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Alibaba and JD.com Partner with Smaller Rivals as E-Commerce Growth Slows

As e-commerce growth slows in China, industry heavyweights Alibaba and JD.com are partnering with smaller rivals to capture new segments of the market.

by Ker Zheng

Last year’s Singles Day sales growth dropped from 36% to 27%, a sign that growth is slowing in China, the world’s largest e-commerce market[1].

New internet user growth is plateauing, and in response, powerful online marketplaces Alibaba and JD.com are strategically partnering with popular smaller competitors like Vipshop and Little Red Book to capture new niches.

This collaborative approach represents the future of China e-commerce, as it becomes clear that one platform can't satisfy everyone's online shopping needs. US brands looking to enter China ought to take notes as they seek to differentiate themselves in an increasingly crowded market.

Alibaba Partners with Little Red Book for its Trusted Peer Product Reviews

While Alibaba’s Taobao platform excels at selling low- to mid-end women’s apparel and accessories, it struggles with appealing to higher-end customers. This is because Taobao, as a marketplace for hundreds of thousands of third-party sellers, has long been plagued by reports of fake goods and fake product reviews.

To improve consumers’ perception of Taobao products, in December the platform began incorporating peer product reviews from Little Red Book, a popular online social community with over 100 million registered users.

On the platform, users post Pinterest-like content about their experiences traveling or using products such as cosmetics and face cream. The reviews can be either negative or positive, and Taobao's algorithms decide which ones are shown.

innisfree taobao little red book.jpg

An Innisfree product on Taobao displays product reviews from Little Red Book. Source: Jiemian

Since Little Red Book started out as an overseas travel community platform that later shifted to e-commerce, its content tends to be more original and trustworthy, elevating the platform in the eyes of many Chinese female consumers.

Alibaba led Little Red Book's $300mn Series D financing round in June 2018, and this newly function represents a deepening of their relationship with each other.

Alibaba Partners with Mei.com, Yoox Net-a-Porter to Target Luxury Customers

Alibaba has also had trouble getting consumers to buy luxury products on its platforms. So in 2015, Alibaba invested over $100 million in Mei.com, a leading flash-sales site offering higher-end European brands[2]. Mei.com now has a direct link on Tmall's front page and benefits from its large base of organic user traffic.

Additionally, in 2018 Alibaba inked a partnership with luxury retailer Yoox Net-a-Porter, pledging to help the global luxury goods platform set up its own e-commerce business and lending its IT and logistics infrastructure. In turn, e-commerce platforms Net-a-Porter and Mr. Porter are setting up shops on Alibaba's Luxury Pavilion page on Tmall. YNAP will contribute its global expertise and wide selection of luxury goods.

tmall luxury pavilion.jpg

Tmall’s Luxury Pavilion store. Source: Luxury Pavilion

JD.com Builds a Global Retail Alliance to Attract More Female Customers

JD.com has long struggled to appeal to the female consumer, as the company made its claim to fame by selling electronics to predominantly male customers in Beijing’s famed Zhongguancun tech district.

While females account for a majority of e-commerce consumption across the industry, on JD.com they comprise a minority[3]. They’re willing to buy basic FMCG products such as baby lotion and diapers, but are more reluctant to turn to JD.com for higher-end beauty and luxury products, which is a key weakness given that these products have much higher margins.

JD.com has sought to make up for this by investing in and partnering with:

   -   Farfetch (global luxury goods platform, June 2017)

   -   Vipshop (women’s apparel & luxury flash sales site, Dec 2017)

   -   Meili (livestreaming + 18-24 yr old female apparel, Jan 2018)

   -   Secoo (online luxury retailer, July 2018)

These four are part of JD.com’s global retail alliance, and act as a bulwark against Alibaba, which built an early advantage in the womens’ apparel sector.

These partnerships are a win-win situation for both JD.com and its partners. JD.com can provide substantial logistics support with its in-house, nationwide JD Logistics network of warehouses and fulfillment centers. This enables merchants to store goods closer to customers, and fulfill orders within 1-2 days –faster than Alibaba’s Cainiao network of third-party logistics providers.

In turn, JD.com benefits from a wider product selection and data insights on women’s apparel and luxury items, which it can use to improve its merchandising selection, as well as fine-tune its product recommendation and advertising algorithms.

Lastly, Vipshop and Secoo both have large stores on JD.com’s platform, where they can benefit from exposure to JD.com’s large organic user base.

jd vipshop flagship store.jpg

Source: JD.com’s Vipshop Flagship Store

Key Takeaways

1.     These partnerships show that even the largest, most well-funded e-commerce platforms can't cater to every customer group out there. There will always be a place for smaller players that can serve a niche better than the big mainstream players.  

2.     Data is a key aspect of these partnerships. Obtaining access to data on a customer segment that’s not currently being served well can help improve product recommendation and advertising algorithms, as well as point out which items are selling and not selling.

3.     Foreign brands new to the market should first focus on the higher end of the market and serve a niche that domestic competitors on the big platforms can’t appeal to as well. Having an official brand website or WeChat mini-program store can go a long way in communicating your brand story to the customer



[1] Liao, Rita. “Alibaba sets new Singles’ Day record with $31B in sales, but growth is slowing.” 11 Nov 2018. TechCrunch. Retrieved 18 Feb 2019 <https://techcrunch.com/2018/11/11/alibaba-singles-day-2018-31b/>

[2] “Alibaba Group Announces Strategic Investment in Mei.com.” 7 Jul 2015. Business Wire. 13 Feb 2019 < https://www.businesswire.com/news/home/20150707006648/en/Alibaba-Group-Announces-Strategic-Investment-Mei.com>

[3] Rapp, Jessica. “China e-commerce contender Vip.com takes on JD.com and Tmall for slice of fashion pie.” 17 Oct 2018. South China Morning Post. 13 Feb 2019 < https://www.scmp.com/lifestyle/fashion-beauty/article/2168768/china-e-commerce-contender-vipcom-takes-jdcom-and-tmall”


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