Ali e-commerce low-price war out of the "killer move", 1688 into Tao to break into the C-end rivers and lakes

In the face of an increasingly rational consumption environment and more fierce market competition, Ali e-commerce has made new moves.

On March 26, the "China Times" reporter learned that Ali's source factory goods direct sales platform 1688 recently opened three stores on Taobao - 1688 Yanxuan Taobao Store, 1688 Enterprise Self-Purchased Tmall Store and 1688 Industrial Expert Selected Tmall Store. Ali insiders told reporters that 1688 has started to fully enter Taobao, and the follow-up 1688 Taobao store will be integrated into a channel similar to Tmall supermarket, and 1688 will be launched on Taobao to carefully select the source of OEM goods.

1688 is one of the "Four Tigers" listed by Alibaba Group CEO Wu Yongming in November last year. Behind its launch of a comprehensive entry into Taotao, Wu Yongming proposed at the current financial report meeting in February this year that the group's highest priority is to rekindle the growth momentum of the two core businesses of e-commerce and cloud computing. And now, letting the low-cost B-end business break into the larger C-end market is one of the solutions that Ali has found.

1688 breaks into the C-side

According to the reporter's understanding, 1688 and Taobao are both in Taotian Group. However, Taotian told the "China Times" reporter that 1688 and Taobao are not merged, but only opened stores in Taobao, 1688 is still an independent APP, and 1688's channels also include its own small programs.

Wu Yongming announced Alibaba's first batch of strategic innovation businesses in November last year - 1688, Xianyu, DingTalk, and Quark. He said at the time that 1688 is Alibaba's oldest business, serving the mainstream manufacturers of China's manufacturing industry, with a solid foundation and great potential for a second venture, and is expected to extend from B2B business to small and medium-sized enterprises and consumer procurement. He also said at the time that the above four business organizations will operate as independent subsidiaries, and the business will break the previous positioning restrictions within the group, and Alibaba will continue to invest in a cycle of 3-5 years.

1688's entry into Tao means that the source manufacturers on its platform will expand their channels to a larger C-end consumer market.

1688 insiders revealed when talking about the reason for entering Taobao that they found that there are two types of demand on Taobao that are growing rapidly, one is the demand for brand replacement and direct supply from big-name foundries, and the other is that Taobao enterprises have a great demand for self-procurement, and users have high requirements for the richness, uniqueness, professionalism and customization of supply, and the ability to organize goods for special groups of people in subdivided fields is the strength of 1688 industrial products.

According to the reporter's understanding, the number of 1688 merchants has exceeded 1 million, of which 600,000 are source factories. The data provided by Taotian also shows that in the past year, merchants invested 1 yuan on the 1688 platform and could get an average of 43 yuan in business.

Li Yingtao, a partner of guest consulting, told the "China Times" reporter that 1688 users were mainly wholesale purchases by small and medium-sized businesses at the earliest, and they had to download the APP separately to buy, which also caused the 1688 user population to be relatively small, although gradually some individual consumers purchased, but the proportion was still low, and mainly young people. He believes that if 1688 becomes a specific channel in Taobao, many people will see it, and the traffic will be much larger, "Compared with before, the flow of people and passengers will be greatly extended to individuals and the C-end." ”

It should be mentioned that 1688 insiders also revealed that the purpose of opening a store on Taobao is not to sell goods, but to test products in a larger market, incubate super single products, and turn them into commodities in the 1688 digital supply chain, which will be sold on the whole network, so that 1688 will become a source of new products from the source of the whole network. Therefore, 1688 will also try its own brand OEM business on Taobao, such as Yanxuan and Expert Selection.

Taobao is surrounded by enemies on all sides

While entering Taobao to bring C-end traffic to 1688, what can it bring to Taobao?

Zhuang Shuai, the founder of Bailian Information, told the China Times that 1688 as a supply chain platform to access Taobao will further enrich Taobao's supply capacity in low-priced goods. He believes that Taobao's purpose is very clear, on the one hand, it is to enrich supply and continue to maintain the almighty Taobao mentality, and on the other hand, it is to focus on all resources and traffic, with Taobao as the core platform, "not just using Taobao as a tool for Tmall to divert traffic, and use Taobao to comprehensively benchmark Pinduoduo and compete with it." ”

For example, the reporter learned that the first phase of the three stores opened by 1688 on Taobao are all directly supplied by the source manufacturers of the industrial belt, supporting 0 yuan order, 1 piece of free shipping, 24-hour delivery and 7-day no reason to return, most of the goods are free of shipping insurance and support free shipping for returns.

Alibaba's new management pointed out this direction at its earnings conference last November. Wu Yongming said at the time that in the strategic cycle for the next three years, Taobao and Tmall will further clarify business priorities - users first. Focusing on users first, Taobao should insist on being a "universal Taobao" and adhere to the strategy of consumption grading and price power.

The background of the new management's strategy is that Alibaba is still the most important player in China's e-commerce market, but it has encountered unprecedented fierce competition from rivals such as Pinduoduo, Douyin, and Kuaishou.

According to the financial report released in February this year, the revenue of 129.07 billion yuan of Taotian Group in Q4 last year accounted for about half of Ali's current revenue, which was 4.5 times the scale of the second international business income, but the year-on-year growth rate of 2% of the revenue ranked last in the group, and its adjusted EBITA of 59.93 billion yuan in the current period was 1.3 times that of the group as a whole, but the year-on-year growth was only 1%. For reference, Pinduoduo's Q4 revenue last year was 88.9 billion yuan, a year-on-year increase of 123%, and its net profit was 23.28 billion yuan, a year-on-year increase of 146%.

Li Yingtao also believed that not only on the consumer side, but also on the supply side, Douyin, Kuaishou, and Pinduoduo are currently seizing the resources of small and medium-sized businesses on the C-side, and after the full launch of Taobao, some businesses in 1688 who have advantages and are willing to do business on the C-end will remain in the system.

Li Yingtao also said that Taobao used to rely on small and medium-sized businesses to start, but with the development of the trend of e-commerce authenticity at that time, it launched Tmall to compete with JD.com, shifting the focus of traffic and resources to the brand owners, and Pinduoduo was able to rise, partly because it used the original Taobao abandoned this part of the small and medium-sized merchants. He believes that Taobao, which is now also attaching importance to small and medium-sized businesses, is essentially facing a competitive situation with Pinduoduo on the left and JD.com on the right, and how to balance resources and strategies is a test for it.

Editor-in-charge: Huang Xingli Editor-in-chief: Han Feng