1. Analysis
November 25, 2019updated 23 Dec 2019 9:24am

The e-commerce reign of Alibaba Group

Alibaba’s beguiling e-commerce journey began unassumingly with a team of 18 in 1999, but its fortunes as a trailblazer in Chinese retail have soared since the first Singles Day, now rebranded the 11.11 Global Shopping Festival, in 2009. Retail Insight Network talks to Alibaba Group to discuss this year’s record-breaking 11.11 Global Shopping Festival, the group’s future plans and retail in China.

By Deborah Williams

Deborah Williams: Looking back at the first-ever Single’s Day shopping event in 2009, what was the key element that transformed it into the 11.11 Global Shopping Festival we see today?

Alibaba Group: Looking back at 2009 and every year since then, the one consistent has been innovation. From launching tmall.com in 2010 to hosting the first Gala in 2015, we’ve always looked for new ways to engage with consumers and to make it easy for brands and consumers alike to make the most of the global shopping festival. Today, 11.11 is no longer just a shopping event but a great illustration of Alibaba Group’s vision to reshape the future of retail, through digital innovation and technology.

DW: This year, the festival bought in a record-breaking US$38.4bn. What do you think this says about Chinese consumerism and where it could lead to in the future?

AG: The 11th annual Global Shopping Festival was a show of strength for Chinese consumers, who continue to demand more from brands as they look to upgrade their lifestyles.

This upgrade in lifestyle is being driven by the fact that Chinese consumers are rapidly expanding their spending power. For example, the per-household disposable income of urban consumers will double between 2010 and 2020, from about $4,000 to about $8,000. China’s share of global luxury spending is expected to reach 44% of the total global market by 2025, according to a McKinsey report. This is driven by increasing purchases by millennials, those aged 25 to 39 years old, and by an emerging middle-class. Interestingly, the spike in consumption from lower-tier cities and rural areas has also contributed to the success of 11.11 this year.

Nevertheless, 11.11 is increasingly turning into a global event, involving consumers outside of China. For example, Lazada Group – Southeast Asia’s e-commerce leader – closed this year’s 11.11 Global Shopping Festival with record-breaking user growth and brands’ participation. The platform said it attracted nearly ten million more users during 11.11, while the number of selling sellers more than doubled, compared to the previous year.

DW: Global pop star Taylor Swift kicked off this year’s Singles Day with a musical live performance. What message does Alibaba aim to create with merging musical performances with e-commerce retail?

AG: We were delighted to welcome Taylor Swift to our gala this year – she really is adored amongst Chinese consumers.

For Chinese consumers who are predominantly young and mobile-savvy, shopping is about much more than passively adding items to their ‘virtual cart.’ It is a social activity, a means of consuming content, sharing with their circles and ultimately a form of entertainment. The Global Shopping Festival Gala brings the concept of ‘retail-tainment’ to life perfectly.

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DW: This year also saw the introduction of consumer goods and gadget brands, such as Scotch whisky company Johnnie Walker and P&G feminine-hygiene brand Whisper – known as Always in the UK – to the ‘Tmall Collection’ fashion show. What was the thought process and response to introducing these types of products to a fashion show and do you think this will become a trend in the future?

AG: Alibaba’s Global Shopping Festival, of which the Gala is a key part, is about far more than just sales. It’s about brands engaging with consumers and giving them a truly unique opportunity to deepen their relationship with Chinese consumers through entertainment, while also testing and showcasing new products.

This year, Johnnie Walker wanted an innovative way to introduce its brand to a younger millennial audience in China. The Tmall Collection show helped the brand to connect with millions of consumers in China, where category perception for whisky is relatively low. Partnering with Tmall also meant that Johnnie Walker could tap into insights capabilities that would help them further engage Chinese drinkers, with more targeted and effective marketing.

P&G’s feminine-hygiene brand Whisper put on an augmented reality-powered performance by popular virtual singer Luo Tianyi, again highlighting how 11.11 is about far more than just selling products – it’s about connecting with consumers and engaging with them.

We expect brands to continue to incorporate entertainment, cutting-edge technology and star power to attract young shoppers – a key growing demographic.

DW: Each year, you have many brands from China, and across the world, participating in the festival. Altogether, this year you had more than 200,000. Aside from the obvious exposure and economic benefits, what else do you think draws brands into participating?

AG: This year, we had over 22,000 international brands from 78 countries and regions participating at 11.11., but the festival is more than the numbers, it’s about brands engaging with consumers on a much deeper level, building their positioning and forming what will hopefully become a much longer relationship.

This is often made possible through technological innovations, such as Tmall Global Collection’s ‘See Now, Buy Now’ fashion show, which enables shoppers to buy the items they’re seeing being walked down the catwalk in real-time, all while the show is being broadcast live to 17 livestream channels across the country.

In addition, the ‘See Now, Buy Now’ fashion shows have a unique ‘Play Now’ function, which allows viewers to vote for their favourite outfits to create a trends report, while watching the show, voting for the ‘next hot items’ and providing brands with insights in real-time.

Livestreaming has also become an effective marketing tool for brands looking to build closer relationships with consumers. Livestreaming is the go-to option for Chinese consumers when seeking out new products and deciding on what to buy. It is an essential part of the discovery journey. While watching a livestream on Taobao, fans are able to shop for the items they see immediately within the same app, without exiting from the livestream. Livestreaming is the primary medium for key opinion leaders (KOLs) to engage with their audience in China. Fans can ask questions about the products and post comments.

DW: The 11:11 Global Shopping Festival and the Alibaba Group as a whole connect global brands with consumers worldwide. But what is the main lesson to remember when connecting brands with consumers?

AG: Chinese consumers are more informed about global brands than ever before, so if you’re a brand hoping to connect with consumers in the market, you need to understand the different consumer groups that exist in China, as well as regional nuances, preferences and trends.

DW: I’m sure that at the end of each festival, the Alibaba team reflects on the festival and brainstorms new ideas and changes for the next one. Upon reflection, what responses, requests or habits have you received or seen from Chinese consumers after the end of each festival? Have there been any particular consumer habits or requests that continue to emerge?

AG: Lower tier cities were a big focus for Alibaba at 11.11 2019. In fiscal year 2019, more than 70% of new consumers came from less developed areas. The user penetration in less developed areas was around 40% (as of June 2019). Additionally, Alibaba has helped factories digitise their operations and improve their efficiency by giving them access to analytics, IoT technology and marketing tools. These factories can manufacture more products to meet demands specifically for consumers from less developed areas. Juhuasuan, Alibaba’s sales and digital marketing platform, is partnering with 1,000 brands to codevelop 1,000 products targeted towards lower-tier cities in China.

‘New consumption, new business’ was another key trend during 11.11 2019. This is about Alibaba leveraging its technologies to create redefined consumer experiences and meet the growing demand of Chinese consumers for new brands and new products.

One million new products were on offer at 11.11 2019, with leading international brands, such as Lancôme, SK-II, YSL Beauté, Givenchy and Shiseido debuting new products during the festival. What’s more, thousands of brands and merchants rolled out their upgraded stores through the Tmall Flagship Store 2.0, during 11.11 2019. The store offers brands more tools and opportunities for customisation to deepen engagement and interaction with their consumers.

DW: The festival has integrated technology advancements such as augmented reality. What are Alibaba’s overall plans for 11:11 Global Shopping Festival 2020 and its specific plans within the realm of tech?

AG: Alibaba is always looking for new ways to innovate and make it easier for businesses and consumers to engage with 11.11. While we can’t discuss specifics of our plans for next year yet, we can say that we’re already looking at ways we can improve and continue to innovate.

DW: What is the main lesson you want the e-commerce retail sector to know about 11:11 Global Shopping Festival?

AG: 11.11 2019 showcased new consumption patterns, new brands, emerging e-commerce shopping demographics and new shopping experiences. Chinese consumers continue to present a great opportunity for e-commerce brands, providing they can understand and navigate all these aspects and most importantly, embrace digital innovation without losing their authenticity and heritage.

DW: Looking at e-commerce on a wider scale, how has China become the centre of the e-commerce sector? What has driven this power-shift?

AG: China’s $1.94 trillion e-commerce is the largest in the world and more than three times that of the number two U.S. market, according to eMarketer data. The areas in online commerce where China is leading are, in particular, mobile commerce, mobile payments and cross-border trade (which enables SMEs to better access global markets).

The power shift has partly been driven by the fact that Chinese consumers are getting richer fast in urban areas but increasingly lower-tier cities, and becoming increasingly sophisticated and demanding, showing a special appetite for international, high quality and iconic products. Thanks to the high penetration of mobile devices and smart technology, consumers have become used to a seamless blend of digital and offline experiences and interactions, with a frictionless purchase journey that offers maximum convenience. They’re not just shopping – they’re on the hunt for new experiences.

How can international brands capture this opportunity? It’s about knowing who their audience is and identifying the right way to interact with them, leveraging digital innovation but at the same time remaining authentic to their heritage.

In the words of [management consultancy] Bain & Company managing partner Manny Maceda: “In order to succeed in China, brands have to design products specifically for China market, make decisions locally, deliver in ‘China speed’ and digitalise China business.”