Alibaba reveals what makes the Chinese click
It’s a tragic fact that British businesses export more to Ireland than China. Population 4.5 million compared with 1.4 billion. The reason? Brits are intimidated. There’s the Chinese language with its tonal pronunciation and that unfathomable script. The geography is forbidding. Basic knowledge is lacking.
The city of Chongqing alone is 30 million people, a voluminous mass of consumers, but what is life like there? The logistics are scary. There’s the currency, the tariffs and laws. Add it up and suddenly a trade mission to Galway feels like the low-stress option.
David Lloyd is here to change all that. He’s the business development director of Alibaba Group in the UK. “We are here to help small and big businesses sell to Chinese consumers,” he says, speaking at the Alibaba office in London’s Covent Garden. “We make it easy to do business anywhere.”
For total newbies, Alibaba is more than a Chinese retail site – it is the Chinese retail site. “The history of the internet is different in China,” explains Mr Lloyd. “In the UK, if you want to buy a box of hot chocolate, you might use a search engine like Google or Bing, click on a link and buy from a website. In China you search using our app.”
Consumers log on, browse and buy entirely within the Alibaba ecosystem. Now that’s what you call a stranglehold on the market. It’s why Alibaba is valued at a quarter of a trillion dollars. And why the Google-Apple-Facebook-Amazon quartet “GAFA” is now starting to be called the GAFAA.
The Alibaba world
This “world” is best thought of as three basic services. There is Alibaba.com, the business-to-business (B2B) platform. Trade here is high volume. If you want to find a commercial supplier, wholesaler or a manufacturing partner, this is the place.
For high-end retail there is Tmall. “It’s like Westfield shopping centre on the internet,” says Mr Lloyd. “It is the home of large successful brands where they can connect with Chinese consumers.”
And for smaller sellers there is Taobao. Like eBay, it’s where individuals and micro enterprises can sell direct. Whereas Tmall goods are of guaranteed quality, Taobao is a bit wilder and less policed.
Together these three platforms offer unrivalled access to the market.
The killer question is how can a British brand get started? Contacting Alibaba directly is a great first step. “We are here to help both large and small businesses,” says Mr Lloyd. “An example is the Cambridge Satchel Company. We are working with them, and now they have a store on Tmall and we are helping them sell.”
As Mr Lloyd explains, it helps to know whether there is pre-existing demand for your products. “As with Google Trends, we can see what people are searching for. We help businesses understand the demand levels. We say this is what your sales could look like, what your revenue and profit might be. We are trying to be responsible.”
If the demand is there, Alibaba’s UK team will provide manpower to guide you on the right path. Size isn’t the key determinant. Tea brand Whittard of Chelsea is an example of a sub-£30-million sales business which entered Tmall with close help from Alibaba. Whittard noticed there were more than 200 resellers of its tea on Tmall and a huge proportion of visits to its website were from China. The demand was clear, so Alibaba took an active role in helping Whittard.
The scale of the opportunity should make it compulsory for all UK businesses to investigate Alibaba
The next step is to find an e-commerce adviser to work with on Alibaba. There is a list of 70 accredited partners. Most specialise in a particular field. For example, Uco is devoted to beauty products, Sowow to home appliances, and Qingmu to shoes, bags and luggage. The e-commerce adviser will help build a storefront within Tmall. It will take care of logistics and marketing.
At each stage of the retail process there is a division of Alibaba to help. For marketing there is Alimama. “If it has Ali in the name, the chances are it’s part of Alibaba,” notes Mr Lloyd. Alimama is the platform for marketing across Alibaba.
“The average user spends 20 minutes a day on our app. Shopping is different to how it’s done in the UK. Here it is direct. I have a good idea what I want. I find it, buy and leave to get on with my life. In China is it more social. The user will browse. They may chat to friends, maybe take in a live stream by their favourite brand. Holland & Barrett might be showing a conversation about health products, so they’ll watch that. Shopping in China is a more immersive and engaging experience.”
Alimama guides brands through the process. It’s possible to target consumers with banner ads, videos and live streams. The platform is a data centre, enabling sophisticated analysis and segmentation of the audience. Market by keywords or demographics – it will all be familiar to anyone who’s marketed on Facebook or YouTube.
Logistics is handled by Cainiao (pronounced Chan-yao). “It is a marketplace for logistics providers,” says Mr Lloyd. “Logistics is a fragmented industry in China. There are some big players and lots of small players. Cainiao is a platform that connects brands to those logistics providers, making it easier to get your goods from A to B.” Goods can be stored in Alibaba’s warehouses, and then fulfilled by a logistics company through the Cainiao system. “It means there isn’t a dizzying array of suppliers you need to deal with.”
Payment is done through Alipay. This is an escrow service like PayPal. It is used by more than 450 million Chinese, processing more than half of all Chinese e-commerce transactions. The holding company, Ant Financial Services, is a fintech giant in its own right, valued at $60 billion in the last fundraising round.
“Our mission is to make it easy to do business anywhere,” insists Mr Lloyd. “It is a really earnest and heartfelt mission which comes all the way from Jack Ma when he started the company.”
The structure of Alibaba is carefully designed to make the journey simple for even the most nervous of beginners. “You don’t need to speak Chinese,” says Mr Lloyd. “I don’t and I can operate at Alibaba quite happily.” Even the tricky stuff like tariffs and paperwork are surmountable. “Really it’s no different to any other export market,” he says.
The scale of the opportunity should make it compulsory for all UK businesses to investigate Alibaba. Even the tourist trade can benefit. Alitrip, the travel platform, has 200 million Chinese users.
“China had 120 million outbound tourists last year,” says Mr Lloyd. “But a really small fraction came to the UK – fewer than half a million. We have a lot of history, great brands, museums, attractions and things Chinese people love. If we can get them to come here, they’ll shop, and when they go back, they’ll want those brands they’ve discovered and tell their friends.”
It’s a mouthwatering prospect. “The opportunity is insane,” says Mr Lloyd. And yet he notes: “Some big British businesses are not taking advantage.” What are they waiting for?