Alibaba continues to expand. The company’s investment in Asia is almost unrivaled and it is also spending in Europe to gain market share. Singles’ Day, November 11, the world's largest online shopping event, makes a major contribution to its revenue. Three weeks prior to this event the “See Now, Buy Now” fashion show–the second for Alibaba’s Tmall after 2016's debut–kicked off to create a buzz ahead of 11/11. With “retail as entertainment” as a central theme to this year’s 11/11, the fashion show is just one way Alibaba is leveraging its media and e-commerce platforms to create a seamless experience for viewers and consumers. And it’s also a platform for fashion and apparel brands to heighten their appeal. This year’s “See Now, Buy Now” show featured 140,000 brands and around 15 million products including items from brands such as Guerlain, Adidas, Pandora, Ray-Ban, Estee Lauder, Victoria’s Secret, Rimowa, Ralph Lauren and G-Star to name only few.
Here, Karl Wehner, managing director of Germany, Switzerland, Austria, Eastern Europe and Turkey at Alibaba Group, explains what to expect from Alibaba in the future.
What makes Alibaba so successful? Please explain the Alibaba principle to us.
There is no secret recipe to explain Alibaba’s growth over the past 18 years. However, what makes the biggest difference at our company is the great people, coupled with the continuous focus on innovation that is fuelled by our customer-centric approach.
Alibaba is a global technology company, whose ecosystem of online marketplaces and vast range of B2C, B2B and C2C services aims to make it easy to do business anywhere. We act as a trusted partner and enabler for businesses worldwide, helping them to transform the way they market, sell and operate in this exciting digital era. We provide the fundamental technology infrastructure and marketing reach to help merchants, brands and other organizations leverage the power of the Internet to engage with their users and customers.
Ultimately, our success derives from our partners’ and customers’ success: that’s why we dedicate ourselves to accompany them across all phases of their journey, offering support for every aspect of global trade–from deep market insights to e-commerce and payments to logistics, cloud computing, marketing and more.
Alibaba just started in Europe. Is the focus put on the B2B business or the B2C business?
Alibaba first came to Europe in 2015, with the opening of various offices in key markets across the continent. Since then, we have been focused on supporting European businesses seize the trade opportunities in the Chinese market, offering great quality European products to Chinese consumers through our Tmall and Tmall Global platforms in line with our mission of making it easy to do business anywhere. At the same time, we have kept developing our B2B business through Alibaba.com, our leading wholesale marketplace for global trade–reinforcing our commitment to make it not just possible but easy for import and export operators to source unique products from verified suppliers worldwide.
This has been accompanied by the development of supporting services such as payments with our affiliate company Alipay, and cloud offering via our cloud computing arm, Alibaba Cloud.
We look to the future with enthusiasm and look forward to continuing working with partners and customers, providing them with the most comprehensive offering and best experience possible.
What is your growth forecast for the next five years?
We see great potential for growth in Europe as more and more businesses come to understand both the scale of the opportunity that exists in increasing trade with China and how Alibaba can become a vital partner in their success. Not only do forecasts predict a continued rise in China’s annual GDP (set to end at 6.8% in 2017), but our insights also show no dropping off in the desire of the expanding Chinese middle class for European and international goods, whether that’s German sportswear, French fashion or British tea.
What are your most important and strong-selling markets in Europe?
With respect to the B2C business, traditionally our key markets in Europe have been Germany (which, at this year’s 11.11 Global Shopping Festival, was one of the top five countries ranked by volume of sales made over the 24-hour event), France, Italy, Spain, the Netherlands and the UK. On top of this, we are now seeing strong demand for our services across the Nordics too.
These are the markets whose cultural heritage, lifestyle values and “nation branding” are top of mind for consumers in China. These elements resonate particularly with the new middle class, composed of younger, sophisticated and opinionated individuals who drive the demand for top-quality, original European goods–especially fashion, food, cosmetics, mother and baby–as these are seen to be of higher quality than their Chinese counterparts.
China is an attractive market for European companies when it comes to fashion. How can Alibaba support brands in this field to successfully enter the Chinese market?
Trading overseas can be a challenge, and exporting to China is no different. Partnering with a trusted player like Alibaba is one way to make the process more efficient and less daunting, getting equipped to navigate a complex yet exciting market like the Chinese one.
To enable brands and businesses to thrive, we do not only provide the platforms where products are made available for purchase. We also offer a full suite of international trade related services (such as marketing and brand positioning advice, legal counsel and day-to-day sales consultancy), often in collaboration with a professional and experienced third-party provider, with the advantage of getting bespoke assistance and great expertise to tap into the local market.
In other words, you can consider us as a one-stop shop for brands looking to trade with China, making it that much easier and simpler for them to succeed.
What kind of products should companies sell to succeed in China?
Brands from all sectors can be successful in China. With China’s growing middle class and appetite for foreign products, the opportunities for international brands are endless. However, more important than the product itself is the amount of time and effort a brand is willing to put in to finding success in China.
The Chinese population may be huge, and the percentage of those shopping online is growing, however this doesn’t guarantee automatic success for brands. Working with a partner like Alibaba to enter the market makes the process a lot easier and less time consuming, however it still requires a solid commitment from brands if they are to succeed. For example, a brand’s strategy will be hugely different in Europe than it will in China, owing to a different consumer base and the fact that retail in China is largely dominated by e-commerce.
Therefore, the key to success will be spending enough time and effort researching the market in general, the consumer they are trying to target and making sure they choose the right partner for the journey.
How are the prospects of a market entry for European fashion brands via Alibaba?
Thousands of brands from different sectors have found success in selling their products overseas. We’ve found that particular sectors that tend to appeal to the Chinese consumer include luxury, fashion and mother and baby, but trends and tastes are always changing, so that list isn’t set in stone.
In addition, working with a trusted partner can make market entry a more seamless and straightforward process. In the instance of Alibaba, brands are set up with a Tmall Partner (TP) who helps set everything up on behalf of the business. Areas typically covered by a TP include IT solutions, operations, digital marketing, customer service, warehousing and inventory for brands.
This enables brands to focus on actually selling their products to the 488 million annual active consumers on the Alibaba platforms, rather than getting bogged down by administration or regulation, ultimately increasing chances of success.
Your founder and executive chairman Jack Ma said in an interview that it’s not about selling a lot of products. The goal is more or less to collect data. Do you have this goal also in Europe? If yes, how does this data help European companies expanding in Asia?
Selling products or gathering data is only one aspect of the picture we look at. By enabling hundreds of millions of commercial and social interactions among our users, between consumers and merchants, and among businesses every day, we create value that can be shared among our ecosystem participants, and beyond. This is what it’s really about.
Everywhere goods or services are bought and sold, information is collected on the buyer and the seller. In the Internet age, collecting data in the retail sector has enabled brands to create, market and distribute products to consumers in a much more tailored way. This increases efficiency for businesses and means that consumers get a better and tailored retail experience. Our aim is to make it easy to do business anywhere, and business is a lot easier when you have reliable data to help inform decision-making.
Last year you presented the structure of e-commerce in China. Can you describe it in a few sentences for us?
China has more e-commerce activity than any country in the world today. According to China’s National Bureau of Statistics, Chinese consumers spent $750 billion online in 2016—more than the US and the UK combined.
Traditionally, physical retail in China has always been less developed than in the West, with the high street and associated retail infrastructure not materializing to the same extent. The digital revolution coincided with the growth of disposable income and consumption. As a result, e-commerce quickly became the norm, and its development was fast-tracked to the point where China pulled ahead of the West.
A large part of this has resulted from the growth of mobile in China. Although mobile phones are popular here in the West, they are an integral part of life in China and Chinese consumers expect everything to be accessible by their mobile phone–be it social media, grocery shopping or simply browsing. After all, many consumers skipped the PC era entirely, going right to smartphones, so it’s not a surprise m-commerce is so advanced in the country.
At our most recent 11.11 Global Shopping Festival, 90% of Alibaba’s sales were processed via mobile. Millions of consumers engaged in app-based games and participated in online streaming of our “See Now, Buy Now” fashion show where consumers can instantly buy what they see, all via mobile devices.
The pace of e-commerce doesn’t seem to be slowing: the industry is expected to grow by 20 percent annually in China over the next five years—twice as fast as in the US and the UK. This growth will be driven not only by increased individual spending but also by an expected influx of hundreds of millions of new consumers, many from smaller cities and rural areas, who have yet to go online.
China is not only big numbers, but also an interesting market to look at to get a glimpse into the future. A good example of this relates to what at Alibaba we call New Retail, an integrated omnichannel model that uses technology and data to merge online and offline shopping seamlessly, offering consumers a more personalized shopping experience, and increased efficiency in inventory management, product selection, logistics and the whole value chain.
When will a Tmall start in Europe? Why are markets and consumers ready for it?
Tmall is the leading business-to-consumer (B2C) platform enabling businesses worldwide to reach China’s vast and growing consumer market. We currently have no plans to create one in Europe and remain focused on helping European businesses successfully enter and thrive in China.