More than a Chinese Amazon, Alibaba Ecosystem is Primed for Global Growth, Says FGRT Report
Plans call for the Chinese e-commerce giant to serve more than 2 billion shoppers, and expand beyond retail, writes Managing Director Deborah Weinswig
August 09, 2017
NEW YORK (August 9, 2017) – Now the largest e-commerce company in the world with $430 billion in gross merchandise volume (GMV), Alibaba is seeking to become a global company as well with a goal of serving more than 2 billion shoppers, says “Alibaba Group: From Strength to Strength-An Overview of the Business Units of the World’s Largest E-Commerce Company,“ a report recently published by the global think tank FGRT (Fung Global Retail & Technology).
Established in 1999 as a business-to-business (B2B) portal connecting Chinese manufacturers to overseas buyers, Alibaba has expanded to include direct selling to consumers as well as digital entertainment, innovative initiatives and local services. Executive Chairman Jack Ma now hopes to expand Alibaba into a global phenomenon that will serve 2 billion customers, host 10 million businesses on its platforms by 2036 and achieve $1 trillion in GMV by fiscal year 2020.
“With the growth of Singles’ Day and other promotions, Alibaba is becoming better known outside Asia as an innovative force in e-commerce, but many still don’t understand the full breadth of its influence and plans for the future,” says FGRT Managing Director Deborah Weinswig. “Our research team is uniquely qualified to give an overview of this company that is transforming the retail experience in China and beyond, and likely will do so worldwide.”
On Alibaba’s Taobao platform, which is China’s largest consumer-to-consumer online marketplace, sellers post items on virtual shops for buyers to browse and purchase using third-party payment provider Alipay. Small merchants can easily set up stores using Taobao’s storefront design, marketing and promotional services, for which they pay a fee. Taobao does not charge sales commissions. Consumers are protected from counterfeit merchandise through Taobao’s big data technology, which is employed to detect fakes, and by Alipay’s escrow function, which allows consumers to pay for the items only if they are satisfied. A significant social selling platform also increases conversion. The result has been a 95 percent penetration rate in China’s C2C online retail market.
“Taobao is in itself an ecosystem for innovative and entrepreneurial merchants, [and] boasts the widest product breadth and depth among all Chinese C2C marketplaces,” Weinswig writes. “We expect Taobao to continue its shift from a traditional online transactions platform to a lifestyle destination platform.”
Tmall, China’s largest business-to-consumer (B2C) platform allows global brands and retailers to sell to Chinese consumers. Established in 2010, it now has more than 10,000 brands. Merchants are charged an annual service fee and Tmall collects a commission based on the product category. Alibaba helps brands engage with consumers through technologies such as big data, augmented reality and virtual reality, and offers year-round consumer events and festivals. As a result, Tmall enjoys nearly a share of nearly 58 percent of the B2C online retail market, more than twice the share of its closest competitor, JD.com.
“Tmall is well positioned to benefit from China’s consumption upgrade and increasing demand for trusted and high-quality goods,” Weinswig writes. Tmall Global is Tmall’s cross-border e-commerce platform which houses the flagship stores of international brands, enabling them to sell to Chinese consumers, regardless of whether they have a physical presence in China.
Alibaba’s Juhuasuan daily deals marketplace provides another avenue for Taobao and Tmall merchants to sell products, through flash sales and promotions. Integrated with Tmall in 2016, Juhuasuan operates under its own trade name and offers a wider range of customized merchandise and services than do Tmall and Taobao – and it sees some 30 million unique visitors daily. FGRT expects the platform to play a major part in helping merchants transition to e-commerce under Alibaba’s New Retail initiative.
“Through promotional campaigns, Juhuasuan helps merchants build brands awareness, launch new products and reach new customers,” Weinswig observes. “Juhuasuan fits well with Chinese consumers’ preference for group buying and has performed well during shopping festivals such as Chinese New Year, Singles’ Day and Double 12.”
Alibaba’s B2B platform, 1688.com, connects local buyers and sellers of trade merchandise, raw materials, and industrial and chemical products. Customers can purchase materials in bulk at very attractive prices. The site also provides membership services such as advertising, exhibition spots, data analysis and other functions, as well as an online community that allows merchants and suppliers to share advice and answer questions. With nearly 1 million members as of March 2017, 1688.com aims to become China’s top trade-data sharing platform for small and medium-sized enterprises within five years.
AliExpress allows overseas consumers to buy directly from Chinese manufacturers and distributors. Since its launch in 2010, it has become one of the leading English-language B2C marketplaces globally, serving more than 200 countries. By contrast, competitors Amazon and eBay serve customers in 185 countries and 30 countries, respectively.
More so than Amazon, Alibaba is expanding beyond retail into film production and distribution, investing in Alibaba Pictures as well as the Tao Paopiao online ticketing platform. The company also has invested in the Xiami music streaming service; Alibaba Sports, a physical and e-sports events developer and operator; the Youku Tudou video-streaming operator; UC Web, a mobile browser; DingTalk, a B2B enterprise messaging platform; YunOS, an Internet of Things (IoT) operating system; AutoNavi, a digital map and navigation service; Ali Health, a healthcare services platform; Koubei, a search engine for local services such as restaurants, food delivery and travel; AliPay, a third-party online payment app developed by Ant Financial, an Alibaba-affiliated company; and cloud-computing and marketing services.
“Technologies such as cloud computing, payment, logistics and local services penetrate every facet of consumers’ daily lives,” Weinswig notes in the report.
The full report can be found here. Other recent reports issued by FGRT include: “Deep Dive: Aussies, Get Ready for Amazon!”;“Deep Dive: US Consumer Survey-Amazon Prime Members Love Shopping Offline Too”; “Fast Fashion Speeding Toward Ultrafast Fashion”; and the “Deep Dive: The Mall is Not Dead” series.
FGRT’s reports and analyses can be found at www.FungGlobalRetailTech.com and www.deborahweinswig.com. Subscribe here to receive Deborah Weinswig’s daily news and analysis on retail, fashion and technology.
FGRT (Fung Global Retail & Technology) is a think tank whose research team, based in New York, London and Hong Kong, follows emerging retail and tech trends, specializing in the ways retail and technology intersect, and in building collaborative communities.
The team, led by Deborah Weinswig, former top Wall Street and retail tech analyst and startup advisor, publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omnichannel retail, luxury and fashion trends, and disruptive technologies. More information can be found at www.FungGlobalRetailTech.com.