Cross-Border Update: Alibaba

Original image by Clker-Free-Vector-Images

In the summer of 2022, I wrote extensively about cross-border e-commerce from China. Since there have been many developments in this area since, I will publish a series of articles on the initiatives of various companies. This week we have a look at what Alibaba has been up to.

Alibaba hasn’t had an easy 2022. Plagued by China’s zero-covid policies that dampened consumer spending and facing increasing competition from Pinduoduo and Douyin, it has shown close to flat sales in the past year.

For the first time, Alibaba (and its competitors) did not release any sales figures after Double 11 (Singles Day). That should tell you something about the current state of e-commerce growth in China. With saturation in internet and e-commerce penetration the years of easy growth are far behind. The rectification of anti-competitive behaviour by the company hasn’t made business any easier either.

While the strategy in the domestic market is shifting towards customer retention, Alibaba is looking at overseas markets to move further towards its long-term goal of servicing 2 billion global customers.

Reorganisaing overseas business: AliExpress & Lazada

It has become clear that the company is planning to give its overseas business under AliExpress higher priority than it has had in the previous 12 years of its existence. In a previous article we already discussed some of the shortcomings of AliExpress’ global business, which started as a B2B platform in 2010 before changing to a B2C platform two years later. Because of fierce fights for the domestic markets of new retail, local services, payment, community group buying (link in Dutch) and rural e-commerce (link in Dutch), AliExpress was never been a priority.

It was obvious that something needed to change at AliExpress. Until 2018 it had shown only a fraction of the repurchase rate that Taobao reached in the domestic market. For too long the company was focussing too much on GMV, pageviews and unique visitors, not customer experience. The latter proved to be poor for people shopping on AliExpress.

Early 2022, the former president of Alibaba’s domestic platforms Taobao and Tmall, Jiang Fan, took over Alibaba’s overseas businesses (which accounts for 7.6% of Alibaba’s overall revenue). He reorganised the various cross-border platforms (AliExpress, Lazada, Trendyol, Daraz and B2B platform into one business unit. One advantage was that merchants selling on these platforms no longer needed to bother with separate platforms anymore. Jiang also moved AliExpress’ European operations into Lazada, which has become responsible for expanding the network of local merchants.

While it might seem an counter-intuitive move to make Lazada, which Alibaba acquired from Rocket Internet in 2016 and previously focussed primarily on 6 South-East Asian countries, responsible for business in Europe, hard figures might explain this move. While Lazada’s GMV is only slightly lower than that of AliExpress, the latter covers 200 countries and has more monthly active users.

Jiang Fan has been quoted saying that globalisation would be Alibaba’s most important growth strategy for the next 10-20 years. He intends to improve AliExpress’ business through better user experience, independent operations in key countries and central teams responsible for high-quality goods. Rules towards merchants will also been tightened, just like they have been on domestic platforms a few years ago.

While AliExpress struggles, Alibaba is continuously pouring extra money into Lazada. In 2022 it made three investments with a total worth of more than $1.6 billion. James Dong, a former assistant of Alibaba CEO Daniel Zhang, was named Lazada Group’s CEO. It’s its fifth CEOs in 5 years.

All these reorganisations still need to pay off. The quarterly financial results that Alibaba released in August 2022 showed no obvious growth in its overseas business. International retail even declined by 3% to RMB 10.5 billion. Sales at AliExpress and the Turkish platform Trendyol decreased, while Lazada compensated part of this with growth. But Lazada’s growth rate slowed down in the June – September quarter, while international retail grew 3%.

Differentiating from AliExpress: Miravia

In the meantime, the first European Lazada initiative has arrived.

In 2021 Alibaba launched the strangely named Shein clone allyLikes. Not much was heard of it since and while it is still operational, the website shows Spring Collection 2022 in its tab name while the homepage still displays a prominent Black Friday banner at the time of writing. Not to mention that the location-based Dutch homepage shows another slide for the Christmas collection that is partially written in Spanish. It doesn’t look like anybody is paying much attention to this webshop, consumer nor staff. Even the almost exclusively negative reviews largely seem to have dried up in the second half of 2022.

In November Alibaba launched a new platform in Spain: Miravia, available as website and app in Spanish and English. Despite the English version items can only be shipped to Spain and when creating an English profile, you still receive Spanish e-mails. Miravia’s Facebook page was already created in May 2022.

Besides clothing, Miravia sells products in the categories beauty care, home & garden, leisure, toys and electronics. It even has da supermarket category with some 4.000 SKUs of packaged goods at the time of writing. These seem to be mostly, if not all, local Spanish brands and some international brands like Ariel and candy brand from Mars Masterfoods.

Of course Miravia is offering new customers a coupon, in this case a 30% off discount with a maximum of €20 on orders of at least €10. The website also offers flash sales.

While offering free shipping for selected items with orders above €10, the terms and conditions mention a strange rule requiring you to pay shipping costs exceeding €25 if your order is sent in multiple packages. It seems strange to make the customer responsible for the way his order is shipped…

According to Yuguo (link in Chinese) Miravia has been positioned as an e-commerce platform with top brands providing mid-to-high-end products. As such, the target audience will be consumers with high purchasing power. Indeed, there are a number of international brands active on Miravia, so it looks like it has been set up to solve the problem of big brand names not wanting to join AliExpress. Spain is one of AliExpress’ most successful markets and the platform has been trying, mostly unsuccessful, to convince well-known local and international brand to sell on AliExpress. The thought of being associated with a platform for cheap stuff from China didn’t really appeal to these brands.

The target audience might be affluent consumers, the website still lacks the look-and-feel of a premium platform and feels clunky.

Pandaily reported that as early as October, merchants received invitations to join the platform. Alibaba presented it as a new, independent B2C platform, operated by Arise Operating E-Commerce Private Limited. The latter is registered in the Lazada headquarters in Singapore. As such this seems one of Lazada’s first European initiatives.   

Whatever happens to allyLikes, Miravia has already replaced it as far as negative reviews is concerned.

Expanding into Europe and South America: Logistics

Alibaba’s AliExpress has been expanding its network of pick-up points across Europe. It was originally launched in March 2021 and has been operational in France and Spain. The pick-up service consists of AliExpress smart lockers or cooperations with local third party partners. AliExpress was aiming to have 47.500 pick-up points by the end of 2022. The majority of these would be located in Spain, France and Poland and operated by local logistical partners and cover 80-95% of major cities.    

In November, Cainiao, Alibaba’s joint venture with a number of logistical partners, announced plans to expand in Brazil. Besides 1.000 smart lockers for delivery of food and packages in 10 cities, it plans to build nine distribution centres in the next three years, as well as a Latin American headquarter in Sao Paolo. Alibaba’s competitors Kuaishou and Shein have also marked Brazil as a priority target market.

Cainiao is also improving its logistical capabilities for South Korea, in November opening the Yantai Export Preferred Warehouse from which orders can be delivered between two and half a day. 

A European offense from Turkey: Trendyol

Alibaba invested in the Turkish B2C e-commerce platform Trendyol in 2018 and raised its ownership share to 86.5% in 2021. Now Pingwest reports that Alibaba has bigger plans for Trendyol than just the Turkish home market.

Logistical lead-times have always been a challenge for Alibaba’s cross-border platforms. But with the strong manufacturing base that Turkey has to offer, the company thinks it will be able to use the country as a manufacturing hub and Trendyol as a platform for further expansion into Europe and the Middle East. 

Alibaba is planning to invest $1 billion into building a (presumably Cainiao) logistics centre at Istanbul Airport and a (presumably Alibaba Cloud) data centre in Ankara. It would be Cainiao’s second logistical centre after the one that went operational in Liege, Belgium at the end of 2021. Trendyol itself opened an office in Berlin in May 2022 and has plans to open offices in Amsterdam and the UK as well. Trendyol aims to sell €3 billion worth of goods in Germany by 2025, an ambitious goal considering its current GMV of €400 million. It also plans to build a new fulfilment centre to support the one it is already using in Poland.

As in Brazil, Alibaba is not alone in Turkey. Shein has already started manufacturing goods for the European market in the summer of 2022 and also operates a warehouse in Poland.

In the next updates we will discuss the cross-border activities of Bytedance (TikTok), (Ochama), Pinduoduo (Temu) and Shein.