After 2020 it is almost a certainty that the way we shop has changed forever.
The COVID-19 pandemic forced consumers to turn to online shopping in a way the world has never seen before, subsequently requiring brands to change and redevelop their digital offerings at a rapid rate. Luxury brands have had to quickly adapt and take on new business models to ensure they can provide the experience customers expect and are looking for, even when they can’t always visit a store.
In China, the bounceback after COVID-19 has been incredible, and the Chinese luxury market is expected to account for half of global luxury sales by 2025. With a market that sees more digitally savvy shoppers than anywhere in the world, they are quickly becoming leaders in e-commerce and the rest of the world is watching closely. Retail and e-commerce specialist Alibaba is carving out a new space for luxury brands looking to develop internationally in China. While many businesses struggled this year Alibaba saw the global pandemic as a great opportunity to progress and develop into new spaces, working with international companies to slimline their digital processes and enter the market in China. Alibaba looks at new ways that luxury brands can get maximum exposure online and provide customers with a new experience that doesn’t deter from the experience they are used to in stores. They are encouraging brands to develop a “China strategy” and “digital strategy” to move their businesses forward post-COVID-19 and it seems many are taking following the lead. China’s e-commerce marketplace is the largest in the world and is being driven by its younger consumers who want more from e-commerce than just a “click and shop” experience. To find out more about how China is leading the way in e-commerce and the steps Alibaba is taking to support international luxury brands we talk to Michelle Lau, Alibaba, Senior Strategic Partnership Manager.
2020 was a strange year, to say the least – what has changed in the strategy of Alibaba moving forward?
COVID-19 and geopolitics have disrupted normal life and created uncertainties throughout 2020, but Alibaba Group is well-positioned to support the recovery and growth of international brands by working with them to succeed in China. In terms of Alibaba’s strategy, this remains unchanged and the pandemic has only further focused the business mission to support businesses globally ‘to make it easy to do business anywhere’. Digitalisation remains the greatest opportunity of our time and Alibaba is well-positioned to help brands capitalise on this by further digitalising their businesses. We believe a China-strategy and a digital-strategy will be more than absolutely critical for success for brands in the future.
What is a lesson learnt from 2020?
COVID-19 rapidly accelerated the speed at which consumers and businesses adopted digital platforms. Every business needed an online presence to survive and consumers shopped with those that were able to deliver the best online experience. This trend is expected to continue through into 2021, as retailers will work harder than ever to create unique and entertaining online shopping experiences in a bid to keep their current customers engaged while also attracting new ones.
Recent figures have shown great growth in the company – where do you go from here?
The core commerce business will continue to grow as Alibaba connects with more businesses and helps them to realise the benefits that trading internationally can bring – during the last quarter alone Alibaba’s cross-border platform Tmall Global experienced a 37% YoY increase in revenue. China’s economy has bounced back to pre- pandemic levels and high levels of consumer spending present great opportunities for brands, both from within China and overseas, to capitalise on. Globalisation will be another key driver of growth. At the moment, Alibaba serves 1.07 billion active annual users but its overall goal is to serve two billion customers, create 100 million jobs and help 10 million SMEs be profitable by the fiscal year 2036. Increased globalisation will be a key factor in delivering on this target.
Can you share with us some of the ways Alibaba is helping to support other businesses globally through this difficult time?
Due to the COVID-19 travel restrictions, there has been a growing demand for imported goods amongst Chinese consumers. International brands have been looking for a trusted partner to provide a channel for their products to reach China, and Alibaba’s expertise in consumer analytics, logistics, and marketing has helped businesses to expand into the world’s largest e-commerce market.
For last year’s 11.11 Global Shopping Festival, the sales extravaganza spanned two sales periods from Nov. 1 to 3 and Nov. 11. The extended sales period was to give brands and SMEs more exposure and opportunities to reach consumers. As China looks to be closer to the tail end of the coronavirus pandemic, 11.11 was a major growth driver for merchants. Ahead of 11.11, Tmall Global worked with international brands to bring over 2,000 international brands to the shopping festival and incubated over 2,000 in-demand overseas products, with the aim of each surpassing a GMV of RMB 1 million.
How do you think the shift to online shopping was accelerated in 2020?
The pandemic has rapidly accelerated consumer adoption of online shopping but it is not just a case of people spending more time online – their expectations when they get online have also changed significantly. Consumers don’t just want a quick and easy online shopping experience; they’re increasingly looking to be inspired, entertained and educated. In response to this, we have seen some brands launch their own live-streaming platforms, allowing consumers to interact directly with the brand and ask questions about new and upcoming products. We have also seen brands focus much more on ‘shoppertainment’, for example – fitness-related brands have launched exercise classes for their customers, and food retailers have partnered with chefs to offer online cook-a- longs. Consumers have spent more time online during the pandemic and as a result, their thirst for entertainment and knowledge has significantly increased.
What can you share with us on the coming months into 2021 at Alibaba?
Christmas and the New Year will see more shopping festivals, as consumers look to take advantage of deals and discounts only available for a short period. While Chinese New Year falls in mid- February and the months ahead of that will be another peak period for e-commerce. We’ll also be continuing to work with the 2,600 new international brands we welcomed to the Tmall Global platform as part of this year’s 11.11.
What do you think is the role of e-commerce and digital platforms for luxury brands?
Following a slow start to luxury sales in China due to COVID-19 lockdowns at the beginning of 2020, spending on luxury in the country has rebounded strongly as restrictions to global travel have pushed Chinese consumers to make luxury purchases domestically rather than abroad. Through the pandemic, we have seen the global luxury market shrink by 23 per cent in 2020 as economic and social considerations have limited access. This means that e-commerce and digital platforms have never been more important for luxury brands, who may have traditionally relied heavily on delivering memorable customer experiences in store, to reach existing and new customers.
One of the most exciting trends has been the way that luxury brands have developed and strengthened their connections with consumers both online and offline. We have seen them test new ideas during the last few months and the pandemic has created an environment for luxury to test, learn and grow.
For example, this year Gucci launched its own live-streaming platform that allows its personal shoppers to video call their most important customers from their Florence showroom, talking them through their latest collection and making recommendations on what they think that customer would like. Offering this level of bespoke service online has allowed them to maintain a close relationship with their customers, while hundreds of their stores were closed across the world.
Can you share a little about the digital marketplace in China and how it differs from the rest of the world?
China’s e-commerce marketplace is the largest in the world and is being driven by its younger consumers – mobile-first, tech-savvy, and curious, they are attracted to unique and new shopping experiences and look to retail as a form of entertainment. Shopping in China cannot be divided between online and offline, the two are completely intertwined and almost indistinguishable. This blending of offline and offline is the core of Alibaba’s New Retail concept.
New Retail is built on China’s digital-first approach to commerce because it largely leapfrogged the bricks-and-mortar buildout seen in the West and moved quickly to online. Omnichannel, however, is the West’s attempt to tack digital services onto its longstanding bricks-and-mortar infrastructure, to deliver to consumers the shopping efficiencies that they have gotten used to online. But as omnichannel operations grow in sophistication and the customer experience becomes more seamless, “the vision of New Retail is closer to becoming a reality” in the West.
How do you strive to provide a customer experience through your platforms when not physically being with the customers?
China has for several years pioneered this form of interactive online shopping and live-streaming has fast become the norm for e-commerce in China before the pandemic. In the fiscal year ending March 31, 2020, the gross merchandise volume generated from Alibaba Group’s Taobao Live platform grew by over 100% year-on- year and live-streaming proved to be essential for customers and brands during lockdown as a channel to interact and connect directly. It is a unique tool that allows you to sell anything, from fashion to travel services, street food to real estate. Its interactive nature allows customers to make product inquiries instantaneously, which in turn helps brands increase conversions compared to traditional e-commerce. For brands, the tool is also valuable since the direct feedback from customers can inform their future merchandising.
These live-streams have been largely hosted by KOL (key opinion leaders) but one change we saw during the pandemic is the number of brand owners hosting live-streams. Their in-depth product knowledge means they can share detailed insight into both the brand and the products. We also saw Chinese department store, Intime train more than 5,000 sales associates to host live-streams meaning they could still reach customers at home. The retailer said over 90% of orders placed through live-streaming came from new users.
What are the biggest challenges you are facing as a company today?
Order conversion and delivery time have been negatively impacted recently by challenges in cross-border logistics presented by the COVID-19 pandemic, but this situation has already started to improve. The pandemic has presented near-term challenges to the development of Alibaba’s businesses across the board, but at the same time we will see opportunities created by the forces of change.
What can you tell us about the company’s mission to exist for 102 years?
Alibaba was founded in 1999. If the company lasts for 102 years, it will have operated across three centuries, something founder Jack Ma set out as an objective at the company’s formation.
You recently partnered with Farfetch and the Richemont Group – what can you tell us about the strategies behind Alibaba’s global partnerships?
The reasoning behind Alibaba’s latest global partnerships is to provide luxury brands with enhanced access to China and to speed up the digitisation of the global luxury industry. The Chinese luxury market – which is expected to account for half of global luxury sales by 2025 – consists of hundreds of millions of young, digitally- native consumers. By partnering with Farfetch and expanding Alibaba’s existing relationship with Richemont, it will accelerate the digitisation of the global luxury retail industry and transform the luxury shopping experience for consumers.
What can you tell us about Alibaba in The Middle East?
Alibaba’s mission is to make it easy for companies to do business anywhere. Alibaba is looking forward to helping more businesses from across the Middle East realise the opportunities that accessing the China market can bring.
What is a message you would send to businesses who are currently struggling to stay afloat?
With the different existing digital platforms, it is possible for all business whatever their size to sell their products internationally. There are several leading economies across the globe that are back in growth and creating great opportunities for brands with the right products. It is important to do research and look to see how you can build an export strategy into your business plan.