- January 27, 2021
- Posted by: Bastion team
- Category: Markets
- Annual 24-hour shopathon Singles Day shows the spending power of Chinese consumers.
- Alibaba, China’s enormous payment platform, isn’t content to stay there.
- Its subsidiary, global marketplace AliExpress, has arrived in Spain and has Amazon in its sights.
- Visit Business Insider’s homepage for more stories.
Singles Day, China’s 24-hour shopathon held on November 11, is the annual opportunity to marvel at the size of China’s Alibaba group.
In 2019, consumers spent $1 billion across its online platforms in the first 68 seconds and an extraordinary $38 billion across the 24 hours. Singles Day 2020 stretched across 11 days, when $74 billion was spent.
But most of Alibaba’s services are limited to the domestic market. To Westerners who have heard of it, it might either look like a B2B platform for buying wholesale from Asian suppliers or the source of political intrigue as its billionaire owner Jack Ma disappeared from public view and then suddenly re-emerged last week without explanation.
Its subsidiary AliExpress, a global marketplace where people can buy goods from international sellers, could soon change that.
It is quietly spearheading Alibaba’s growth into Western markets and, after 10 years honing its operating model in China, has its first European foothold in Spain.
The AliExpress homepage
AliExpress plays a key role in Alibaba’s bid to reach two billion clients by 2036. It’s not itself a retailer- everything on the platform is sold by third parties – but its ambition and target markets inevitably make it a challenger to the king of online selling, Amazon.
Amazon’s income is far higher – $296 billion compared to $72 billion, but Alibaba’s profits are only just behind: $12.9 billion in the 12 months to March 2020, compared with Amazon’s $14.1 billion.
In AliExpress, Alibaba seems to have just what’s needed for commerce in the time of coronavirus. It saw a 30% rise in revenue in the three months to September 2020, compared with Amazon’s 39%.
Amazon built itself up delivering global brands to local buyers. AliExpress helps independent small sellers go global, which appeals when bricks and mortar operations are suffering and businesses need to get digital fast.
Once committed to European expansion, Alibaba set up a logistics centre, the “Electronic World Trade Platform (eWTP),” in Liège, Belgium, and invested throughout 2019 in digitizing China’s shipping industry to speed things up.
Alibaba launched a new China to Belgium freight train route in October 2019 and an air route that ships goods to Spain in three to 10 days, a fraction of the 15-20 day industry standard.
Once in Spain, AliExpress “started on-boarding the Spanish sellers to join the marketplace, kind of upgrading to our own capabilities,” says its director general for the country, William Wang. Spain’s e-commerce market has untapped potential. It is projected to grow 7.6% a year to 2024, the fastest in Europe. For now, only 10% of its small and medium businesses sell online.
Covid-19 has boosted online selling but also made unlocking this potential more challenging. “We’d normally invite teachers from China to do the training [to sellers],” says Wang, “but right now … we are live-streaming an online university on how to understand the marketplace, training and providing some special support because they are using a different language and a different business practice.”
More than 8,000 Spanish SMEs have joined AliExpress since it launched there in 2017. They get access to Russia and other EU markets, plus its platform’s mobile payments, cloud computing solutions and translation technology, as well as its dropshipping and the logistics support network.
Sellers are boosted by site-wide marketing campaigns and are given tools to promote their products.
Cannily, at a time when Amazon sellers are complaining they lose up to a third of profits in fees and commissions, AliExpress charge low commissions of between 5% and 8%, don’t charge to join their platform and offer sellers periods with no sales commission at all.
AliExpress also subsidizes sellers’ shipping fees, says Wang, adding that it runs monthly campaigns for local sellers, and provides promotion benefits for buyers.
AliExpress also seeks to enmesh buyers in the kind of “shoppertainment” that’s thriving in Asia, receiving rewards and discounts from coins and coupons collected by playing games on the AliExpress app.
Silvia Rivera attending a livestreaming event at a studio in Shanghai to offer products on an Aliexpress channel in Spain in October 2020
Even promotion has been woven in as a win-win opportunity. AliExpress Connect, launched last May, encourages an army of influencers and content creators to collaborate either with AliExpress or with brands selling on it, creating new income streams for them and exposing businesses to new demographics.
Wang says AliExpress wants to help grow local economies in Spain and “help people realise how important digital transformation is.” But this isn’t altruism. AliExpress is leveraging this growth as well as driving it. Wang calls this “a network effect”.
“The more companies join the platform, the greater the choice. Then more customers and the sellers will benefit.” Once it’s honed this model in Spain, AliExpress plans to replicate it in the next, as yet unannounced, market, which Wang hints could be Portugal, saying: “Southern and Western Europe to give you a range.”
The approach is to slip into new markets, adapt to it and grow gradually, rather enter with a lot of noise. “It’s a new market and we are a new team, so our starting point is working out how to work with new partners that will help us serve the customers well.
“We try to partner with local candidates in everything we do, from media and marketing to logistics and banking. That’s what we did in China and I believe, going to a local market, we have to do that,” says Wang.
“If we do it right, improve our customer shopping experience, make ourselves more local in terms of supply, service, we can be even more successful.”
Adapting to local markets includes adjusting the range of product categories to suit local supply and demand, so fashion, beauty and footwear are well represented in Spain. The waters need to be tested. Wang says it is keen to expand the food category but “we haven’t figured out the best way”.
It has “huge potential but it’s very complex and not easy to digitize”. He says the company doesn’t want to have a “huge launch” only to then realise it isn’t viable.
Certain partnerships – with national banks, iconic retail brands and trade associations – are specific to their market. And AliExpress isn’t so rootless it can do without bricks and mortar.
It opened two physical stores in Madrid and Barcelona last year “as a touchpoint with consumers,” says Wang, “After Covid, we’ll decide whether we do things differently.”
But it is also forging partnerships with tech-savvy scalable startups that are also focused on international expansion, some of which are already operating in markets AliExpress is eyeing up.
“The goal is an ecosystem of e-commerce,” says Wang. “We don’t want to do everything by ourselves.”
Bastion Balance Seoul, Korea.