A recently conducted survey by Frost & Sullivan finds that only two out of 10 U.S. and foreign retailers believe they are penetrating the world’s largest retail market: China.
According to the survey, “Over 80 percent of surveyed U.S. and foreign retailers see China as a lucrative market, as affluent Chinese consumers seek quality products from overseas. However, only 20 percent of retailers feel confident in their capability to succeed in China’s e-commerce market.”
If you’re one of the many businesses seeking to gain entry into China but don’t know how, you might want to take a closer look at how Alibaba is building its brand with affluent Chinese consumers. As we have blogged, Alibaba is one of the Big Three firms, along with Baidu and Tencent, that dominate the retail landscape in China. We believe that the key to succeeding in China is to make BAT (Baidu, Alibaba, and Tencent) a central focus of your strategy. You can’t win without understanding how to play ball with BAT. They’re building off their lock on the Chinese retail market to stronger inroads with different consumer segments.
Alibaba, for instance, is penetrating the market for luxury in China. As Alibaba’s President of Tmall Fashion & Luxury Jessica Liu told research firm L2, Alibaba is relying on its own Tmall online marketplace to crack the code of affluent consumers. Indeed, Alibaba has launched a Tmall Luxury Pavilion and livestreamed a fashion show ahead of Singles’ Day focused on premium and luxury brands available on the platform, among other efforts. And Tmall is not the only online marketplace where the action is, with rival JD.com also zeroing in on the affluent consumer.
L2 reports that only 24 percent of luxury brands are present on Tmall. So why is Tmall so important? Because Alibaba owns it. As we have reported, Alibaba, Baidu, and Tencent have created self-contained, proprietary ecosystems for doing business, and online malls are elements of those ecosystems. Sooner or later, you’re going to need to build a beachhead in each of the BAT ecosystems to thrive. As Liu told L2,
Consumers do not go to other platforms to search for something when they want to buy. We are actually the number one purchasing search engine in China. Consumers not only search in our platform, but they also find new products because we have very good machine learning to find the consumer’s potential demands. Our front page has a lot of channels to expose new recommended products. The traffic of recommendation is now the same as the traffic of search. It’s all personalized.
To be sure, her comments are not terribly surprising given her role. But her insight reflects our experience helping businesses succeed in China: you have to go deep with each ecosystem to thrive, and Alibaba’s is the dominant one. And Alibaba, in turn, provides a lot of value, including rich data about its customers.
In addition, the fact that Tmall has a low penetration in luxury gives a Western business an opportunity to grow a business as Alibaba does. Alibaba is not trying to maintain an already-strong marketplace – it’s turbocharging its growth. Now is the time to get involved in Tmall as Alibaba places a more aggressive program to accelerate growth mode.
We suggest businesses view China through the lens of their own people, processes, and platforms. We call this lens the BAT Framework. The BAT Framework gives businesses a way to navigate the different ecosystems that Baidu, Alibaba, and Tencent have built. Check out our framework and contact us to succeed in China.