Friday, 2022 August 12

Alibaba leverages customer-centric strategy to stay ahead in China’s e-commerce race

Earlier this year, Trudy Dai, head of Alibaba’s new China digital commerce unit, was tasked to lead the tech giant’s core e-commerce business in a new direction. Amid weakening consumer demand and intensifying competition, Alibaba is betting on consumer spending to spur growth.

While Alibaba now has 1 billion annual active consumers (AACs) in China—a historic milestone—the tech giant was also approaching market saturation.

To create a new pathway for business growth, Dai is launching a new content drive to boost user spending. The aim is to help merchants add value to their online offerings through the development of digital content to attract online traffic and drive conversions.

Currently, Taobao and Tmall have an in-built short video content channel, Guangguang, which allows merchants, influencers, and consumers to publish blog posts and make product recommendations.

Alibaba’s online merchants are also streaming live videos to deepen their user engagement and drive sales. In May 2016, the e-commerce giant launched Taobao Live, combining livestream broadcasts with e-commerce stores to allow viewers to watch and shop at the same time.

By incorporating live video content with two-way communication, livestreaming provides value to merchants by improving brand appeal and differentiation, and accelerating conversion.

In China, live commerce is a massive industry worth over USD 180 billion. In a 2020 survey, 66% of Chinese consumers said they had bought products via livestreams in the past year, based on a 2021 McKinsey research report.

In November 2020, Taobao Live reportedly generated a whopping USD 7.5 billion in total transaction value in the first 30 minutes of Alibaba’s Singles’ Day. In January this year, Taobao also started a campaign to help small and mid-level influencers boost sales with cash rewards and traffic support.

Moving forward, Dai has plans to divert more organizational resources toward content development. This move will help Alibaba’s e-commerce merchants improve their content strategies and increase sales leads and online conversions.

Eyeing the potential of generating more revenue, more brands on Taobao and Tmall have been creating new video content and starting their own livestreams. “So far, we have seen good results by connecting livestreams and online shops that have entailed the use of short video content,” said Yang Guang, president of the Industrial Development and Operation Center of Taobao and Tmall.

Alibaba’s push into consumer engagement content is also evident from the launch of its content-centric app, Taibang, in April this year. Integrating community with e-commerce, the social app allows users to communicate with each other while sharing fashion content. The tech conglomerate began testing the fashion app with the aim to reach young generations, especially Gen Z. Currently, it is still in beta and requires an invitation code to access.

Nevertheless, the content-focused approach faces hurdles. Some Taobao merchants may be less willing to build and develop a content strategy, which can take considerable time, effort, and costs to foster engagement with online customers.

There is also a lack of quality content among Taobao and Tmall merchants due to low awareness of brand identity and innovation. While some merchants can build their own brands and sell directly to urban middle-class consumers through video streaming, others are unable to keep up with younger, savvier urban streamers backed by professional production crews. Some Taobao retailers also find it difficult to engage with online customers due to a lack of social media savvy.

With a growing need for Alibaba to transition to content-driven commerce to fuel growth, Alibaba has poured millions into initiatives to increase merchant support. In August 2021, Alibaba announced that it was reinvesting some of its profits into various aspects of its e-commerce business, such as merchant support and streaming commerce.

As competition heats up in China’s e-commerce landscape, user experience is another key element to boosting sales revenue and business growth. To retain online customers in the long haul, e-commerce retailers must provide a frictionless customer experience with a high-performing search platform, accurate product descriptions, and easy returns, according to a recent research report by Ernst & Young.

To support the development of Alibaba’s e-commerce unit into a consumer-centric organization, Dai sought to enhance Taobao’s commerce infrastructure. “Taobao’s entire business philosophy involves honoring the delivery of goods, which is an important factor for front-end funneling,” she said.

To this end, over the past six months, Dai has been fine-tuning organizational work processes to ensure that e-commerce operations were more service-oriented. These include providing refunds to customers within seconds when products are not delivered and simplified procedures for online store closures.

Daniel Zhang, Alibaba’s chairman and CEO, said, “We should help more sellers achieve capital flow, and find ways to effectively transport goods, conduct logistics, and honor contracts.”

To create an improved customer-centric experience for online users, Dai also streamlined business operations of the digital commerce division. These included a major restructuring of the back-end operations of Taobao and Tmall in January this year.

Through the reorganization, Dai attempted to align Alibaba’s technology capabilities with the renewed strategy by creating a seamless workflow from order placement to delivery. At the same time, the integration of Taobao and Tmall allowed Alibaba to reap the benefits of a central inventory management system and ensure that delivery timeframes met customer expectations.

Dai also plans to further boost operational efficiency by simplifying sales promotions and improving pricing policies and logistics management.

Meanwhile, Dai must find new ways to meet the growing demands of Chinese consumers and unlock the next wave of retail growth. A potential growth driver, she suggested, is Alibaba’s 88VIP loyalty program. She said the average revenue per user of VIP members is 800% that of the average user.

This article was adapted based on portions of a feature originally written by Tan Xiaohan and published on Wuji Ciaijing (WeChat ID: wujicaijing). KrEurope is authorized to translate, adapt, and publish its contents.

KrASIA Connection
KrASIA Connection
KrASIA Connection features translated and adapted content published by 36Kr.com, the largest and most influential tech portal in Chinese language.
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