Alibaba is finally making its move on Europe, after years of reconnaisance and strategic planning. As a global e-commerce marketplace, Alibaba’s AliExpress still lags in third place behind Amazon and Walmart. In an effort to gain on its main competitor in Europe, Alibaba is recruiting sellers by undercutting Amazon sellers’ fees.
So far their gambit is having mixed results. Small businesses are signing up in droves but some larger brands are holding back.
AliExpress has had limited success with well-known European brands like Mango, Benetton and Spanish fashion group Tendam, owner of Cortefiel. according to Reuters. The latter two companies do sell on Amazon.
A question of brand reputation
Some of the brands perceive AliExpress as a marketplace mainly for cheaply priced imitation goods or “fast fashion.” There’s apparent fear that it could dilute their own brand reputations to appear in the same marketplace
One of them, speaking anonymously to Reuters, said its brand needed to be in an “aspirational environment”. Another brand representative diplomatically described the AliExpress platform as “a work in progress”.
Alibaba is using the Chinese cultural practice in business that prescribes patience in these situations. It says that foreign brands just need time to understand the platform.
The company has initially targeted Spain and Italy, plus Russia and Turkey, under a first-phase business model launched in 2010.
Towards a virtual “mall” concept
Until recently, Alibaba has focused on selling inexpensive Chinese products overseas through AliExpress–things such as $3 USB cables and $2 crystal earrings. The result has been to limit its appeal to a wider audience.
But in the last six months, the company has been moving away from the concept of a virtual bazaar full of market stalls, towards the concept of a more upscale virtual shopping mall full of stores with their own merchandising displays, point of sale advertising, and branded imagery. With space to design their own stores within the platform, brands can build their own homepage, with pictures and video, to create the feel they want.
This highly profitable model of virtual malls that is what has enabled Alibaba to swallow more than half of online sales in China.
“Overseas sellers have a better understanding of local users, [and] their products have better designs as they are closer to local users,” the head of AliExpress, Wang Mingqiang, told Reuters.
Monthly Fees Waived
AliExpress has waived monthly rates for sellers in Spain to attract their business, while commissions for goods sold are set at 5% to 8%, according to a senior source close to the company.
By comparison, it costs 39 euros per month plus sales tax to sell on Amazon, plus a 7% to 15% commission for every item sold. Some items like jewelry and Amazon device accessories command even higher rates.
Thousands of small businesses have signed up to register on AliExpress in Spain since it was opened up to local sellers in 2019.
Though Alibaba didn’t give a specific number, that would compare favorably with Amazon, which said more than 8,000 small Spanish businesses sold on its platform in 2018.
In one of AliExpress’s most high-profile signings so far, Spanish department store El Corte Ingles said in June it would boost its presence on the platform to seven fashion lines.
Some European brands see that AliExpress has been associated for a long time with only Chinese products, but they recognize the compay’s aggressive growth strategy and support for brands as an opportunity.
It’s just a question of time.
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