May 30, 2017 Industry news
Terry von Bibra, General Manager, Alibaba Europe addressed the GS1 UK industry conference and spoke about the opportunities and challenges of the Chinese market.
Launched in 1999, Alibaba started life as a B2B listings company in China and it is now the world’s largest trading platform for businesses and consumers.
The growth of the Chinese market
Terry talked about the huge growth in the Chinese consumer market, stating that from 2016 – 2020 “the consumer market in China is set to grow by the same size as the entire UK consumption”. So where is all this growth coming from? Firstly, there’s the change in the Chinese consumers themselves. Terry stated that in the last 30 years, “no other group of consumers have gone through such dramatic development”. Not only in terms of personal finances, but also in their expectations, lifestyle and changing tastes. The parents of today’s young consumers faced very little choice and a scarcity of branded products. But today, the quality of life and opportunities are very different.
Now Chinese consumers are some of the most demanding and differentiating in the world. They can buy so much more and there are more products available to them, to meet this ever-increasing demand.
The internet and Chinese consumers
From the vast population of China, there are 731 million internet users. That‘s almost the same size as the entire population of Europe. Crucially though, that figure only equates to 53% internet penetration. When you compare this to the 92% of internet users in the UK, it’s easy to see just how much potential growth there is in China.
Terry also touched on the big differences in consumer behaviour. In the UK and Europe, brands will offer the whole omnichannel experience for their customers. But this approach “is not relevant for the Chinese consumer”. Here, consumers go straight to the online marketplaces, rather to traditional stores or branded websites. The marketplaces in China are perceived as reliable, providing the best product offerings.
Chinese consumers are also far more likely to purchase on their smart phones than any other device. Terry mentioned that 82% of their GMV, (gross merchandising volume), was made on a mobile device, on Singles day 2016.
Alibaba and GS1
Alibaba is now part of a group of many websites and platforms, including Tmall and Taobao, and had an annual GMV of $485bn in 2016. However, Terry stressed that Alibaba do not actually deliver any of the 57m packages they send a day. They do not own their own warehouses or logistics channels. They prefer to work with partners and this is where GS1 standards are vital, as Terry explained, “To work with partners, I need standards. We don’t want to create our own world – we want to work with partners and for that you need standardisation.
“The work of being able to create global standards …and the importance of traceability and trust are key topics for us. Trust is the most valuable thing we as a company have.”