BAT 2.0: Alibaba
Brand & Content Management Guide – Part III
This guide is part of the 2020 BAT Series. BAT – formerly consisting of Baidu, Alibaba and Tencent – continues to evolve and shape global technology trends. For the new decade, Baidu is out, ByteDance is in. BAT 2.0. ByteDance. Alibaba. Tencent. This changing of the guard reflects the culture of Chinese internet consumption. Mobile-first app ecosystems have fully replaced platforms previously described as ‘western-clones’. BAT 2.0 are leaders of innovation.
The Chinese digital landscape is hyper-fast and hyper-social, with familiar big names such as Google, Facebook, Amazon and Netflix excluded from the market. As such, China’s online world has diverged from the internet as we know it in the west – a ‘splinternet’. US tech giants now imitate features from their Chinese counterparts, with the two world’s rarely colliding. Western brands regularly clash with imitators in and disseminating from China. For success in China, brand owners must learn to navigate the online environment of the world’s largest manufacturer and exporter of pirated goods.
In 2020, BAT 2.0 command domestic digital dominance, and are increasingly reaching out from national constraints to exert influence over international digital culture. This guide provides an understanding of each BAT member, recognising the vibrant land of opportunity for commercialising brand assets whilst appreciating the flip side – the brand protection risks. Continue reading below to learn more about Alibaba – the company behind the world’s largest ecommerce website and mastermind behind the world’s largest shopping sales holiday.
When it comes to Chinese ecommerce the Alibaba Group is unavoidable, from dominating the domestic market to offering cheap goods to the world over. Chinese customers have higher expectations from ecommerce platforms, always demanding new, innovative features with a frictionless user experience. Alibaba has outclassed rivals in terms of creating a seamless shopping experience, from pushing customised product listings to users to integrated payments and rapid delivery. In some areas, Alibaba has been the innovator, other times the giant has copied successful features and services from rivals to neutralise any possible advantage.
The challenge for Alibaba now to extend reach beyond the mature markets already dominated by the Group. Shoppers in tier one cities treat Taobao and Tmall as an extension of their social life, spending on average over 20 minutes per day browsing through an unending list of products. The three key areas identified by Alibaba for continued growth are: connecting online-to-offline experiences (O2O), increasing penetration in lower tier cities and international expansion.
The plan to connect physical stores with digital experiences, or leveraging physical stores as part of the logistics of ecommerce is what Alibaba is calling ‘new retail’. Alibaba does not sell directly to customers, but provides tools for third-party merchants to enable mass scale commerce activity; creaming off transaction fees and charging for ad services. Providing real time analytics to physical stores to help them with inventory management fits the Alibaba approach to commerce.
Moving into lower tier cities is also closely tied to this approach, where infrastructure is less developed so physical stores can be utilised as part of the supply chain and interface with customers. Upstart rivals including Pinduoduo have had significant success by targeting lower tier cities, another factor driving Alibaba’s increased efforts to improve penetration rates in this area.
Alibaba founder Jack Ma has long spoken of a global vision behind the Group’s philosophy. The original ecommerce platform Alibaba.com was designed to connect Chinese sellers to the global market. International expansion seems to be the logical next step, with high growth economies being the main targets.
The Alibaba Group is much more than just ecommerce, with this guide focusing on four key business areas of the Group: commerce, payments, cloud computing and video streaming.
The Alibaba Group’s ecommerce offering is a collection of platforms. Some are domestic-facing, and some are international. However, across all, Alibaba does not directly sell items to customers. This approach partially explains how Alibaba dominates the digital advertising space in China extracting around a third of total spend; whereas Amazon struggle to achieve double-digit market share of advertising spend in the US. Alibaba provides the platform for merchants to grow their own digital empire. Central to the approach is reducing transaction costs, meaning removing barriers for SMEs to create a store and providing tools for merchants to gain visibility and build a profitable business. This section will break down the different platforms by niche to help brand owners understand the culture of each platform and facilitate both brand building and brand protection activities across the Alibaba Group.
The world’s largest ecommerce platform, third most visited website in China – only beaten by offerings from traditional BAT rivals Baidu and Tencent. Taobao is a domestic consumer-to-consumer marketplace, providing the tools for merchants to sell their wares to the widest possible reach. Taobao is a hyper fast marketplace, full of opportunity for merchants and brands alike. The flip side to such digital vibrancy and mass reach is the proliferation of counterfeits, knock-offs and piracy. Taobao is a domestic-facing platform, therefore sellers must be based in China and brand owners can only rely on Chinese IPR to enforce infringing listings. This means a knock-off Birkin bag can only be removed from Taobao if the listing infringes a Chinese registered trade mark, design patent or other Chinese registered IPR. Brands often overlook this point and struggle with brand enforcement efforts on Taobao. Given the size of the platform and the fact it is in China – the world’s largest producer of counterfeits – Taobao must be considered as a core part of any brand protection strategy.
Selling on Taobao is extremely competitive and complex, product description pages are fully customisable, with sellers often including extremely long description with many images. Page sizes are far bigger and longer compared to western ecommerce platforms, feeling more akin to a social media feed when using the Taobao mobile app than an ecommerce platform. Carefully crafted listings are vital to drawing traffic, along with all the reputation tools which attest to the seller’s creditability and maintaining high ratings from buyers. To succeed on Taobao, merchants must balance organic visibility mechanisms and utilise the Group’s digital advertising tools.
Tmall trails to only Taobao in China, although Tmall listings can be accessed via the same domain as Taobao – Taobao.com, or on Tmall.com. Tmall offers a more curated experience for brands and businesses to connect with customers. As such, the platform is not as agile or hyper active as Taobao, although compared to western ecommerce platforms, Tmall is still a whirlwind of activity. Another domestic-facing platform. Therefore, to operate as a merchant on Tmall the company must be a registered entity in China with a business licence. There is Tmall Global, which enables non-Chinese entities to sell into China, however, the lower user base makes it a far less attractive proposition.
Tmall is the home of major brands in China, with the only other competitor in the space being JD.com – the Tencent backed B2C platform. As part of the battle for luxury shoppers, Tmall launched the Luxury Pavilion, a dedicated exclusive section for brands which rely on exclusivity. The three big luxury conglomerates Louis Vuitton, Richemont and Kering all reside on the Pavilion, tapping into the luxury hungry Chinese millennials and Gen Z demographic. To boost the luxury offering, Alibaba purchased the cross-border ecommerce platform Kaola. This move increases Alibaba’s reach with wealthy buyers, a position of existing strength for Alibaba through the Tmall brand. This strengthens Tmall’s dominance of the high-end ecommerce segment, further pulling away from JD and preventing rival Pinduoduo from obtaining a foothold in the segment.
Given the focus on attracting major brands, merchants on Tmall are subject to stricter vetting requirements. This comes with a few knock-on effects, including higher selling fees, a seemingly higher burden of proof when filing IP infringement cases and more severe punishment for merchants who are found to be offering knock-offs. Highly rated sellers on Taobao are given similar protection, with observed removal times being far slower than the average when rightsholders report listings from such merchants. In a way, it is logical to assume a merchant with little feedback and poor ratings is more likely to be offering knock-offs, and Alibaba have stated ratings and comments on listings are metrics considered by the proactive scanning tools used to automatically detect infringements. However, the burden can occasionally seem obstructively high when reporting Tmall stores or larger Taobao merchants.
Double 11 Shopping Festival
From the largest ecommerce platforms comes the largest shopping sales event: 11.11, known as Double Elevens Day or Singles’ Day. The Alibaba Group has lead the development of the ecommerce extravaganza, which generated over $38 billion in 2019. For months brand owners represented in China prepare for the November 11 shopping festival – formulating unique marketing ploys and discounts, and undertaking brand protection planning to ensure sales are captured by the legitimate distribution channels. The event is jumped on by brand owners and counterfeiters alike. An opportunity of this scale cannot be missed by brands, along with other shopping festivals, a large proportion of annual revenue can be generated in these compressed periods. Double 11 is more than just discounts, with fashion shows, celebrity endorsements and round the clock coverage resembling a Comic Relief telethon. For a practical brand protection guide to prepare for the event, see here.
The domestic B2B arm of the Alibaba ecosystem, with sellers offering items in bulk. 1688 is a portal to manufacturers, suppliers and factories for businesses seeking to build connections with wholesalers. Many Taobao merchants will purchase their wares from 1688 to sell onto retail customers at a mark-up. It can be a difficult platform to navigate from a brand protection perspective as the sellers offer incomplete items with many listings offer customisation options. Whilst this is normal practice for a factory to produce items to specification, it leads to a mass of knock-offs and lookalike products being offered which can be incredibly challenging for brand enforcement. It can be hard to distinguish between legitimate manufacturers from mass scale infringers. Often, brand owners will have to closely monitor 1688 as a form of intel gathering, which can potentially lead to offline enforcement if evidence is obtained to prove the factory is producing knock-offs. Alibaba has shown a desire to support brand owners with joint brand enforcement action, including supporting litigation against mass-scale infringers of IPR.
Resides on a subdomain of the main Taobao site, but optimised for the mobile-first generations through the app. Xianyu is what Alibaba calls ‘recommerce’ – basically a marketplace for second hand items. Xianyu was developed somewhat reactionary, noticing the growth of resale C2C platforms. Xianyu has grown rapidly, becoming an essential part of the ecosystem, supported by burgeoning ecommerce sales and a cultural shift. Younger, trendy consumers have shifted towards second hand purchases, no longer fearing being stigmatised for such preferences. Buying new was seen as a status symbol, a sign of wealth. Younger generations are still concerned with status symbols, partly driving the demand for luxury goods, but they are also more demanding in terms of keeping up with new trends and creating a unique look. More so than whether the item is second hand. With most western brands less aware of Xianyu, rightsholder led brand enforcement efforts are less prevalent on the platform. Infringers have been agile to this trend, shifting towards Xianyu to offer counterfeits and knock-offs in what is perceived as a safer environment, less likely to be detected and reported by the brand owner.
The original platform conceived by Jack Ma in 1999. Four years prior to Taobao being launched, Jack Ma believed there was a market to connect Chinese sellers to international businesses and created the Alibaba.com portal to fill the gap. The platform operates as an international B2B portal, essentially the international version of 1688. The early teething problems of the portal has shaped the developed of the Alibaba Group ecosystem more generally. The development of tools to facilitate communication and hold payments in escrow due to dispute resolution issues are now core parts of the ecosystem’s DNA. The international focus on the genesis ecommerce platform also provides some insight into the early outward looking nature of Jack Ma, and his desire to be a globally recognised force. An extension to this global outlook was opening Alibaba.com to US merchants. This is the first time non-Chinese merchants have been able to list on the platform. Further US plans were envisaged, however, trade war politics have led to a scaling back of implementations, although it is unlikely Alibaba’s ambitions have been curtailed. Alibaba will continue to push in the US once tensions have subsided.
The little sister of Alibaba, operating as an international B2B platform, with many wholesalers operating on both platforms. Often the manufacturers are also on 1688, but have obtained the necessary export license to operate on the international portals in addition to the domestic B2B arm. AliExpress also supports B2C transactions and has a distinctly retail feel to the website. Many manufacturers support single purchases or very low minimum quantity orders and so AliExpress is often used to source suppliers for dropshippers and small retail businesses. The Group is undertaking an interesting experiment with AliExpress, recently opening up the platform to non-Chinese merchants. Now, international sellers from Russian, Turkey, Span and Italy can sell on AliExpress to a global audience. This fits into Alibaba’s global growth strategy, testing different markets, with the option likely to be opened up to additional markets in time, and potentially Alibaba.com too. IPR infringement submissions can be conducted on both Alibaba.com and AliExpress using non-Chinese registrations, given the international exposure of the two portals. This facilitates brand protection action for rightsholders, although, the issue with manufacturers that was mentioned above for 1688 also applies in the same manner to both international portals.
Lazada is one of the most popular ecommerce platforms across South-East Asia, operating in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Founded in 2012, the Lazada Group sold a controlling stake to Alibaba in 2016 and is slowly being fully integrated into the Alibaba ecosystem. IPR infringements on any Lazada regional website are enforceable using the same portal for the core Alibaba platforms – the IPP Platform, click here for a comprehensive guide to signing up for the portal access and submitting takedown notices. The roll-out was delayed numerous times, however, now fully implemented, it has had a positive impact on enforcing infringements across the Lazada platform. Previously, brand enforcement conducted on Lazada could best be described as inconsistent and frustrating. Lazada is the market leader in many of the regions it operates within, but faces especially stiff competition in Indonesia. Lazada is battling another ecommerce platform Alibaba has heavily invested into – Tokopedia – for ecommerce supremacy.
The Alibaba Group’s Brand Protection Initiatives
Intellectual Property Protection Platform (IPP Platform)
Across all the mentioned platforms, the Group offers a single portal to submit IP infringement takedown requests. Takedown requests can also be submitted via email, although for brand owners should look to use the portal for a streamlined process. Alibaba goes to great lengths to promote the IP portal and holds regular events with brand owners, trade association and relevant local bodies to raise awareness about the work they do to protect IP. The portal is a vital tool for brands and brand protection professionals to enforce IPR across the Group. Any brand protection strategy should consider all Alibaba Group platforms, given estimates as high as 60% of items on Amazon from third-parties are thought to be sourced from an Alibaba platform. Even the domestic-only platforms have an international reach.
The portal is great for brand owners to submit, track and escalate IPR infringement issues. However, it can be difficult to navigate and understand the portal and policies which apply. The portal website “ipp.alibabagroup.com” provides training materials and is transparent policies, but the application of the policies can be difficult for those not experienced with the platform to understand the nuances. Plus, most of the training is regarding the setting-up of an account, rather than the application of policies, which is where most of the friction points arise.
A detailed understanding of the policies is vital when a place inside the ‘Good-faith Takedown Mechanism’ is at stake. Joining the good-faith system lowers the evidential burden required for submission, reduces the takedown time of reported issues and gives access to extra data to brand owners. To obtain these additional features a rightsholder must achieve a success rate of over 90% when filing over 100 submissions for a rolling three-month period. Smaller rightsholders can use a special admissions program through the AACA (see below).
The main issue with achieving this relatively easy sounding criteria is the sheer number of reason codes to select from when reporting an infringement. If a rightsholder reports an infringing item but selects the incorrect sub-reason code, even if under the correct main-reason category, the filing is counted as an unsuccessful submission. If a new submission is made for the very same item, this time using the Alibaba-correct reason code, the original submission still remains on the record as unsuccessful, regardless of the item being taken down by Alibaba for IPR infringement. This is not trivial when the Alibaba portal has over three times as many reporting reason codes as Amazon or eBay.
The complexity and rigidness of the system is the prime reason brand owners struggle to meet the acceptance criteria, and the benefits that come with. Contacting a brand protection specialist is advised if inexperienced in using the portal or struggling to meet the good-faith acceptance criteria.
Alibaba Anti-Counterfeiting Alliance
Another initiative by the Group which has been an industry first is the creation of the AACA – an association of members, mainly brands and trade associations, to discuss IPR infringement issues across the Group. The AACA has vast industry backing including fast-moving consumer goods sector, luxury, fashion, automotive and a lot more. So far the focus of the AACA has seemed to be on recruitment of members and organisational structure. The success of the alliance will be judged over time by any positive changes made to help brand owners protect their intellectual property.
One notable success is the use of the AACA for relatively small brands and rightsholders to gain access to the good-faith program. Through links with trade associations and collectives, Alibaba has vastly extended the reach of the good-faith program, making acceptance more attainable than ever.
As previously noted, a key strategic area for Alibaba is connecting online-to-offline experiences. Hema is the flagship for Alibaba’s New Retail, bringing digital best practices into the physical world. Hema stores aim to maximise the efficiency of a supermarket by combining it with a logistics centre and even robotised restaurants.
For specific product categories, Chinese customers still prefer to visit a store i.e. fresh produce and seafood. In a Hema store, customers can go further than just eyeballing a crab to assess freshness and provenance; the scannable QR codes on every item in the store detail the source of the item, and information such as certifications for items which meet specific requirements. In a country that has a large counterfeit food issue, features to track product source provides a welcomed layer of assurance for customers.
Customers must use the Hema app, which integrates with other Alibaba apps, including Alipay to purchase the items. The check-out process requires customers to flash their phone in front of the scanner to complete the transaction. Customer preferences, habits and cross-platform data can be analysed to provide custom discount coupons or push notifications for relevant discounts.
The app also brings the digital shopping staples of reviews and price comparisons to the real world, augmenting the traditional groceries shopping experience. Labels also have a natural look, more similar to an eBook display rather than a smartphone, which provides uncanny realism whilst enabling live updates, for price changes etc.
Hema stores are not a zero-sum game between online and offline shopping, the aim is to drive both areas through customisation, engagement and platform lock-in. Customers can choose to use the app to order online and have in-store pickers prepare the order for immediate dispatching. Customers within a 3km radius of a Hema store can expect delivery within 30 minutes. Alibaba plans to open hundreds of stores, with the focus on highly dense urban districts. However, Hema should be thought of as a model for other stores to follow into digitisation, which would then integrate with the Alibaba ecosystem through Alipay. A closed-loop commerce ecosystem is the long-term goal.
To support the commerce ecosystem, Alibaba has invested heavily into logistics. Ensuring the first Double 11 delivery is made in under 10 minutes from the time of purchase. Taobao users have become accustomed to receiving goods in a few hours from purchase when buying from a merchant in the same city. As Amazon have shown in the west, rapid delivery does impact customer purchasing decisions. Cainiao is the logistics infrastructure behind the Group and is central to delivering the ambitious plan of all domestic deliveries being completed within 24 hours and even more ambitious target of 72 hours for international deliveries.
Another fundamental infrastructure element bundled into Alibaba’s commerce ecosystem is Alimama – the digital ad network which is one of the key revenue drivers of the Group. Unlike many other ecommerce platforms, Alibaba does not directly sell anything, revenue is generated from commission fees and selling ad services. Alibaba already dominates the digital advertising space in China. Alimama will continue to rapidly develop alongside the Group’s global and O2O strategies.
China leads the world in innovation when it comes to third-party payment apps. Alipay, and rival offerings from Tencent, have a stranglehold over the sector in the same way Visa and Mastercard dominate in the west. It is impossible to discuss Alipay or Tencent’s Tenpay in isolation, without making comparisons to the other. Most users of either app with have both apps installed.
With Alibaba owning the two largest ecommerce platforms in the country and accounts for around 80% of ecommerce the potential commercial user base leads to a big competitive advantage. Alipay has the upper hand in terms of gross merchandise value, measuring the value of all transactions made using the app, however, Tencent’s Tenpay has more users, benefiting from direct integration with WeChat.
Scanning QR codes has quickly become the payment method of choice for consumers in tier one cities, with many trendy locations no longer accepting cash or credit cards. This benefits Alibaba, as urban populations have higher rates of internet penetration and are already using Alipay on Taobao and Tmall. For Taobao customers, Alipay outside the digital world is frictionless, as they will already have the app installed and ready to scan QR codes to complete purchases. However, non-Taobao or other Alibaba services are more likely to use WeChat Pay, as WeChat is near ubiquitous across the country.
Alibaba understands of the importance the network effect has in tech industries and Alipay is central to the Group’s growth strategy to increase user base in lower tier cities and connecting online-offline experiences. To move beyond a payment app for Alibaba’s ecommerce platforms the company is promoting and attempting to develop Alipay into a “lifestyle super app”. Part of this process includes incorporating commerce directly into the app, which features adverts, special customised promotions based on preferences and location and even push notifications to remind users to use the app.
This push includes copying the mini program feature developed by WeChat. With Alibaba’s ability to get partners onboard Alipay mini programs is definitely an area brand owner should be exploring, especially industries which heavily benefit from tourism. International partners are being sought, with the promise of increased sales for companies which can accept Alipay and therefore cater to Chinese tourists. Given the links between Chinese tourism and sales of luxury goods, Alibaba is in a strong position to leverage international partners and build a global e-payments network.
Future Alipay customers could also be captured from offline stores, which are digitally connected, encouraging customers to install the app for special discounts and then use alerts and customised content to keep the user engaged with the app.
Cloud computing is yet another area Alibaba leads in China, with Alibaba Cloud holding around 43% market share in 2019. Again, the closest competitor is Tencent, with the equally functional name – Tencent Cloud, sitting in a very distant second place with just over 11% share of the market.
The growth of affordable cloud services has led to an increase in webstores being hosted in China which target non-Chinese customers. It is common to find websites offering counterfeit items being hosted on Alibaba cloud servers. Webstores offering for sale counterfeit items are a key brand protection risk diluting the online sales channel.
Alibaba Cloud has a specific webform dedicated to reporting intellectual property abuse, however, the on-page disclaimer does not provide much assurance to brand owners and content creators that copyright, trade mark and patent issues are treated with much regard. Whilst starting with a statement about respecting IPR, the disclaimer then makes it clear Alibaba Cloud will not remove infringing content and the webform is merely to forward the takedown request to their customer. Brand owners have reported mixed success using the webform to have infringing content removed or webstores suspended.
Alibaba’s online streaming platform Youku – one of the areas Alibaba falls behind traditional BAT rivals Tencent and Baidu. Youku purchased another streaming platform Tudou in an attempt to compete with Baidu’s iQiyi and Tencent Video. Youku, and Alibaba generally, are investing heavily into partnerships and licensing agreements with international sports to gain market share. Youku reportedly signed the most lucrative overseas licensing deal with the Premier League to show the 2019-2022 seasons. American football is also another area of heavy investment. Tudou, prior to being purchased and subsumed into Youku applied a technological market leading fingerprinting solution to prevent the re-uploading of copyright infringing content. The advanced feature supports Alibaba’s efforts to onboard major partners through efficient content protection mechanisms supporting digital rights management.
The focus on exclusive content is to convince users to attract new customers as the content is not accessible elsewhere, and migrate free customers to subscribers. Free customers have additional ads and a restricted level of content made available.
Youku has one major advantage over its larger rivals, the ability to leverage the most mature commerce ecosystem. Major sports teams benefit from merchandising, have dedicated Tmall stores and integrated cross promotions during seasons or events creates the frictionless experience Chinese consumers seek. Combining preferences from customers with their digital content consumption habits, then leveraging data analytics to target customers with promotional offers and relevant content step up on specially created webstores, which integrate with other highly interactive services is a dream scenario for marketers. Taking this a step further into push notifications of special promotions as potential customers pass by offline stores via Alipay and the future of commerce becomes scary.