In the days leading up to Alibaba’s enormous Double 11 sale, more widely known as Singles’ Day, vitamin business Blackmores took out a giant ad in Times Square to promote “Australia’s most trusted brand.”
The ASX-listed company doesn’t sell its products in the United States but used the premium New York advertising real estate to generate buzz on Chinese social media to help push sales through its stores on Alibaba’s Tmall and Small Global marketplaces.
The marketing tactic demonstrates the sizeable investment Australian companies are making to appeal to China’s growing middle class. As the world’s largest ecommerce market, China represents a huge opportunity for Australian businesses which can successfully navigate the rapidly changing and “most advanced digital economy in the world.”
For Blackmores its planning paid off. The company surpassed its entire 2016 Singles’ Day sales figure in only two hours, ten minutes and eight seconds.
This year 63 Australian merchants, representing 252 brands, participated in Alibaba’s 11.11 shopping festival.
Australia recorded its best performance to date ranking as the third highest selling country (outside of China) behind the United States and Japan. Last year, Australia ranked fourth, and fifth in 2015.
Although Alibaba doesn’t reveal how much money Aussie brands made this year, the value of products from bought Australia was up 127 per cent, year-on-year.
Speaking during a panel in Shanghai prior to the start of the sale, Blackmores Managing Director, Asia, Peter Osbourne said foreign businesses need a strategy that can evolve with the pace of change in the China market otherwise you are just “get left behind.”
“One of the challenges for the China market for any brand is the speed of evolution of the market,” Osbourne said.
“This is the market that leads the world when it comes to digital engagement. This market moves so fast and is faster than any other market we’re involved in around the world. The ability to have a strategy that constantly evolves and changes is really important,” Osborne said.
“As a brand you’ve gotta be here and deeply engaged in the market and monitor that constant evolution.”
Christina Zhu, President Greater China for New Zealand dairy co-operative Fonterra, agrees the “digital economy in China is probably the most advanced by far.”
“China is by far Fonterra’s largest and most important market — the largest market in terms of volume, in terms of value, in terms of cash generation and certainly in terms of growth,” Zhu told Which-50 in an interview in the lead up to the sale.
The sheer scale of the market, advances in fintech, internet penetration and fierce competition to please consumers sets the digital economy in China apart from the rest of the world, Zhu said.
“The obsession with consumer convenience, the consumer experience is unparalleled in China,” Zhu said.
Zhu said the relationship with Alibaba had a big impact on the New Zealand company, forcing it to move faster and disrupt itself.
“More important to me is having that external partner who’s running so fast and is so formidable that they are putting pressure back on your own organisation to pick up the speed, push ourselves out of our comfort zone, to disrupt our own business model and how we do things.”
“Something that would probably take two years we are now doing in three months.”
Alibaba in Australia
John O’Loghlen, Director of Business Development for Alibaba in Australia and New Zealand, puts the success of Australian brands during Singles’ Day down to experience in the market and deeper relationships with Alibaba following the opening of its Australian office in Melbourne.
“We are in a really fortunate position, most of the big brands on there have already had an 11.11 before, so they know what to expect in terms of preparation,” O’Loghlen told Which-50 in the hours before the sale began.
Alibaba’s Australian office, which the company refers to as an “embassy”, opened in February but the business has been active in the local market for almost two years, building relationships between Australian companies and management in Alibaba-headquarters in Hangzhou.
“If you are selling to Woolworths you better make sure you go to [Woolies head office] Bellavista a lot,” O’Loghlen said.
“It’s really important we have the offices down in Australia because you really have to be well connected into China to make sure you are aware of all the platforms,” O’Loghlen said.
Alibaba’s Australian strategy not only involves getting more Australian brands onto its platforms to sell into China, but also introducing businesses to more and more Alibaba services, including Alibaba Cloud.
O’Loghlen said Alibaba’s most sophisticated clients are working out it’s not about being on one platform.
For example Blackmores “works with pretty much every part of the Alibaba universe,” Osborne said. That includes Tmall, Tmall Global, Tmall Direct, AliHealth, Southeast Asia marketplace Lazada and a strategic blockchain project around food safety.
Alibaba’s marketplaces aren’t the right fit for every business. Australian online cosmetics retailer Adore Beauty closed its Tmall Global store after a six month trial and Which-50 has spoken to other companies including pharmacy Amcal and South Australian fashion retailer BNKR which both chose to enter China with standalone websites, instead of a marketplace store front.
O’Loghlen said it’s possible for foreign businesses to test their products in the Chinese market with a small number of products using Alibaba’s infastructure, but “don’t expect to make any money from that.”
“It’s not some short term flutter in China to make a whole lot of cash. You need to be confident that you can really then apply the resources afterwards if it does garner interest,” O’Loghlen said.
“Then we need to have a second conversation about are you prepared domestically in Australia to do that? Because a lot of companies they are not prepared, they don’t have the balance sheet for it, they might not have the right human capital to get to that next level.”
Why Alibaba isn’t Amazon
Despite having boots on the ground in Australia, Alibaba has demonstrated no interest in going after the wallets of Australian consumers.
Amazon, which Australian businesses have used as an export platform, now plans to open a retail and marketplace offering targeting Australian consumers. Alibaba, on the other hand, says it’s keeping its Australian operations business facing.
“We don’t play in each other’s backyards and that’s why Alibaba tries to distance itself from Amazon and particularly around concerns they are going to come in and affect the retail landscape adversely in Australia,” Alibaba’s John O’Loghlen told Which-50.
“India is one of the few markets where we actually overlap with them through some investments in the leading players in both camps there.”
O’Loghlen said Alibaba’s consumer-facing platforms Alibaba.com and English-facing platform AliExpress are “a meaningful business” but “it’s not a big focus for us.”
“A lot of that product, particularly from Alibaba.com, is B2B2C. We think a lot of it winds up on Gumtree, eBay and Catch in Australia.”
A Global Singles’ Day?
At the close of this year’s Singles’ Day sale, Alibaba CEO Daniel Zhang said the event would become “bigger and more universal in years to come.”
Alibaba has set itself the ambitious goal of serving 2 billion consumers by 2036. To do that it needs to expand beyond China and build relationships with consumers elsewhere in the world.
Which-50 asked Alibaba co-founder and executive vice chairman Joe Tsai if he believed there was an opportunity to export Singles’ Day to other international markets.
“The short answer is yes, because exporting this festival around the world means that we will develop the capability to serve consumers not just in China but all over the world,” Tsai answered.
Rather than bringing Singles’ Day to a market like Australia, which would clash with Remembrance Day, it’s more likely to arrive in India and Southeast Asian markets where Alibaba has investments in consumer-facing businesses.
“Alibaba has international expansion strategy that is currently focused, very much focused on, developing economies,” Tsai said.
“The reason is, if you look at our history and look at our capabilities and experience, we grew up in China in the context of a developing economy. Some of the characteristics of lack of infrastructure, lack of legacy systems, sometimes it’s actually an advantage for e-commerce.”
“We see some of these same characteristics in, for example, Southeast Asia, for example, India, so those are the countries that we’re inherently focused on in terms of reaching consumers outside China,” Tsai said.
As Alibaba expands globally, that gives Australian businesses an entry into other international markets such as Indonesia, Malaysia, Philippines and Vietnam. In that instance, the relationship would be with Lazada, which Alibaba now has a controlling stake in.
“We have finally taken a controlling stake in Lazada; they are the first mover and the major player across those ASEAN markets,” O’Loghlen said.
“Over time the plan is to move key accounts across to Lazada so they can access the consumers in that market because it’s the same problems and challenges they face in getting into that market as it is in China.”
Tess Bennett travelled to Shanghai as a guest of Alibaba.