Ecommerce offers a cheaper and faster way to market in China
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On November 11, Todd Fryhover, president of the Washington Apple Commission, joined China’s Singles Day celebration for the first time, hoping to sell 1.2m apples from Washington State in 24 hours.
To help him out was the marketing juggernaut of Alibaba, the Chinese ecommerce company, where Washington apples are sold through branded website Tmall, one of a number of foreign food brands that are finding a ready market in China amid health scares over domestic produce.
Singles Day, which began as a student celebration of singledom in the early 1990s, was reinvented by Alibaba in 2009 as a mass festival of conspicuous consumption, and more and more foreign companies are joining, hoping to use the holiday as a marketing exercise to get their brands out to the Chinese public.
Mr Fryhover wants everyone in China to have “a repeatable, wonderful experience on Washington apples”. China is number six on the list of 60 countries that import apples from Washington’s 450 growers, but he thinks it will be number one by next year.
He may be right. By midnight, as a video billboard in Alibaba’s Beijing auditorium showed, $14.3bn of merchandise had been bought via Alibaba’s platforms in 24 hours.
Western companies are increasingly turning to online commerce, a cheaper and faster way to get to market than setting up store chains or penetrating the opaque retail market in China.
To do this they are learning to love China’s internet conglomerates, informally known as BAT — Baidu, the search company, Alibaba and Tencent, the social media and gaming company. The three have begun to dominate economic life in China with amazing speed, doing everything from retail to finance to transportation, and moving into healthcare and even agriculture.
In just a few years, the BAT conglomerates has been able to monopolise every aspect of daily life that could conceivably be put on the web and sold to the public. “They all want to own the customer, they want to be with them every second of the day, when they watch a video, chat to their friends, buy groceries, or go to a restaurant” says Chris DeAngelis from the Beijing-based Alliance Development Group.
China’s internet giants are becoming what analyst Anne Stevenson-Yang of J Capital Research calls “tech Keiretsu”, referring to the national champions that dominated the Japanese economy in the 20th century with interests in multiple industries. “When companies are this big in China, the difference between public and private is not that important,” she says. “For all intents and purposes these companies have become the ministry of the internet.”
But fierce competition means foreign sellers have many options for courting Chinese middle class buyers who are looking to buy imported goods abroad due to concerns about home-made counterfeit goods.
Alibaba offers a number of options for sellers, including the free eBay-like platform Taobao, which is basically an online flea market. Most big brands set up on Tmall, which resembles an Amazon market place, a platform where big brands can set up stores and have more control over their sales and supply chains. Tmall’s first store from a fortune 500 company was Procter & Gamble, launched in 2008, which has grown 100 times since then, according to P&G vice-president Jasmine Xu.
This year on Singles Day Ms Xu says that P&G made its first Rmb100m ($16m) in six minutes, compared with eight hours last year. “[Tmall] is a key platform to drive brand building in addition to sales,” she says.
Some merchants have been loath to list on Alibaba, however. It gets vast online traffic, but the pressure to discount and the prevalence of fakes means it is “hard to protect a brand on Tmall,” says one consultant.
But there are plenty of alternatives. JD.com, Alibaba’s rival, which is increasing its market share, has attracted a number of brands to its online store.
Meanwhile, waiting in the wings is Tencent’s social media app WeChat, which has more than 500m users and is growing rapidly. Fearful of flooding the app with advertising and products, Tencent has been holding back on “monetising” WeChat.
But advertising on WeChat is just one way of getting attention, and many companies have found they can win huge marketing success simply by using WeChat for word-of-mouth marketing.
Fans of English country living, for example, can join a WeChat group devoted to Aga cookers, the iconic English oven brand, watch videos about cooking on an Aga, swap messages about it, and, thanks to the software which embeds the store in the chatroom, even buy one on impulse.
“WeChat is unusually versatile; its better than Facebook, better than WhatsApp for marketing,” says Jim James, head of EastWest Public Relations in Beijing, which designed the Aga WeChat group.
“China in many ways is more switched on to the internet than other countries which have had it for longer.”