia Group retail mogul behind Topshop, introduced Chinese shoppers to its younger sister brand Miss Selfridge via premium fashion e-commerce site Shangpin.