Until its initial public offering last month, e-commerce giant Alibaba was largely unknown outside the confines of its native China.
This story first appeared in the October 29, 2014 issue of WWD. Subscribe Today.
Now it looms large on the global scene.
The 15-year-old company, founded by Jack Ma, commands about 85 percent of China’s e-commerce business, said John Spelich, Alibaba Group vice president, international e-commerce business development. Alibaba doesn’t hold any inventory and works with third-party providers in its “ecosystem platform approach.”
“[Chinese consumers] lead the world in mobile shopping,” Spelich said, adding that Chinese e-commerce will comprise 12.4 percent of retail sales by 2017 (with business-to-consumer models such as Tmall expected to command the largest share of e-commerce by this time).
And he threw out other staggering statistics: There were 279 million active Alibaba users in China who collectively drove $296 billion in gross merchandise volume during the last fiscal year. Alibaba saw 14.5 billion orders taken and 6.1 billion packages shipped in a 12-month period, with users shopping once per week on average.
“Chinese consumers are different,” Spelich said. “They love a bargain, but price isn’t paramount. They demand authenticity.”
They also rely heavily on social media for product information, and are into brands —although they aren’t very loyal (yet).
Alibaba has many facets. Its investments range from social networking platform Sina Weibo to the largest department-store chain in China — Spelich noted the idea was “Not to put off-line retail out of business, but to digitize off-line retail.” The company also owns a consumer-to-consumer marketplace often compared to eBay, AliExpress; Chinese factories that sell to global consumers and B2C marketplaces Tmall and Tmall global that work with brands such as Burberry, Clinique, Ray-Ban, Apple, Estée Lauder, Levi’s, Lacoste and Forever 21, and Taobao.
Alipay — Alibaba’s payment arm — is also an enormous business in China, where credit cards have yet to really take off. The payment system offers secure shopping, as well as a rating system for sellers and buyers. Earlier this month, Alipay unveiled ePass, a group of products that will enable Chinese consumers to buy directly from American Web sites.
Not only will the solution aid in the logistics process — cross-border shipping and tax processes are notoriously cumbersome — but there is a marketing arm that helps partner brands target their desired Chinese demographic. The program gives American brands access to hundreds of millions of Chinese Alipay users — and all they have to do once an order is placed is ship the goods to a freight forwarder in the U.S.
This is sure to bode well for U.S.-based retailers during Chinese shopping events, especially Singles Day on Nov. 11, the country’s single biggest selling day when unmarried people are encouraged to shop online. Spelich said the day generated $5.8 billion in gross merchandise value — with 254 million orders processed and 156 million packages generated.
“It took a week to deliver them all, but China’s logistics system is getting better,” Spelich said, adding that this year will see a demonstration including items from the U.S., Brazil, the U.K. and more. “We want to demonstrate to merchants in these countries that we’re an effective way to sell in the Chinese market.”
When asked about China’s counterfeiting problem and how Alibaba addresses the issue across its properties, Spelich assured the crowd that the group is vigilant in this area. It hasn’t been easy, but Alibaba has spent the past few years working with advisers, complying with the law and conducting off-line enforcement. The company has also partnered with brands such as Louis Vuitton to help better understand what a counterfeit looks like and how to spot fakes.
“You can’t kill the doctor if you want to kill the cancer,” he said, quoting Jack Ma on the issue.