How Alibaba addressed international merchants' hurdles of accessing the China market
They rolled out an English-language customer-service and self-service registration system.
With people pushed to stay at home amidst the pandemic, e-commerce businesses have seen a significant surge in demand. Alibaba in particular saw a 43% YoY rise in orders for imported products in their Tmall Global platform, which is dedicated to overseas brands and retailers, during the 618 Mid-Year Shopping festival this year. However, facing this growing demand could prove challenging for merchants that are keen on diversifying beyond their home markets but are dealing with tight budgets and limited knowledge of the China market.
Reaching out to these merchants, Tmall Global rolled out several initiatives involving the waiving or reduction of service fees, logistics costs and agency service fees, as well as an English-language customer-service and self-service registration system for brands.
In an exclusive interview with Retail Asia, Alibaba’s general manager of global business development and key accounts for Tmall Import and Export, Lynn Dong discussed more about these initiatives, as well as some recent developments in China’s and Asia-Pacific’s e-commerce scene.
Describe the trends in China’s and APAC’s e-commerce landscape for the past three to six months. Could you share with us what changed in your operations since the COVID-19 emerged?
The e-commerce landscape in China and Asia Pacific has definitely changed quite a bit as a result of the COVID-19 pandemic. Over the past six months or so, we have seen a boom in demand on Alibaba’s platforms for daily necessities such as groceries, and medical and personal hygiene supplies such as face masks and hand sanitisers. More recently, as Chinese people become more health-conscious as a result of the pandemic, many have also turned to e-commerce for a range of health-related products, from hula hoops to treadmills, gluten-free starches and health supplements.
According to data from our recent 618 Mid-Year Shopping Festival, imported goods were particularly in high demand in the Chinese market. During the sale, the total value of orders for imported products on Tmall Global settled through Alipay increased by 43% from last year, whilst the total value of imported products shipped through the [consignment solution] Tmall Overseas Fulfillment programme (TOF) tripled (199% growth).
As many brands and merchants’ physical and offline sales have been affected during this period, digital commerce is set to play an increasingly important role in business recovery around the world post COVID-19.
The Alibaba Business Operating System (ABOS) offers a host of services to empower brands of all sizes to accelerate their digital transformation, boost operational efficiency and drive growth by leveraging all the available tools in our ecosystem. By using ABOS, companies can digitise their value chain end-to-end by harnessing the robust analytics and market insights offered by different touch points in the ecosystem to unearth the underlying preferences and future demands of China’s still-growing 1.4 billion-consumer market.
ABOS has helped many brands, large and small, weather Covid-19 with outstanding results. We expect ABOS to play an even more important role for brands in this market environment of “new normal” going forward.
Tmall Global, as a key component of ABOS and with access to Alibaba’s user base of over 700 million Chinese shoppers, is uniquely positioned to offer brands a comprehensive set of innovative tools and technologies to deepen their ties with the Chinese market at a time when consumers there are becoming more reliant on e-commerce for their day-to-day purchases.
We have made it our priority to onboard even more international brands and merchants to increase the diversity of our offerings, and provide these brands with an effective online channel to connect with consumers there.
What strategies have you adopted to respond to the resulting shift in consumer demand?
As China and many other countries have experienced or continue to be in a state of lockdown, we observed more consumers turning to e-commerce as a substitute for their usual shopping at physical stores to buy daily necessities, medical and personal hygiene supplies, and other day-to-day needs. We have also seen a growing trend of “revenge buying” in recent months, as Chinese consumers indulge in spending sprees to make up for time lost in lockdown.
We have redirected and redoubled our efforts accordingly to speed up our merchant recruitment and product sourcing processes, creating opportunities for more offline brands and merchants from around the world to go online and satisfy the demand we have seen.
We also leveraged the recent 618 Mid-Year Shopping Festival to create more accessibility to the China market for overseas brands and merchants. We brought together more than 25,000 overseas brands to take part in the sale, launching a total of more than 400,000 new products. We saw this as a strong opportunity to tap on China’s online consumption rebound to boost these global brands’ exposure and to catalyse their sales.
What initiatives have you launched to reach out to businesses during the pandemic? What pain points are you trying to address?
The pandemic has understandably affected supply chains and businesses’ ability to operate as per normal, and our brands and merchants have been visibly and similarly affected too. As a platform operator that strives to foster a healthy business environment, we’ve made an effort to support our brands and merchants through this difficult period in a bid to turn the “danger” brought about by the pandemic into “opportunity” for SMEs to prepare for the future through digital transformation.
One of the measures is to speed up the onboarding process for the brands and merchants through Tmall Global’s brand-incubation programme announced in April this year. Under this programme, we rolled out an English-language customer-service and self-service registration system for brands, and a process to ensure new online storefronts will be operational within 30 days of registration. We also offer newly-joined brands and merchants incentives to hit pre-agreed targets, which motivates them to grow and flourish on our platform.
We have also announced a comprehensive set of measures to support brands and merchants on Tmall Global during the COVID-19 outbreak. Among other measures, we have waived their platform service fee for the first half of this year, and reduced their other operating expenses such as logistics costs and agency service fees.
As a whole, Alibaba Group mobilised our various business units to lend help to businesses around the world through our Spring Thunder initiative, which capitalises on the expertise and know-how of the Alibaba ecosystem to enable SMEs to stay afloat. We also introduced a similar initiative in Singapore, known as the Sprout Up initiative, to support local exporters in their plans to reach the overseas market through our B2B platform Alibaba.com.
How have these measures helped your merchants cope with the crisis?
Here’s an example. The COVID-19 outbreak has stalled sales from offline retail channels for many overseas brands, pushing them into dire distress. Nevertheless, Korean SME cosmetics brand JUNGSAEMMOOL continued to thrive on the Tmall Overseas Fulfillment (TOF) model despite the crisis. While offline duty-free shops and department stores were hit hard in South Korea, JUNGSAEMMOOL, which opted into TOF via the programme’s Korean warehouse in April 2019, made up for the sales it lost in its home market through the 618 Mid-Year Shopping Festival. The brand’s sales during the 618 campaign this year even grew 50 times compared with the same period last year. JUNGSAEMMOOL has gained significant brand recognition among Chinese consumers after about a year of adopting the TOF model, and has recently expanded its collaboration with Tmall Global with the launch of its own flagship store on the platform–which signifies its official market entry in China.
How do you see the e-commerce landscape shifting in China and Asia Pacific as a whole after COVID-19?
The shift towards e-commerce is going to be the reality of retail, and not a trend. What the pandemic has done is to accelerate this journey, and give brands more confidence that online commerce is not only viable, but a viable sales channel that should complement their offline retail presence. Consumers at the same time are also gaining confidence in shopping online during the pandemic, especially given the convenience and sheer variety easily available through online retail.
Diversification of online retail strategies will only seek to grow, such as the use of gamification and livestreaming in e-commerce shopping. During our 618 mid-year sale, sales of 1,700 different agricultural products doubled year-on-year through gamification engagements. Apart from pent-up demand, Tmall also made its 3D shopping technology widely available to brands during 618, which helped the stores using the new feature attract five million visitors and quintupled their average conversion rates of consumers in just three days. These online avenues will only gain more interest in the future as we continue to reinvent digital technologies and digital retail penetration.
What are your future plans? What’s in store for Alibaba?
We want to continue our commitment and existing efforts in supporting businesses through the pandemic and beyond, and stay true to our mission – to make it easy to do business anywhere.
SMEs are a vital part of any economy, and need help in navigating cross-border challenges and actually securing the opportunities available in other markets. During the past few months, our cross-border commerce units such as Tmall Global and Kaola have devised three new strategies to work towards helping them overcome this, and to meet the growing Chinese consumer demand for international products and brands. These strategies are to focus on new brands, new categories and new products.
For brands without a physical presence in China, we have been working with them to set up a flagship store on Tmall Global, or leverage the TOF model which provides overseas brands and merchants the opportunity to test the Chinese market at a lower cost and risk.
Another concept we have been working on is launching joint promotions with domestic and overseas influencers via Taobao Live. Especially in China, influencer-led engagement with shoppers is extremely effective but may not be a familiar mechanic with overseas brand, and we hope to help brands explore doing so.
Our aim is to bring 1,000 new international brands to China through our Tmall Global platform in the coming year and support more brands and merchants during and beyond this pandemic.
Any observations in the digital retailing landscape? What trends arose as a result of current market conditions?
We are starting to see business recovery take-off in recent months, as consumers in China have begun to spend more than before the early stage of the pandemic. We are determined to continue our focus on enlarging our product selections and offering brands more innovative tools and technologies to accelerate their digital transformations and empower them to forge deeper engagements with their customers.
More importantly, we have seen that brands who took the opportunity to go all-in on digital and online platforms are emerging stronger. While the road to a post-pandemic recovery is challenging and long, we hope to provide SMEs around the world with learnings based on the experience of their successful counterparts in China, and help them regain their momentum.