Young Chinese consumers looking for international brands present an untapped opportunity.
Alibaba’s marketplace for international brands, Tmall Global, wants to help small and medium-sized US brands sell to young Chinese consumers at a time when international travel is limited, and demand for unique international products is high, building itself up as a global rival to Amazon.
Tmall Global is hosting its first-ever “Pitch Fest” for US brands to apply to sell on its marketplace, in time for Singles Day, the 11 November annual shopping event whose gross merchandise value on Alibaba reached $38.4 billion last year.
Singles Day sales in China are larger than Amazon Prime Day, Black Friday and Cyber Monday, combined, marking a hefty opportunity for struggling US brands. Tmall, which entered the US market in 2014 and established teams in New York and Los Angeles in 2017 to help guide US brands toward selling to the Chinese market, doesn’t directly compete with Amazon in the US, but by building relationships with its brands, it is setting itself for global competition.
“They are not pitted against each other right now in terms of the consumers they serve, but they are running into each other in India and Southeast Asia,” says Gartner managing VP Danielle Bailey, who leads the firm’s Asia-Pacific sector. “China is surpassing the US as the largest retail market in the world, and Alibaba is the largest business-to-consumer platform in China. People underestimate Alibaba in terms of what it represents on a global stage.”
Amazon and Alibaba are, however, competing for scale and prestige, she says. “Alibaba is more sophisticated than Amazon. That is where the competition aspect of it comes in — the perception as the global e-commerce leader.”
Tech giants have been increasingly working to appeal to small and medium businesses; while often positioned as an altruistic partner amid economic uncertainty, tech companies also rely largely on small businesses to achieve scale. In May, Facebook introduced Facebook Shops with the goal of helping small businesses sell online; 75 per cent of Facebook’s $70 billion annual ad revenue comes from small businesses. And Google, in June, made someGoogle Maps advertising features free for small businesses.
In September, Amazon will hold its first Amazon Accelerate conference for small businesses, which will include a talk by president of fashion Christine Beauchamp on building a brand in Amazon’s store. Earlier this year, Amazon launched Common Threads, a CFDA initiative bringing small fashion designer brands to Amazon, a first for the platform known for lower-priced clothing. “Accelerate will help small businesses find new ways to grow and expand while also creating new connections,” said Jeff Wilke, Amazon CEO of worldwide consumer business, said in a statement.
Alibaba is more sophisticated than Amazon. That is where the competition aspect of it comes in — the perception as the global e-commerce leader.”
For Tmall, the pitch fest is an effort to publicise its opportunity and resources, Tony Shan, head of Tmall Global for the Americas says. Even if a company isn’t chosen, it will be beneficial to initiate the conversation with interested brands. “It’s tough times, and brands might be looking for ways to grow and looking for other channels. It’s a way for us to provide an opportunity for them to think about whether going international is something they want to do,” Shan says.
Selected brands will be “fast-tracked” to selling on the marketplace, with advice on product selection, pricing and marketing for the Chinese consumer; use of Tmall Global’s overseas fulfilment programme, in which products are shipped out of Los Angeles; and access to sales and customer preference information.
“We’re seeing a huge demand from Chinese consumers looking for international products. Especially from our younger customers, the late millennials and Gen Z consumers, they’re more into global cultures and like to buy things that they cannot find in the local Chinese market,” says Shan. “There are so many great brands and businesses in the US, covering all consumer categories that we think would really appeal to Chinese consumers.
Alibaba has 874 million mobile monthly users, and its Tmall Global is the largest cross-border business-to-consumer marketplace in China.
© Alibaba Group
It’s also a moment to position the company as a proactive, friendly player at a time when Donald Trump has come after big Chinese tech companies, specifically TikTok and Tencent-owned WeChat, but this could extend to others, including Alibaba. Some experts worry this might lead to patriotic sentiment among Chinese consumers, but Alibaba CEO Daniel Zhang said last week that Alibaba’s pursuit of making “it easy to do business anywhere” is aligned with the interests of China and the United States. “We are closely monitoring the latest shift in US government policies towards Chinese companies, which is a very fluid situation.”
Tmall is working to fill out some sub-categories. In apparel, there is interest in athleisure, and in beauty; “Instagram-driven” beauty brands with high-quality ingredients and vibrant colour cosmetics are in demand. The ideal brands, in addition to having already navigated domestic e-commerce, will be unique either in their brand story or the product itself.
China has become an influential market for brands amid the global pandemic, initially due to lost sales to the Chinese consumer and now because it is one of the first regions to recover. “China was the first in and out of this crisis for brands operating there and continues to have fast growth in its middle class. There’s a huge untapped potential for small and medium-sized businesses who have yet to take advantage,” says Gartner’s Bailey.
The beauty opportunity is perhaps even larger than fashion’s, Bailey says. “They are always looking outside their border for product trends. They are a very sophisticated consumer, always looking for what’s next,” adding that a small to medium-sized business that “took hold there” would be at a significant advantage. For many popular brands, she says, there is a chance that Chinese consumers are already talking about it and someone might be selling it without the brand knowing it.
In 2019, Kim Kardashian West participated in Singles Day with a live streamto introduce KKW Beauty to the platform. West’s KKW perfume stock garnered 13 million viewers and sold out in minutes. In the past three months, more than 100 US brands have joined the platform, which is more than double the number during the same period last year. Recent US brands to the platform include skincare brand Supergoop, cosmetics brand ColourPop, athleisure brand Avocado and basics brand Everlane.
Bailey says that for fashion and luxury brands, the Chinese consumer represents about 40 per cent of all global luxury sales. Wealthy consumers, she says, are “going to move beyond the Guccis and Louis Vuitton that everyone knows. They are looking for niche fashion brands to display exclusivity”.