Can't break the siege, what should Ali Overseas do?

On August 4, Alibaba (BABA. US) announced its results for the first quarter of fiscal 2023 (April-June 2022).

According to the financial report, from April to June 2022, Ali's revenue was 205.555 billion yuan (RMB, the same if noted below), with no year-on-year growth. Among them, China's commercial revenue fell by 1% year-on-year to 141.935 billion yuan, cloud business revenue increased by 10% year-on-year to 17.685 billion yuan, and international business revenue increased by 2% year-on-year to 15.451 billion yuan.

The decline in profits was significant. According to the financial report, from April to June 2022, Alibaba's net profit was 20.298 billion yuan, down 53% year-on-year; net profit attributable to common shareholders was 22.739 billion yuan, down 50% year-on-year.

Obviously, the decline in domestic commercial income of the main business has put pressure on Ali's profit space. The search for new growth poles is imminent.

On July 26, Daniel Zhang, Chairman of Alibaba's Board of Directors and Chief Executive Officer, reiterated Alibaba's three major strategies, namely consumption, cloud computing and globalization, in a letter to shareholders, "Our globalization direction is very clear, and it is precisely to explore the globalization of the consumer field and the globalization of the cloud computing field." ”

Ali's strategy of "globalization" has not changed since it was proposed in 2014. At present, of Alibaba's 1.31 billion global users, 903 million are from China and 305 million are from overseas. In order to achieve the goal of "serving 2 billion consumers worldwide by 2036", it is necessary to find users overseas.

However, at present, Alibaba's international business revenue has not yet seen an increase. From April to June 2022, Alibaba's international business revenue accounted for 7% of total revenue, and this figure was also 7% in fiscal 2022. In contrast, alibaba cloud business revenue contribution to total revenue rose slightly from 8% in the same period last year to 9%.

AliExpress seller Assi told Burning Dimension that in 2020-2021, he can sell 100,000-200,000 US dollars a month, but this year's monthly sales fell to 60,000-70,000 US dollars, "Affected by the Russian-Ukrainian war and the global economic situation, Europe also introduced a value-added tax policy, and aliexpress's performance is in a comprehensive decline." ”

In July 2021, the European Union issued a new policy announcing the removal of the import VAT exemption for products under 22 euros, which directly affects the scale of AliExpress transactions.

"In the June quarter, overall order volume from Lazada, AliExpress, Trendyol and Daraz fell 4% year-on-year, mainly due to changes in EU VAT tariff regulations, the depreciation of the euro against the US dollar, and the continued impact of supply chain and logistics disruptions caused by the conflict between Russia and Ukraine, which reduced AliExpress order volume." ”

In Southeast Asia, Lazada has continued to be under The Oppression of Shopee since 2019. According to Alibaba's financial report, from April to June 2022, Lazada's orders in Southeast Asia recorded a healthy year-on-year growth of 10%. In fiscal 2022, Lazada's paid orders grew 60% year-over-year.

Shopee, on the other hand, has significantly better grades. Shopee's first quarter 2022 results report, the total number of orders increased by 71.3% year-on-year. In addition, the platform ranks first in the total number of downloads in the global shopping app; In the Google App Store global shopping app, the total user use time also ranks first.

An industry source close to Ali told Yan Ciyuan that since the beginning of this year, Ali has integrated the overseas consumption field, and the base camp of cross-border e-commerce in the future is AliExpress, while the local consumption platform is Lazada, "The cross-border teams of Ali systems such as AliExpress and Taobao Tmall Overseas have been integrated, and the localization operation team is in Lazada." He pointed out that Trendyol and Daraz are still operated by the initial team, and Ali only plays the role of investor.

"The construction of the logistics system is the highest priority in the implementation of the globalization strategy." He revealed that in Alibaba's overseas business strategy, building a localized logistics network is the top priority.

At the beginning of the year, Jiang Fan, former president of Tmall, Taobao and Alimama Business Group, took over the "overseas digital business", and this year will also make a difference. But in the face of global changes, it is not easy to win a world.

Overseas markets have changed

At the beginning of 2018, Xiaoxiang, who was in Guangzhou, began to do cross-border e-commerce in Southeast Asia, initially opened a Lazada store, and only settled in Shopee half a year later. By 2021, the company will have stores in six southeast Asian countries, selling household products, with annual sales of 2 million yuan.

Since 2021, Xiaoxiang's team has begun to explore local operations, and now has its own local teams in Malaysia and Thailand, and is ready to enter the Thai market next. This year, they also decided to close Shopee's cross-border stores and only do local stores.

Xiao Xiang told Yan Ciyuan that since the beginning of this year, Lazada has introduced some "plans" to support local sellers in Southeast Asia. For example, in Malaysia, if the store has a monthly transaction volume of $2,000, it can obtain some platform resources, such as exclusive small two docking, participation in promotional activities, etc.

However, Xiao Xiang faces a test this year. "This year's economic situation is not good, our sales have dropped by more than half, and the overall situation is much worse than in the previous two years." In fact, in 2020-2021, the epidemic has accelerated the development of e-commerce in Southeast Asia, and Xiaoxiang has taken advantage of this east wind to double or triple its annual sales.

Ass, who mainly works in the Russian, Spanish and French markets, has a similar experience. At the end of 2019, he gave up the domestic e-commerce platforms such as Taobao and Pinduoduo, and entered the cross-border e-commerce blue ocean of AliExpress to sell sports and tool products.

"In my experience, AliExpress is best done in 2019-2020, and friends who started earlier said that 2018 is easy to do, but it is not good from 2021." Assi told Yanjiyuan that after Europe collects value-added tax, Chinese cross-border merchants who have always focused on low prices will no longer have much competitive advantage in the local area.

This year, for high-quality merchants, especially those who want to develop their brands, AliExpress launched "AE Mall". Assi introduced that this is a "gold and silver medal" rule, such as meeting some conditions such as monthly sales of 20,000 US dollars, you can become a gold medal seller, there will be a "gold medal" logo in the store, which has the effect of increasing exposure, "but at present, I have not felt a lot of change." ”

According to the above-mentioned industry sources close to Ali, since the launch of AliExpress on April 19, more than 5,600 cross-border enterprises have participated in the registration, and AE Mall has been tested on july 5 in overseas markets, and it is currently only tested for some users.

Alibaba International Business includes international retail businesses such as Lazada, AliExpress, Trendyol and Daraz, and international wholesale business businesses such as Alibaba International Station. Trendyol and Daraz have also made some moves this year.

Since the second half of last year, the Xiaoxiang team has also accessed the Daraz platform, which focuses on the South Asian market, and made three sites in Pakistan, Bangladesh and Sri Lanka, "Ali is now also promoting this platform, encouraging more sellers to settle in, and opening up some logistics systems in the same city." But these countries are poorer, and now the orders for three sites per month add up to just over 20. ”

"These countries have four or five hundred million people, but the buyers may only be a few hundred thousand. And all are COD orders (Cash On Delivery), that is, cash on delivery), the proportion of local non-pickup can reach 15-20%. Xiao Xiang said that at present, their team has not invested too many resources in this platform.

According to Alibaba's earnings report, the International Business Segment lost $1.567 billion in adjusted EBITA from April to June 2022, compared to a loss of $1.03 billion for the same period in 2021, "mainly due to Trendyol's increased losses due to its investment in new businesses, including international businesses and local life services in Turkey." ”

According to Alibaba's financial report, from April to June 2022, Trendyol's overall orders increased by 46% year-on-year, serving more than 225,000 merchants through its market platform, "In order to better serve the main consumer groups, Trendyol continued to invest and expand into the high-frequency local life service business." ”

The above-mentioned industry insiders close to Ali pointed out that Trendyol is now doing some takeaway business. But Trendyol is facing poor market conditions such as Turkey, where inflation has continued to soar since the second half of last year, with data released by the Turkish Bureau of Statistics on August 3 showing that Turkey's inflation rate rose to 79.6% in July, a new 24-year high.

Southeast Asia is difficult to defend, and Europe is difficult to attack

After 10 years of deep cultivation in the Southeast Asian market, Lazada has faced round after round of competition and is difficult to hold its position.

"At the beginning, Lazada was still the leader of Southeast Asian e-commerce, and the overall data performance was relatively good, and our store was the same." But after 2019, Shopee grew rapidly, and our Shopee store data began to be higher than Lazada. Xiao Xiang pointed out that today in Southeast Asia, Shopee still occupies the largest market share, and Lazada ranks second.

According to late Post, in 2017, before Shopee entered the Southeast Asian market, Lazada's work came to a standstill due to problems such as conflicts between Ali's residents and local teams, and even the most important investment was suspended.

In 2018, Shopee, backed by the listed company Sea, began to expand into the Southeast Asian market. Shopee is like Pinduoduoduo, spending money to buy traffic and making subsidies. In just one year, at the beginning of 2019, Shopee surpassed Lazada in various data.

Malaysian local merchant Abby told YanJiyuan that before the epidemic, Malaysians rarely used platform e-commerce and preferred social media "micro-business". After 2019, many local sellers began to settle in Shopee, and this platform has gradually become the most popular shopping platform in the local area.

Why are sellers flocking to Shopee? In addition to subsidies, the simplicity of back-office operation is also one of the major reasons. Abby said that the threshold for sellers to enter Shopee is extremely low, and they can directly open stores with the buyer's account and can directly list products without review. Lazada is more complicated, registration requires personal real ID card, bank card information, and goods also need to be reviewed before they can be listed.

Xiao Xiang also pointed out that shopee's operation is suitable for novice sellers, and Lazada is to move the functions that have been verified globally by Taobao, AliExpress and other platforms to be used directly, and it is difficult for novice sellers to get used to it, "The number of local sellers in Shopee exceeds Lazada, which may be one of the reasons." ”

Obviously, after the epidemic, Southeast Asia, where e-commerce has just started, whether sellers or buyers, has far less experience than that in China.

Abby pointed out that the Shopee price war is more powerful than Pinduoduo, and similar to Pinduoduo, the use of the platform is relatively simple, "no need to receive coupons, the price is clear for you to calculate, direct auction is the lowest price." But Lazada is more difficult to operate, like Taobao, but also have to go to get coupons, sometimes can not find a place to collect coupons. In chatting with friends around her, she found that many people don't use Lazada because they "can't play."

Xiao Xiang also believes that in addition to the price advantage, Shopee has now established its own basic disk, occupying a large market share in traditional popular categories such as clothing, beauty, and home, and the audience is mostly women, "while Lazada's advantage is in the 3C electronics category, which is less competitive." ”

Shopee's gaap (Generally Accepted Accounting Principles) revenue in 2021 was $5.1 billion, up 136.4% year-on-year; total orders were 6.1 billion, up 116.5% year-on-year; and GMV (Total Merchandise Transactions) was $62.5 billion, up 76.8% year-on-year.

In addition to Shopee, Tiktok Shop has opened its sites in Indonesia, Thailand, Vietnam and Malaysia in the Southeast Asian e-commerce market. Based on the local team, Xiaoxiang also opened Tiktok Shop in Thailand and Malaysia.

At present, the Southeast Asian market is a strong enemy, and the European market is not optimistic.

People familiar with the matter revealed to YanJiyuan that Lazada, which is now responsible for localization operations, is also trying to enter the European market this year. However, AliExpress, which has been working in Europe and the United States for more than 10 years, is now facing many uncertainties.

Assi pointed out that after the Russo-Ukrainian war, the sales of his AliExpress stores in Russia and Ukraine declined, and the sales of his stores from Russia accounted for 70-80%.

In fact, Russia and the United States have always been the two largest countries with high aliexpress orders, and under various factors, the sales of these two countries have inevitably decreased.

Of course, in Europe and the United States, Amazon's dominant position also makes AliExpress difficult to come out. According to the comprehensive information of the combustion dimension, in the United States, Spain, France, and the United Kingdom, Amazon's market share is the first.

In addition, in the European and American markets, decentralized independent websites also have a large market share. In the United States, Among the top e-commerce retailers in 2021, Amazon accounts for about 41% and Shopify accounts for 10%. Independent stations represented by Shopify and Shein are attracting a group of European and American consumers with their brand tone.

A Shopify cross-border merchant in Hangzhou said that Europeans and Americans are extremely tolerant of independent stations, and they are willing to spend more money to support niche brands and get better brand services.

Overseas opportunities, how does Ali seize it?

This year, the focus of Ali's overseas business is the construction of logistics networks.

Xiao Xiang pointed out that Lazada's overseas warehouse is doing better than Shopee.

Xiao Xiang introduced that in 2020, Lazada opened an overseas warehouse, they are also the first batch of merchants to settle in, and after this, the data of Lazada stores also began to improve, "In addition to reducing costs, Lazada will also take this opportunity to do some activities, such as labeling products with 'promised 72 hours arrival', which can play a relatively large role." ”

Shopee's overseas warehouse is prone to "errors", such as often sending the wrong goods, when the order volume is large, it will not be shipped or shipped for a long time. Relatively speaking, Lazada's logistics system is more complete.

Ran Dimension learned that in 2020, Lazada upgraded the logistics technology system through the Apollo project (Project Apollo), and the warehousing operation system was completely rewritten and upgraded. According to the data, more than 82% of Lazada's orders for "first kilometer" logistics are completed by self-operated logistics teams and facilities. Through the overseas warehouse, Lazada cross-border logistics timeliness can be almost the same as local purchases in 2-3 days, and the user experience is greatly improved.

In 2021, Lazada launched the CPFR intelligent replenishment plan system, which will guide merchants how to replenish according to the actual situation of merchants and multi-dimensional digital intelligence.

AliExpress in Europe has also achieved results in the localization of logistics systems this year.

At present, AliExpress has built 28 overseas warehouses in 9 overseas countries and regions, with a total area of more than 860,000 square meters, and has built 10 preferred warehouses in Shenzhen, Dongguan, Yiwu, Weihai, Xuchang and other cross-border merchant gathering places in China.

Through Weihai Preferred Warehouse, cross-border sales to South Korea can achieve 3-5 days of delivery, after the upgrade, AliExpress Sales in South Korea rose from 17th to 7th, with a faster growth rate.

Asi said that he will prepare some explosive products in advance to overseas warehouses in Russia, Spain and France, and accelerate the logistics time from half a month to 7 days.

In March 2021, AliExpress also launched the customer pick-up point (counter) service for the first time in Europe, solving the "last mile" delivery problem in overseas markets. In France, AliExpress currently has 15,980 pick-up points (cabinets), and the coverage rate of key cities has reached 95%; There are 11,600 pick-up points (cabinets) in Spain, and the coverage rate of key cities is 80%; There are also 16,000 pick-up points in Poland, with a coverage rate of 90% in key cities.

Alibaba has seen initial results in the construction of a local logistics network, but it will take time to verify how much effective benefit it can bring to its growth.

It is worth mentioning that both Lazada and AliExpress are adjusting in the direction of brand upgrades.

According to Lazada's official website, in 2021, 80% + of forbes Top 100 brands have entered the LazMall brand mall. However, in the early stage of the Southeast Asian e-commerce market, users have not yet learned to pay for the brand.

AliExpress's brand going overseas may enhance competitiveness. The above-mentioned industry insiders close to Ali pointed out that AE Mall is AliExpress's hope to attract start-up brands with production plants and help them become new cross-border brands.

From a global perspective, China's supply chain still has irreplaceable advantages, but in the current complex international situation, cross-border merchants are no longer able to rely on the early price advantage to occupy the market, brand upgrading, improve competitiveness is the only way. From this point of view, Ali uses AliExpress as a carrier to expand the cross-border e-commerce market, and there is still a chance.

However, it is still difficult to predict whether the localization team starting from Lazada can cope with the challenges overseas and gain market share in developed countries.

This article originated from the combustion dimension