Two weeks ago I wrote about the massive potential of e-commerce in China that Boston Consulting Group predicts will be worth more than 300 billion dollars by 2015.
As numerous e-tailors fold under highly competitive market pressures and others battle it out with nasty price wars, through all of this, one company – The Alibaba Group has risen to become the undisputed leader of e-commerce in China.
The Alibaba Group is now China’s second biggest internet company in terms of revenue. Combined, the Group’s web sites cover the entire spectrum of e-commerce and related services in China and cater to all business and consumer needs.
For any fashion company or foreign brand with ambitions of doing business in China, understanding the Alibaba e-commerce network is fundamental knowledge. This is true even for brands not intending to sell online, as Alibaba’s shopping portal Taobao.com has become so big that it influences the entire retail ecosystem in China.
Alibaba was founded by Jack Ma in 1999 in Hangzhou – an enchanting city 200kms south west of Shanghai. Once an English-speaking tour guide, over the last decade the charismatic Ma has grown Alibaba into China’s leading internet company and earned himself nationwide admiration as a business figure and CEO.
By definition, Alibaba is not an online retailer because it doesn’t own or trade any of its own merchandise, nor manage inventory or warehouses. Instead, Alibaba acts like a shopping mall developer, owning internet real estate that allows buyers and sellers to congregate online. Alibaba then makes revenue through online advertising and subscription fees.
According to a US SEC filing from June this year, Alibaba witnessed a 64 percent increase in revenue from last year. Net profit for the first quarter 2012 was $220 million and according to Forbe’s estimates, by 2016 Alibaba could worth a more than $150 billion.
Starting below with a brief introduction to each of Alibaba Group’s main websites and services, over the following weeks Maosuit will conduct in-depth looks into the companies most relevant fashion and luxury portals including Taobao.com and TMall.com.
Alibaba.com is an English language B2B marketplace that offers a platform for importers and exporters to connect and source products from over 2.5 million storefronts (many of which are Chinese manufacturers). Products are sold wholesale and orders are usually for thousands of pieces at a time. According to the company, as of June 2012, Alibaba had 29.4 million registered users from more than 240 countries.
Aliexpress.com is similar to Alibaba.com in that it is primarily a B2B operation, but it allows transactions of much smaller order sizes while still at wholesale prices.
A basic understanding of Alibaba.com and Aliexpress.com is enough for fashion brands operating in China as these sites don’t influence consumer’s individual purchases in China very much.
In a nutshell Taobao is the ebay of China and primarily a C2C platform, but with one striking difference – most products traded are brand new. Taobao.com was launched in 2003 and has now grown to account for around 80% of online transaction volume in China.
According the Alibaba’s website, as of June 2012, Taobao can boast more than 800 million product listings and more than 500 million registered users. Google ranks Taobao is one of the top 20 most visited websites in the world.
Understanding what Taobao is, how it works and how it influences retail and your brand image etc. in China is absolutely vital knowledge.
TMall opened for business in 2008 and is Alibaba’s B2C platform dedicated to individual brands across all categories including fashion, home furnishings and books etc.
Tmall.com allows brands to create their own pages on the TMall platform and now claims to feature over 50,000 international and Chinese brands. Many fashion brands including Gap, Ray-Ban, Nike and L’Oreal etc. operate part, if not all, of their online retail in China through TMall.
Whereas many counterfeit products can be found on Taobao, brands operating on TMall are all verified by Alibaba to be genuine. So proper brand retailers should only consider opening their brand pages on TMall and never Taobao.
Etao is a comparison-shopping service with information about prices, special offers and promotions from a host of e-commerce operators in China including Taobao Tmall, Amazon China, Dangdang, Nike China and Vancl etc.
Alibaba hopes etao will become a one-stop shopping engine for all China, however, some disputes have arisen between Alibaba and other e-tailers regarding conflicts of interest and fairness with the price comparisons.
Currently in the beta phase etao has recently launched ‘Discover etao’ – a Pinterest like social network and social commerce site that links to Taobao and Alibaba’s other e-commerce portals.
Juhuasuan is Alibaba’s group shopping platform and not so relevant to the majority of multinational fashion brands in China.
Through Alipay, Alibaba solved their own online payments issues early on and also provided payment system solutions for millions of internet merchants in China.
Maosuit will cover Alipay in a future post about the difficulties of online payments in China. This is something fashion retailers should start to investigate when they are ready to begin trading online in China.