Eye on eCommerce: Alibaba on China's growing middle-class shopper

Nearly 6,000 miles away, a completely different culture and a huge language barrier. Throw in a population of 1.4 billion – half of which are online – and China can be a pretty daunting prospect for UK retailers looking to break into Asia.

But Alibaba's UK director, David Lloyd, clearly thinks it is a huge opportunity. "People get hypnotised by what they perceive to be the complexity," he says. "But this is where we can help. The market is almost unique, with one player – us – the biggest eCommerce platform. We have an incredibly large marketing team and logistics which can get your goods from here in the UK all the way to China, and we help you navigate what the Chinese consumers want."

The growing Chinese middle class

And Lloyd wasn't exaggerating about the biggest eCommerce platform – Alibaba boasts 443 million annual active buyers on its platform, while 493 million people visit Alibaba's website from a mobile device on a monthly basis. With retailers and brands including Sainsbury's, Burberry, Liverpool FC, Holland & Barrett and Dyson all entering China using Alibaba's marketplace, which takes around 5% on sales made through its Tmall platform.

But where has all this monumental growth come from? Lloyd describes how the country is witnessing a growth of its middle-class population. "It's probably the biggest story in terms of consumption and business in the world right now," he says. "The Chinese economy was largely based on manufacturing and now it's moving to consumption. By 2020, the growth of consumption in China will be bigger than the total size of consumption in the UK."

He says Chinese consumers finding themselves with more disposable income are looking for better quality brands and products, and because of the increased penetration of eCommerce and mCommerce, they are looking overseas.

"There are also over 120 million outbound Chinese tourists every year – so double the population of the UK is leaving China for a holiday every year," explains Lloyd. "And when they go to the UK, US, Australia and beyond, they are experiencing brands and when they get home they want to buy these brands – just go to Burberry on Regent Street and see the number of Chinese tourists."

Mobile first

These consumers are also mobile first, the majority of which will have had their first experience of the internet on a smartphone.

"If you look at the development of the internet in China, when Alibaba was founded in 1999, only around 10% of the Chinese population was online. We've been an important part of the internet penetration in China," explains Lloyd.

He describes how, at the time, Chinese towns and cities did not have a lot of established retailers and malls available to shoppers. "So traditional retailers in the UK have had to adapt from offline to online, but here, eCommerce was more organised retail than the stores."

While UK consumers have had to experience eCommerce through desktops, laptops and then tablet and mobiles, Chinese customers were shopping directly through their smartphones making the devices integral to Chinese retail.

Around Singles Day – a Chinese shopping day held on 11 November, which reported a new record of $17.8 billion in gross merchandise volume in 2016 – Alibaba launched an augmented reality game, similar to Pokemon Go. Shoppers were encouraged to chase Tmall's signature cartoon cat using their smartphones, following it into shops and getting discounts in-store if they were playing the game. A staggering 70 million customers engaged with this commercialised game around Singles Day last November.

But Lloyd reassures British retailers and brands that they do not have to have the latest and best mobile offering in order to sign up to sell in China. If UK retailers want to open their own store on the Tmall platform, a TP (Tmall Partner) will be assigned to them to help them build, operate and market their eCommerce site. Meanwhile, brands and retailers who do not want to commit to a store, but can see demand from China for their products can work with Alibaba to supply their goods into the country on a B2B basis. While the latter option is limited and most retailers choose to open a store, as more and more retailers – especially smaller companies – set their sights on the country, Lloyd predicts this part of the business will grow. 

What’s Hot on Essential Retail?