With the curtain already up for this year’s Singles’ Day (the first without Jack Ma), expect to hear more about Alibaba over the next month. Done well, the Singles’ Day/Double-11 extravaganza can be a powerful event to raise awareness and trial of your hero products, and shift some large volumes.
Alibaba as a whole can be a great ally to your China aspirations. Tmall and Taobao don’t just account for a majority of ecommerce sales in China but they are also an important touchpoint in the customer journey for researching products and brands. Then there’s Alipay, Weibo, Youku, Kaola, Little Red Book, Fliggy, AliHealth, Focus Media, SenseTime facial recognition and many others which can assist with your China marketing and sales. There are also the all-important brick & mortar stores: RT-Mart, Auchan, Suning, Carrefour, InTime and Hema of course, all which Alibaba owns a stake in. Then add the more than a million independent mom-and-pop stores that Alibaba reaches and influences through its LST system. The list goes on…
Whilst China’s retail market remains highly fragmented, Alibaba is doing a remarkable job consolidating many of China’s largest and smallest retailers online and offline, while slowly integrating its technologies into them.
The allure of Alibaba’s retail footprint, and cute pussy-cat and hippo logos may feel like El Dorado for many, yet brands would be wise not to just blindly drink the Alibaba Kool-Aid. Even some of the most famous brands that Alibaba has ‘built’ are moving focus away from Alibaba due to lower margins, increasing customer acquisition costs and limited scope for product diversification.
Brands with all of their eggs in the Alibaba basket also face a lesser-known risk: competition from Alibaba itself. In 2017, Alibaba launched its own label retail site Taobao Xinxuan. Although it didn’t make much of an impact, it hints that Alibaba is motivated to slowly creep more of its private label brands onto its platforms and retail stores. One example is the fresh milk category, where Alibaba’s own dairy brand TheLand has grown its market share and now accounts for almost half of the value of all fresh milk sold on Tmall.
Alibaba is increasingly edging into new product development – encouraged by Beijing – using its data with its “New Manufacturing” tools. The most recent example is the fashion industry, where Alibaba is providing trends to fashion brands, and creating new materials based on their data. Although Alibaba usually does this in partnership with brands, it is likely to only be a matter of time before they play a larger part in creating brands and products on their own. They have the data insights, customer relationship, and are learning the approaches to manufacturing through its partners. Most important of all, Alibaba have the sales channels – much like the way supermarkets provide optimal placements for their private label brands, but on steroids.
Diversifying customer touch points beyond the Alibaba ecosystem can decrease a brand’s exposure should they be pushed down the Ali rankings. Fortunately, China’s digital channels are diversifying. While share of screen time spent on Alibaba’s platforms stayed at around 10% in the 12 months ending June 2019, the share of ‘other’ apps – those not owned by Alibaba, Tencent, ByteDance and Baidu – increased from 26.3% to 29.7%. This signals the increasing ‘niche’ apps that provide more targeted platforms to reach specific demographics and interest groups, often with a much better ROI. China Skinny can assist you to ensure you have a holistic marketing and sales strategy for China, while reducing your exposure.
On a related note, China Skinny’s Mark Tanner will be joining a quorum of China experts at the TEC Community in partnership with Asia Turnaround & Transformation Association next Tuesday morning, 22 October in Shanghai. He will share how brands can succeed in China with an in-depth cultural and structural branding strategy. For more information, click/tap here. Go to Page 2 to see this week’s China news and highlights.