According to founder Jack Ma, China’s internet behemoth Alibaba is set to become the world’s fifth largest economy by 2036. In fact a large proportion of China’s retail shopping is driven by mobile and is said to be “racing ahead” of US and other markets in merging the online and offline worlds.
With such grand ambitions and scope, what can the West learn from Alibaba? The Drum hosted a coffee morning with speakers from Oban International, Future Thinking, Portas agency and Rakuten to discuss how retailers in Europe should be approaching their retail strategy and what, if anything, can be learnt from Alibaba.
The panellists agreed that Alibaba is storming ahead in the retail sector with the UK and the rest of Europe lagging behind. Part of the reason is a “mentality dissonance” – consumers in the West are not quite ready for the advent of mobile shopping.
Oban International’s founder, Greig Holbrook put down Alibaba’s success to having “good social credit” with businessmen who are familiar with Alibaba’s offering.
“Jack Ma came to the states and was really pushing Alibaba into America. No disrespect to Americans but they are not the most international looking. But while many of the business people in America know of Alibaba, this is not the case in the UK or the rest of Europe,” he said. “When you talk to retailers that use Alibaba, many of them are starting to say it has a lot of power over us.”
On the flip side, the Chinese retail market can be a hard nut to crack – which is where Alibaba comes in handy, Rakuten’s senior account manager, Clodagh Ryan acknowledged.
“It’s a very different digital landscape and consumer buying behaviours. [The West] can really learn from the innovative technologies Alibaba is using like integrating gamification and Artificial Intelligence (AI)”.
She added: “They are really putting the consumer first and learning how to personalise experiences through data and engaging with the consumer in a way that no one else is really doing at the moment.”
Should Black Friday be rejuvenated like Singles’ Day?
The discussion then turned to China’s popular annual holiday event Singles’ Day - the de facto anti-Valentine’s Day. The event is so huge that last year alone, shoppers spent more than $25 billion smashing records. According to The Guardian, the retail event is now nearly four times larger than Black Friday and Cyber Monday, the biggest retail events in the US. Any guesses to who is the host? Alibaba of course.
Speaking about the success of Singles’ Day, Future Thinking’s research director, Noreen Kinsey said Alibaba has done an amazing job of building up anticipation to the big day - the entire experience is fun and not solely focused on shopping.
“There is so much razzmatazz that it’s about the event as much as its about people finding the bargains. On the actual day there is a big gala with American stars performing. It’s just huge that retailers can just piggyback off.”
Portas head of strategy, Richard Danks agreed with Kinsey about Alibaba instilling a sense of excitement into the act of shopping. “A really good thing about Singles’ Day is that its not only focussed on discounts. There is this sense of fatigue with Black Friday because retailers have realised its cannibalising sales and its not really paying off long-term for brand profit. For me, it’s more of a sustainable event than something like Black Friday,” he said.
Will Europe soon have its own version of Alipay?
Alibaba’s payment wallet Alipay has 450 million registered users worldwide. While the West has similar services (Apply Pay, Google Pay) there is stiff competition to dominate the payments market. US retailer Walmart recently ditched Alipay in favour of Tencent’s mobile payments app in Western China.
Danks sees huge potential in Alipay to gain insight into consumer behaviour. “Westfield in Stratford city has about 70 or 80 million visitors a year and tourism is a really important aspect of that. China is the number one go to market in terms of driving tourism to Westfield. So by integrating things like Alipay into systems, it provides real insight into Westfield around customer behaviour. All of that helps in reaching more customers and driving more footfall.”
Holbrook concluded: “One thing they have done really well is integrating technologies into so many services, whether its existing ones offline or online, across big to independent stores. Alibaba has done a really good job of connecting so many different systems.”
In the fight to go global, how does Alibaba stack up in the fight against Amazon?
Amid a tough retail environment, online giants Amazon and Alibaba are continuing to swiftly gain ground. But they have largely avoided any kind of direct competition by dominating different parts of the world and operating different models. The panellists warned the audience of giving into “temptation” to start comparing the two. “After all, to be successful in China, you have to have some support directly from the Chinese government,” said the self-confessed conspiracy theorist, Holbrook.
When asked the question if this could change as the two giants expand their international footprint, he said: “It's interesting to see how Amazon launched as B2C first and then built businesses at the back of it. Alibaba did it the opposite way starting B2B first. From a customer point of view, especially when we’re thinking about small businesses in the UK, this is a bit of a challenge from a B2B perspective."
He continued: "Alibaba is a brilliant platform to find a supply chain in China which can help them scale. I just wonder if that's slightly at odds with the sorts of small businesses being built today. And whether what Alibaba is looking for is a big sourcing base in China or is the real trend around that closer to home, a more specialist production? It will be interesting to watch.”
Danks concluded that changing consumer trends and needs need to be taken into account when looking at the rise of these e-commerce giants – and to be aware of different cultural habits such as the rise in lifestyle events or the increase in community-run shops. “In the West, the shopper approach towards less, but better might be a little bit at odds from the ‘Alibaba scale’ in China."
Watch the highlights below.