Retailing in the Week Ahead, Week 11, 2019

Kantar Consulting’s parent company WPP hosted an ‘Alibaba Europe’ day in London on 7 March 2019.  Kantar Consulting was there – in fact, KC’s Malcolm Pinkerton delivered an eCommerce trends-based presentation at the event. To nobody’s surprise, the number one audience question was: “When will Alibaba be coming to town?”

Ever since Alibaba took a majority stake in Southeast Asia’s eCommerce juggernaut Lazada in 2016, rumours have been circulating that ‘BABA’ would be investing in European platforms. These rumours were enhanced as BABA sent delegation after delegation into Eastern Europe to scout out logistics centres and sign warehousing agreements with local dignitaries. AliExpress Russia began opening physical collection centres in Russia, furthering the notion that what BABA’s founder, Jack Ma, calls ‘New Retail’ would soon be travelling from Moscow, Istanbul and Athens to the heart of Europe via multiple supply chain depots in a relatively short space of time.

Fast-forward to 2019 and BABA’s New Retail impact has still not really been felt in Moscow or St Petersburg, let alone Prague, Berlin or Budapest. So just why is that? Did the world misunderstand BABA’s strategy or is BABA behind schedule?

The answer is mostly the former rather than the latter. As WPP’s Millward Brown BRANDZ team points out, BABA has a good branding problem. When you mention Alibaba to the average consumer, global recognition is high, and immediate associations are made with the founder Jack Ma and with New Retail.

However, when it comes to understanding Alibaba’s actual businesses, brand recognition outside of China is relatively low. Alibaba has multiple businesses encompassing payments systems, Cloud computing, advertising, global logistics, import/exports, wholesale, online marketplaces and, to some extent, retail shops. These platforms are not as well-known as the parent company - Alipay, Taobao, Tmall and Cainiao are names many consumers in Europe do not recognise.

So, what does this all mean for retailers and suppliers in Europe and other parts of the world? Let me break the Kantar Consulting perspective into three myths and two truths:

  • Myth #1: Alibaba is a retailer. Alibaba’s team said it themselves – the company’s goal is not to ‘own’ physical inventory like most retailers; rather, they want to use technology to make retail better for the consumer, faster for suppliers and more efficient for retailers, particularly SMEs across the supply chain.
  • Myth #2: Alibaba is a consumer website. Alibaba does not have a consumer-facing website called Alibaba – each website they do have has a different brand name and a different operating model. The biggest opportunity for European retailers and suppliers remains establishing a presence on Tmall to sell Western brands to Chinese consumers or to work with Taobao to get Chinese household brands represented in innovative ways.
  • Myth #3: Alibaba’s biggest business in Europe is AliExpress. AliExpress is big and growing in Europe, but Alibaba’s logistics network, Cainaio, payment network Ant Financial/Alipay, and Cloud services platforms are all generating more cash and profits than AliExpress and are also growing rapidly in Europe.
  • Truth #1: Alibaba wants to come to Europe. This should not be in doubt and while it is unlikely to happen in 2019, do not rule out Alibaba buying some websites, like they did with Lazada, to speed their expansion and impact in Europe.
  • Truth #2:  Alibaba is Chinese. Unlike many multinational companies that desire to become truly ‘global’, Alibaba continues to promote a Chinese-first strategy. This is important in considering just how they will be represented in Europe in 2019, 2020 and beyond. The saying, ‘When in Rome’ does not apply to BABA, at least not yet.

If you haven’t had the chance, please register for our upcoming eCommerce workshop in Amsterdam, at which Alibaba will be a guest presenter. The link to learn more is here. And with that, as always, we encourage you to click on links to some other great pieces of work we published on Retail IQ in Week 10:

In addition, if you get a chance, please share your thoughts or questions on Alibaba, or any other topic. Good luck in the week ahead. 


Ray Gaul – and @KantarConsulting or @RayGaul on Twitter plus LinkedIn.

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